The bidding and estimating functions are so intertwined, you can consider bidding and estimating software to be the same. Most software developers do; thus, if you buy a bidding program, it does estimating-and vice-versa. This article uses "bidding" to describe either bidding or estimating. Bidding software is a powerful tool in your arsenal. In an upcoming article, we'll see the mechanics of using such software. Let's look now at how you can use this software as a competitive business tool.
Tip 1: Build your inventory Bidding software allows you to know the cost of the materials you'll use for a job. From the program, you can "take off" the details you need for building your physical inventory. If you have an inventory database, you can use a Windows-based bidding program to interact with it.
Tip 2: Get ready. Gather all the information you need, or ensure easy access to it. The more accurate your information, the more accurate your bid. Develop standard costs to use. For example, determine the cost of travel to a particular location, or the cost of providing a one-line diagram.
Tip 3: Aim for the best price. In 1996, a company bid $1.2 million on a job, while competitors bid as high as $3 million and as low as $700,000. Obviously, not everone knew how to hit the target. How did this company come up with the $1.2 million figure? They built a spreadsheet model of the costs involved and let the computer spit out the price. They could have done the same thing for less work, had they used bidding software. They were not the low bidder. Do you think they got the job? The next tip explains what happened.
Tip 4: Let your ammunition work for you. When the company met with the client, they arrived with printouts of the worksheets they used to arrive at their cost. They showed only the categories accounted for, not the actual numbers. This level of detail impressed the client enormously. None of the other bidders had used a scientific method to arrive at their bid price. The contract went to the firm that did it in software. A further development: this same firm got the nod for the other parts of the overall project, which ran close to $40 million. The small investment in software paid for itself. You, too, can hit your target-when you're prepared.
Tip 5: Know your stuff. This company's employees knew exactly what their costs were and how much they wanted to make from this job. Thus, they were able to negotiate from a position of strength. And because they didn't try to gouge the customer, they were able to negotiate from a position of integrity. This is perhaps the biggest benefit of being able to quantify what it takes to do a job. Finger-to-the-wind estimates may work fairly well-but it takes only one poor bid to wipe out your company. You can't afford to talk price without knowing your cost.
Tip 6: Show your stuff. You may need to lay your cards on the table and show the potential customer why your cost is accurate. The bid is the basis for your contract. In many jobs, an accepted bid is a de facto representation of the contract. In case of a dispute, the bid would count for more than what the customer says you meant. Are you bidding on the same project your customer thinks you are? Make clear what you are going to do.
Tip 7: Show you know. Use the bid to show you know how to do the job correctly. A plant engineer once found himself being forced to accept a low bid from a contractor he didn't like. He had used them before, and they cut too many corners. The engineer rewrote the bid requirements such that each contractor had to submit a detailed work plan. He was able to drop the undesirable contractor on that second round. However, it's common for the "cheap outfit" to get the job by providing too little information. As demonstrated in tip 4, you can force the competition to a higher standard-or out of the bidding.
Tip 8: Decommoditize the bidding process. Use the bid to show how you add value. In tip 7, you might show what steps you'll take to conform to the National Electrical Code. But, are you providing your own lift, or are you using the customer's? Maybe the customer would rather loan you a lift. Or maybe the customer assumes everyone provides a lift. Force the customer to ask your competitors to say what they are going to do. In a vague bidding situation, everyone looks alike. You then must compete on price, instead of workmanship and competence. Guess what suffers? That's right-workmanship, competence, and, ultimately, your reputation. Make your value clear-bidding software is the perfect tool for doing so.
Tip 9. Plan your work. Wouldn't it be nice if you could plan your work several months in advance? You can. The more accurate your bids, the more consistent your "hit rate" in getting work. So, you can determine some value, such as 40%, of all bids end up in sold jobs. As soon as you do a bid, plot the labor hours per week on a spreadsheet-multiplying the number by your "hit rate." You can then see future needs for labor, training, and equipment.
Tip 10. Find out why bids died before getting approval. If your price was too high, though, don't make the mistake of lowering it the next time around. Do not simply cut costs. Look for ways to improve efficiency and eliminate non-value-added steps. Your bid can give you intelligent information for doing this. For example, why all the trips from your supply house to a distant location? Maybe you could have ordered over the Internet. Or bought from a supply house or national chain with an outlet in your job sites' city. Or maybe your regular supplier could have drop-shipped to your job-site location.
Both content and presentation are key factors in bid acceptance. Maybe you lost the bid because you were off the mark as to what your customer really wanted. Maybe you need to make sure the bid includes a concept statement or executive summary. Maybe your bid was so detailed the customer just refused to look at it-or too skimpy for your customer to take seriously. Maybe your bid was excellent, but something else happened. If that was the case, then you know where to put your efforts.
Here's an example of a sales presentation gone wrong. Company A sent a delegation to a bid on a major project. They came equipped with spreadsheets, laptops-the works. Company B sent one person. Company A had an inferior bid, in terms of quality, price, and value. However, Company A got t he job. What was the deciding factor? Company B did not act like they wanted the work. What cinched the deal for A was when B's man pulled out his plane ticket, looked at it, and said, "I have a flight to catch." This was a $120 million deal. The customer left that meeting knowing which of the two companies would care more about him. And that is exactly what you need to show with each and every bid. Look through your bid process and your sales process, and see if this is what you are showing. If it's not, then you need to make a change.