Once you know your real project costs, your main bidding concern is finding out about the competition. After all, customers don't determine final costs — bidders do.
If you want to win the contract at the highest possible price, you need to know your competition.
Keeping track of your competitors is not easy, but crucial to turning a profit. You should know what they charge for labor and material and why. Fundamentally, this comes down to just a few primary factors, which are as follows:
Strengths and weaknesses
What do competitors do better than you? What can you beat them at? One contractor may be very good at hospital projects, and way too expensive on office rehabs. You want to know all of the strengths and weaknesses of all your usual competitors. This information will usually come from a bid results file, and from further experience. You use past facts to determine strengths and weaknesses.
You need to know your competitors' key field people. These employees will determine what types of work they do well or poorly. Here is an example: If you know that one competitor's only good project manager is tied up on a very difficult project, a project that also happens to be the biggest one they've ever done, then you can be sure that the contractor will not be bidding low because without their good project manager, they will have to leave extra money in the bid to ensure that the not-so-good manager comes in under budget.
The second concern is the people who will be bidding. In strategic warfare, the ultimate target is the mind of the opposing general. The same applies here. If you know the strengths and weaknesses of the person you are bidding against, then you have a good shot at beating him or her. If you do not, you fly half blind.
In most cases, your competitors' costs will be mostly the same as yours. What you want to know is how they differ. Are they using the same suppliers that you do? Do they have the best generator price? Do they get the same discounts from the suppliers that you do? Do they pay the same for labor as you do? Try to identify any differences between their costs and yours.
How busy they are
This is a big factor. It comes down to simple supply and demand. If your competitor is completely out of work, and looking for somewhere to send his employees, you are not likely to get top dollar for the project. On the other hand, if your competitor is very busy and has work backed up way into the future, now is the time to increase your price a bit. First of all, the competitor has plenty of work for a long time, and will not be interested in taking new work cheap. Secondly, he will not have enough key people to run the new job efficiently, and will have to charge more for it to cover his risk of running it with second-quality personnel.
Gathering this information is not something that you do before each bid. It is an ongoing process. There is no easy way to gather all of this information in a short period of time, either. You simply have to make a part-time project of knowing about your competitors.
As much as keeping track of your competitors may seem like an added workload to you, it is important. Remember that your competitors determine how much you can charge for your work. It is worth a lot of money to your company to know whether they will be setting the price high or low.
GOING INTO THE BID
When you are actually going into the bid, you have to keep the following competitive factors in mind.
Who is bidding the electrical work?
You can usually find bidders from lists of plan holders or attendees of the prebid conference, suppliers and reps, general contractors or from a builder's exchange or plan room.
Which general contractors are bidding the project?
Knowledge of the GCs will help you ascertain your overall chances on the project.
Many general contractors will prefer to use certain electrical contractors, and will naturally pair up with them. You'll probably want to avoid these general contractors, at least until the last minute. (You're probably best off not bidding to them at all. Then, if they call you later, you can say, “We didn't think we'd have a chance with you; you always use ABC Electric.” More often than not, this approach keeps the door open on the next bid.)
Next, you can analyze which general contractors you think have the best shot at the job, and if they will be giving another electrical contractor preference. Take a good look at the entire situation, and structure your bids accordingly. There is no rule that states you have to give the same price to every GC. Some GCs run their projects better than others; logically, these GCs should get lower prices.
Take a good look at your key people when bidding. Will you have the right people available to run this project profitably? Will you have to get financing to handle the cash flow? Will there be enough skilled workers available to complete this project on time? How far in advance do you have work scheduled? (In other words, do you really need this job or not?)
How will this job fit into your schedule? Are profitable projects coming to bid soon? If so, why take a break-even job that ties up your assets?
As you bid a job, all these factors should be playing themselves out in your mind. Bidding for the highest possible price is not an exact science — it is an art. Sometimes you'll win, and sometimes you'll lose. But in nearly every case, you will not even get close to the “magic number” without traveling this road. (The “magic number” is the bid price that wins you the project by being $1 below your closest competitor.)
Reprinted with permission from the NFPA Successful Electrical Contracting. Copyright 2001 National Fire Protection Association. To order, visit www.nfpa.org.