Chances are you’re a grading and excavation contractor because you love the process of creating and building. But there’s also that other side of being a contractor—the business side.
Maybe you’d like to spend all your time moving dirt around, but you have to be business savvy for your company to succeed. And an important part of attaining this success requires that you know how to write winning bids—quality, persuasive bids that convince potential clients you’re the one for the job. You, over all the others.Sure, a lot of whether a bid gets accepted depends on price, especially with public bids. But often there are many other factors involved too, particularly with private bids. This article will give you tips on how you can manipulate those other factors to create effective and winning bids for your company.
Before the Bid
In addition to writing a great bid, one of the best things you can do to make yourself more eligible for new job opportunities is to maintain a level of integrity in how you run your business. “Successful contractors are known for their honesty, fairness, and ability to complete the work on time within budget,” says Bonnie Hartman, invitation-to-bid specialist at Computer Guidance Corp., a provider of financial, project management, and bid solicitation software. “What people say about you has a big claim in whether you will be selected in that bid.”
Oscar Hernandez, president of Delta Grading/Three-Way Construction, definitely agrees. “It’s very important in this industry that you deliver on your promises,” he states. He believes that one way to build and uphold your reputation is to admit when you’re wrong. It earns trust. “In construction, it’s common that people don’t take responsibility for mistakes. This makes it difficult for the developer because it increases the cost of their project.”
And it’s just common sense that positive relationships go a long way, too. “Many of the decision makers pursue other opportunities with other developers. The more you establish a good relationship with these key people, the more your customer base will increase,” offers Hernandez.
Be Prepared
Obviously, just as you wouldn’t jump into a new job without first doing research and developing a plan, you don’t want to jump into writing a bid before doing the same. “You can tell who’s prepared and who isn’t,” says Melissa Aguirre, marketing director of On Center Software Inc., a bidding, take-off, estimation, and project management software company. There’s a big difference between someone who has thrown numbers on a sheet and [someone who submits] a more formal visual presentation.”
To write a strong bid that smacks of reliability, you have to do your research. You should also aim to include the following qualities: accuracy, detail, completeness, profitability (understanding your costs), clarity, and a clean presentation. To help you do this, following are some basic questions to consider before you begin writing:
- How can I attain accurate materials and labor costs?
- What resources (equipment and materials) do I need?
- What resources are available to me?
- In what time can I supply them?
- How much profit would I like to make?
- What is the simplest, clearest format in which to present the above material?
Brad Barth, senior vice president of Product Management at Hard Dollar Corp., an estimating and job control software company, points out the importance of understanding the impact of a job’s schedule on your bid. “You can’t just bid the job in a vacuum,” suggests Barth. “You have to know when the job will be built and what your resource availability will be during that time frame. And be aware of how to take advantage of those situations where there might be early completion bonuses—or how to avoid late completion penalties.”
Hartman suggests asking yourself the following questions. “Do you have the ability to obtain the necessary labor, material, equipment, licenses, and insurance to complete this work in a timely manner? How much of this work will you be self-performing, and how much will you need to sub-contract? Is your current work schedule flexible to accommodate any work delays by others that prohibit you from completing your work?”
And do what is asked of you. “Follow the directions in the bid documents,” says Hartman. “If you cannot follow the instructions for the submission of bid documents, the employer will question your ability to complete the work as designed. Any submission that requires extra effort to evaluate leaves a negative impression of your company, and questions your ability to perform.”
Research, Research, Research
“Winning bids are all about understanding the customer’s specific project requirements and goals,” says Chris Bell, market manager at Primavera Systems, a leading developer of project management systems. “This information isn’t always contained in the RFP [request for proposal]. It’s only obtained through knowing your customer, meeting with them, understanding their concerns, and understanding what—in their minds—demonstrates a successful project.”
A great place to start with your research—and it’s often overlooked—is to attend any and all pre-bid meetings. “Through pre-bid meetings, you can cover any changes to original plans and specs that were sent out to you before,” says Greg Duyka, sales manager at On Center Software Inc., with a 25-year background in estimating and project management. “Be sure to ask lots of [questions] here, which will help you clarify the bid requirements.” He suggests getting everything you’re concerned about out in the open at the start, asking questions before and during the writing of your bid, and bringing up issues as they arise.
And it’s just common sense to visit the site. “Do a soils testing analysis, confirm requirements for environmental controls as well as possible costs related to the existing site and soil conditions,” adds Duyka. “If you have to haul in material, be up on new material prices.”
Barth also emphasizes the importance of a thorough site visit and considering such things as soil issues and traffic control. “A lot of times when you look at the job on paper, things don’t jump out at you until you go to the site. The most important thing is to model the job in your head. And part of that is going to the job site and understanding exactly what you’re getting into. People often tend to not think through how the job will be built, but instead approach it from the perspective of, ‘What have similar jobs cost us in the past?’ “
“Not doing your homework will reflect on your proposal,” says Hernandez. “The grading plans give you a general sense of what the quantities will be. However, if you do not continue to develop a good basis of information for your bid, your numbers will not be competitive.”
“Do a take-off, put all your cuts and fills into a good software program and, with those, create solid numbers,” he adds. “In our trade, correct quantities are everything.”
To guide you even more in your research efforts, Hartman has developed a checklist of other things to consider.
- What applicable federal, state, and local government rules, regulations, and required inspections will affect your ability to perform in a timely manner?
- If you’re bidding as a subcontractor, are you required to work with the apparent general contractor low bidder, or only with those to whom you submit a quotation? And does whoever you’re working with have a good reputation?
- What are the requirements for payment for work performed?
Profitability
Obviously, you want to offer a good price to keep you in the running. But you’re in business to make money, so one of the most important elements of a successful bid is for it to be profitable.
“Oftentimes in the construction industry the focus is on securing a large number of jobs rather than ensuring those winning bids are profitable for the company in the long run,” says Paul McKeon Jr., president of BID2WIN Software, a developer of estimating and bidding software. “What determines whether a bid is profitable or not is how well you define the cost within that specific estimate. A bid is a forecast of profit.”
There are several ways to control your cost. For starters, don’t ever estimate what the subcontractor’s price will be. Be sure to have them bid to you. Also, a detailed approach—where you financially account for every factor in your bid—is the safest way to go. “If you haven’t fully mapped out the costs when writing the bid, then you have no blueprint to accurately indicate your profit margin,” says McKeon. This could also impact profit, in the sense that you won’t have enough accurate information to give to the people who are doing the actual work. Additionally, you can forecast profit by tracking the cost history of previous bids so you have a reference point to work from. This process can be enhanced by using the appropriate bidding software.
Conchi Ossa, senior manager of Bid Express, a Web-based bidding information service from Info Tech Inc, a construction management software company, suggests looking at the agency’s published bid tabulations, or a database of recent bid tabulations, to find out what other contractors have bid recently. This will also give you a good idea of how to price.
Controlling Your Costs
To control your costs, John Meibers, president of ComputerEase Software, a project management software company, suggests the following four steps in setting a price:
- Start with the take-off. What do I need (equipment, materials, and labor) and in what quantities?
- Verify current day-labor prices.
- Verify these prices using the correct labor.
- Calculate your costs, add on overhead, and then mark-up.
Be sure to give extra attention to pricing volatile materials, such as steel. “If you’re bidding on anything with steel and the price of steel goes up,” explains Aguirre, “you’re stuck honoring that bid. So you have to do research and maintain a good relationship with your vendors so you know that they’ll work with you if the price fluctuates once you’ve made the bid.” She also suggests writing qualifiers in your bid, such as, “This bid is good for x amount of time,” to cover yourself as much as possible.
Barth highlights the importance of understanding your true equipment cost. “That’s where we see a lot of fluctuation in this market, and a lot of opportunity to gain a real competitive edge. If you don’t have a handle on what your machines really cost, you can easily blow the bid or get a job you didn’t want.” He suggests using software that can really track and capture your true equipment costs and make last-minute adjustments if one of your elements suddenly changes.
Meibers—among others—points out the importance of having historical records from past performances so you are aware of your production rates. “You can’t know them accurately if you’re not tracking that information on your past jobs. You need to know production rates and per unit costs.” He also stresses having an accurate figure for your labor costs. “If you say you will charge x dollars per hour, you need to know this is legitimate.”
Even when you’re looking at cost history, you obviously can’t always assume that each job will require what past ones have. Sometimes you just have to use your best judgment. So when you don’t feel comfortable quoting something that isn’t completely quantifiable in a concrete way, you may want to put provisions for unforeseen circumstances in your contract.
Be Detailed and Specific
These two elements are the keys to instilling confidence in the owner. “You want to make it apparent that you thoroughly thought through the process,” says Barth. And you achieve that by actually doing just that.
“You don’t want them to have to call you up and ask you questions,” says Duyka. “You want to make sure they have as much information as necessary to see that you have everything covered.” What’s particularly important is to include detailed inclusions and exclusions, which really show your attention to detail and ability to predict and prevent future problems or misunderstandings.
“Some people think the less things you list the better off you are, so the owner can’t hold you to anything you wrote,” starts Barth. “But typically, an educated owner will force you to list all issues and potential issues. Not doing so could make you come off as sloppy or like you’re trying to sneak something by. Ideally they should specify what they want to see, but it’s the contractors job to bring them up if [they’re] not addressed by the owner. If you get the owner to rely on you as the expert, you can get out of the price wars that drive down your margins.”
Presentation
“I think certainly you want to show a professional appearance,” says Barth. “But I also think some people tend to get carried away at times. What the owner wants is to have confidence that they’re dealing with a professional company and that this company has gone through a process to arrive at their proposal.”
“Most owners we talk to,” he continues, “say the biggest factor is the price. But right behind that is the confidence level that the jobs will get done on time and on budget. So the more professionally you present your bid proposal, and the more complete and professional it is, the more you will elicit that confidence.”
Your bid and the way you present it can be seen as a reflection of your methodology. So you shouldn’t take it lightly. When Hernandez’s company submits a bid, presentation is everything. They make sure it’s well-written, detailed, includes a video, and is branded throughout. Hernandez says this approach really helps them stand out from their competitors because most contractors don’t put this much effort into the presentation of their bids. His philosophy is, “When a developer sees that a contractor has it together on a proposal, they can assume they’ll get quality service out on the field.”
However, Jennifer Teufel, president of Pathway Developments (a general contractor in Tucson, AZ), who reads grading and excavation bids several times a week, puts no value on the physical presentation of the bid except for “basic completeness, legibility, and organization.”
Presentation is hardly limited to the visual aspect. You should also think in terms of how you want to communicate to your audience through the language you use. Be clear on who your reader is and think about how they would best receive the information you’re conveying. “For smaller proposals,” Hartman recommends, “make sure you write in the language of your intended reader. Homeowners, for instance, may not understand the technical terms of your special field.”
To Software or Not to Software?
Although some contractors and subcontractors still use Excel for their bid template, at this point the general consensus among industry sources is that it’s a bit old-fashioned. Bidding software saves time and is more accurate, so the question is really why wouldn’t you want to use it?
“If you’re detailing the cost of a project, spreadsheets are not the right solution,” says McKeon. “They can be inefficient and are only as good as the formulas someone writes in them, which can lead to costly errors. Plus, there is a degree of inefficiency because you cannot have more than one person working on a bid at the same time.”
“Bidding software can save contractors a lot of time and effort,” adds Ossa. “Bidding errors can be reduced or eliminated by using software designed for the bidding industry to prepare bids, and by using an online bidding service that can perform mathematical calculations and detect errors with the bid before it’s submitted.”
“With the right software,” says Barth, “you can integrate the estimate with the schedule. You can make changes to the schedule and see what that does to your estimate.” If the owner asks you if you can get this job done in two weeks instead of four, there’s a relationship between cost and how quickly you can complete the job. The right software can calculate how these factors will effect your cost.”
Software can also help you build up good history. “Contractors can see in real-time how estimated costs and production compare against actual costs and production—both while the job is in progress and upon completion,” says Fred Ode, CEO of Foundation Software, a developer of construction accounting software. “The contractor can then use this historical data to help estimate future job bids more accurately. This eliminates any guesswork, as job estimates are based off of true, historical numbers as opposed to mere speculation.” He also points out that companies who do not track historical data run the risk of losing money on specific aspects of their jobs without even knowing it. “For instance, a contractor could do great on site preparation but lose money on water lines.”
Bell concurs with Ode on the importance of historical data. “One of the best ways to be prepared is to have a centralized repository for project costs. That’s why a project management application is so important. This is different from estimating in that it tracks what really happened on the job and then that information is used to improve your estimate for the next job. You can break down the actual costs into both units and time so that your estimate precision improves dramatically.”
Hernandez has found that the importance of software for the grading and excavation industry varies depending on the size of the job. “For big jobs, yes, it’s important. For smaller jobs, like fine grading, it’s not so important. The big projects do require software because it helps you calculate quantities. For mass grading we work off of a cubic yard measurement. Without software you won’t know what this is. Software is very important to determine your quantities, which will determine accurate pricing.”
Other Pointers to Keep in Mind
Again, the importance of asking questions can’t be emphasized enough. It’s the basis for clear communication. “As a subcontractor, you should be just as meticulous about bidding to the contractor as the contractor is in bidding to the client,” says Duyka. “Many people don’t realize how important this is.”
“And when following up, it never hurts to ask the client if there’s anything you haven’t covered in your bid that they want to see,” says Aguirre.
Tuefel says when she receives bids, what really turn her off are hourly rates, cap rates, overly abundant exclusions beyond appropriate for the job and, of course, any clear indications that the sub does not understand the scope of the work.
Hernandez believes it’s very important to adopt a corporate mentality. “Contractors tend to have this mom and pop mentality and they often don’t look very professional. The more of a corporate mentality you have, the greater chance of earning the trust of developers.”
And always, always, double-check your work. “Some contractors get sloppy and don’t double-check their bid package for errors,” says Ossa. “Some of the biggest mistakes are often simple omissions. Often contractors fail to verify their math on extended prices or sums, or neglect to apply all amendments issued on the project. Sometimes they fail to attach a required bid document such as their bid bond.”
So—bottom line—be sure to have as many people as possible proofread and double-check your bid.
The Power of a Good Bid
So, how much impact can a good bid have even if the price is not the lowest? The general consensus among those interviewed is quite a bit.
“In almost all bid situations,” says Hartman, “the bid speaks for itself. But remember, it also speaks for you. A coffee-stained, dog-eared submission in pencil, red ink, and black ink, with unit price numbers that are hard to read and columns that are added incorrectly—with missing signatures and certifications—makes a clear statement of the quality of work that you might perform if hired.”
“Many times, well-written bids can override or provide compelling evidence why someone should choose your firm, regardless of price,” says Bell. “However, you need to give the customer a compelling reason to choose your service over those with less expensive bids. All of this starts with client intimacy. That means knowing your client better than your competitors do, for this starts a trusting relationship, which is far more valuable than a few thousand dollars difference.”
Speaking as an ex–general contractor, Duyka strongly believes in the impact power of a good bid, especially in its ability to build the comfort level of the employer. “A general contractor has the biggest risk. He stands to lose the most. When a subcontractor can recognize that risk and help reduce it by providing a complete and concise proposal, the general contractor and subcontractor both stand to win. A good bid builds credibility. That’s where you get the preferred bidder status—from having a complete scope, a clear explanation, open communication lines, and accessibility.”
Barth’s sentiments parallel Duyka’s. “When you think about what the owner has to base their decision on, price is certainly a big factor,” he says. “But more and more, that’s not the only factor. And a lot of times it’s not the number one factor. The decision is based on the confidence level the owner has in the contractor. And unless you have a really great existing relationship with that owner already, your bid proposal is the best chance to get that confidence across.”