When you think about it, and you should, we estimators can rightly be considered the modern-day equivalent of the mystic medieval alchemists. We regularly consume truckloads of seemingly worthless material—reams of useless paper marked with volumes of semi-coherent lines, letters, figures, notes and symbols. Then we work our special estimator’s magic on this massive pool of architectural vomit, and transform it all into gold! At least, that’s the expectation. But when we’ve finished with all those countless exhausting hours of translating the "design professional’s” hieroglyphics into conditions and assemblies, further transformed the assemblies into units of material and labor, then finally produced a meticulously detailed analysis that organizes the scope of our work into quantified components, we can now sit comfortably back and allow others to marvel at the fruit of all our efforts—right?
Think again. At this point, you’re still a long way from the gold. After all of this struggling to produce an accurate and potentially profitable estimate, the next step in the process, writing an effective proposal, is every bit as critical to launching a profitable job as is an accurate estimate. The effective proposal in a hard-bid context is a sophisticated, multiple-purpose piece of correspondence that communicates a number of things to the general contractor’s estimating and management teams. Most importantly, it assigns dollar amounts to the relevant components of work; it establishes your sources upon which you based your estimate; it clearly defines the scope of work that you intend to perform, and it declares the terms and conditions under which you propose to perform the work. In effect, it is a condensed version of the contract you hope to arrive at when you sell the job.
Show Me the Money
The first items that a GC’s estimating team is going to look for are the dollar amounts. Those dollar amounts are often the only items they are interested in at the beginning, but that does not diminish the importance of the other aspects of your proposal. The manner and degree to which you break out your numbers for the GC will depend on your understanding of their wants and your needs.
For instance, you may be bidding multiple sections of work, and the GC wants you to break out your number by section or by building. However, there are certain sections that you are only willing to perform in conjunction with certain others, or your estimate is based on a certain volume and you intend an all-or-nothing approach. One example is the scenario where stationary scaffold is involved. You prefer not to perform the exterior plaster work without also performing the exterior framing and sheathing, and vice-versa. A good way around this potential impasse is to break out your numbers by section as requested, but include a simple clarifying sentence such as "This proposal is contingent upon an award of all sections and areas submitted” or "Bid breakdown for review purposes only.” This gives the number-crunchers the itemized figures they need to build their bids, and defers the "all-or-nothing” issue for another day.
Other important dollar-assigned items include designated alternates, allowances and bond. To minimize clutter, only those alternates that affect your scope should be included in your proposal, and it should be made clear whether it is an additive or deductive alternate. Allowances should be included for contingency items that may or may not be necessary for performance of the work. Weather protection, unspecified materials and repair work for trade damage are common examples of allowance items. Unless directed otherwise, performance and payment bond should be calculated as a separate line item so that it is clearly stated as an exclusion from your pricing.
Finally, as a courtesy to the estimating team, set the information critical to their efforts in boldface type. General scope of work, sections bid and dollar assigned line items are the focal points for them during the bedlam of Bid Day. Help them stay focused on your numbers with this small favor. It could provide you with a windfall edge.
Can You Cite Your Sources?
Include a solid "CYA” paragraph on your front page that refers to the documents on which you based—and didn’t base—your estimate. Plans and specification manuals with dates and names of architects and engineers are essential.
Acknowledge addenda, if any, and instructions to bidders.
State whether or not a schedule was available for review at bid time.
Finally, especially with first-time prospective clients, state whether or not a sample contract was included in the bidders’ package. All of this may help to preemptively correct any potential "misunderstandings.”
Scope It Out
A truly effective proposal includes a scope section that does a good job of clarifying, in detail, what it is that you intend to provide, and what you don’t. A bullet-point list of inclusions, clarifications and exclusions does the trick here. Just how voluminous this portion needs to be depends on the extent of the "gray area” in your documents, and on the state of your relationship with the GC.
Certainly you don’t want to clutter your proposal with an endless laundry list of annoying trivialities. On the other hand, you don’t want your numbers to be misinterpreted or difficult to compare to the others they receive. Worse yet, you don’t want to be awarded a job based on ambiguities and assumptions that you may be held to accepting later.
Include whether you will perform work that is connected with your sections, but not clearly designated as such. Include those items that you may have agreed upon verbally with your GC. Include items that may have been sources of disagreement in the past. Composing a good scope section requires striking a delicate balance between all of these competing considerations. Be thorough, but stay relevant.
Make Them an Offer They Can’t Refuse
Many estimators are not fully aware that the proposal they send to the GC is an offer to contract. Technically it’s a counteroffer to the GC’s invitation to bid. Either way, it is a condensed contract, and as such, should contain the terms and conditions under which you wish to perform the work.
A single line at the end of your scope letter, "attached terms and conditions included herein,” incorporates your list of terms into the proposal and makes them binding unless and until an overriding subcontract is drawn up and mutually agreed to.
It is especially critical to attach your own terms if the GC has included a sample contract in his bid package because a silence on terms in your "counteroffer” is construed as a tacit acceptance of his entire set of terms—a scary thought indeed, given most of the GCs’ contracts I’ve reviewed lately.
As a legally binding document, your set of terms and conditions should include all of the many aspects of an agreement that a full-blown subcontract does. Payment terms, changes in work, hourly labor rates, premium time, schedule considerations, protection of work, indemnification, insurance, bonds, suspension of work, termination and dispute resolution are all part and parcel of a complete set of terms.
Due to the complexities of these contract issues, it is strongly recommended that an attorney be consulted when generating a standard set of boiler-plate terms that can be attached to every outgoing proposal from your firm. Absent this, a safe short-form approach to including terms in a proposal would entail including the line: "Contract terms to be per standard AIA form A401, 1997, or equal.”
In addition, put an end-date on your proposal. Make it valid for 30 or 60 days—whatever keeps you comfortable. With the fluctuation in labor and material prices these days, the last thing you want to give your future client is an offer in perpetuity.
There you have it. Do you now think your estimate is as good as gold? Well you’re not quite there yet. But armed with an effective proposal, you can present your estimate with clarity and confidence. And who knows? You might just be one step closer to paydirt.
About the Author
Vince Bailey is a project manager/estimator for MKB Construction, a commercial drywall/plaster/paint contractor in Phoenix, Ariz.