A good rule to heed is that the more desperate things become, the less desperate should be the response.
That’s another way of saying that this is not the time to turn innovative or to improvise when it comes to bidding for jobs; these are the times to return to the fundamentals of bid response.
A few years back, during the construction boom—when the market was awash with both jobs and money—bidding, to be honest, on occasion grew a bit sloppy, corners were on occasion cut, but who cared? There were more jobs floating about than there were subcontractors, so the general contractors just had to live with it, didn’t they? And they did.
Not so today.
Yes, it’s true that today the GC has more subs available to him or her than he has projects, and it is true that the market is turning more dog-eat-dog by the day in terms of subs underbidding each other which, on paper, should play straight into the GC’s hands.
But it is also true that the GC’s worst nightmare is that a contracted sub cannot—for whatever reason—finish the job. This is what breeds sleepless GC nights, for the GC knows that he or she is walking the fine (and dangerous) line between lowest bid and ability to perform.
Therefore, a bid response that puts the GC’s mind at ease, and makes him or her confident that the sub can complete the job, will always be given serious consideration.
“I’ve had subcontractors go belly-up on me during jobs,” says Dirk Squire, a Santa Barbara, California-based general contractor. “It is the worst thing that can happen to you. There’s no scramble like the one needed to salvage such a situation.”
When qualifying subcontractor bid responses, what does a GC look for?
Squire says, “I look for a very detailed response, with a complete breakdown of all labor and material so that I can qualify it properly and easily.
“Also, if I have not worked with this sub in the past, I want to see a track record, including references testifying to their work as being of quality and on time, and a summary of their financials.
“Another thing I look for: Can they man their crews? Drywall
requires a lot of manpower; are they manned to do it? I have to know that the sub can meet the construction schedule.
“If all of this is provided in the bid response, it makes it that much easier for me to decide.”
If you gain the GC’s confidence, half the battle is won.
When it comes to winning bids, many contractors still report that the work they win today is primarily with GCs they have worked with in the past and with which they have established a performance record, which is another way of saying that they have gained the GC’s confidence.
As Dave DeHorn, chief estimator at Brady Company in Los Angeles, reports: “Our last three successful bids were due to existing relationships with the general contractor.”
Rob Little, vice president of Little Construction in Indiana, agrees, “Most of our successful bids are due to the owner or GC wanting us to do the job based on past experiences with us. We are rarely the low bidder.”
Says Dennis Jarvis, president of D.J.’s Drywall in Florida, “It comes down to knowing the customer. The majority of our work is repeat business, based on our demonstrated ability to produce quality work and to finish the job.”
“If the owner really wants to build the building right,” says Richard Riley, president of Simpson Plastering in Alabama, “and if he is willing to pay for having it done right—and some are—we win the bid both by reputation and by our bid response, because we demonstrate that we can do the job right and that we can do it on time.”
From the GC’s view, Squire also stresses confidence. “Confidence is huge, and a clean, complete bid response, professionally presented, goes a long way to instill confidence. That is a bid that I will seriously consider.
“The bid is a representation of the company and the way it performs. The bid (and the person presenting the bid, if in person) must make me confident that they not only can do a good job, but can meet the schedule.”
Bid Response Fundamentals
A bid response that answers all of the GC’s questions and concerns—and that makes his job easier—will always receive serious consideration.
And that is what bid response fundamentals are all about.
Read the bid request carefully. In order to respond professionally and specifically, you need to fully comprehend and know precisely the request. Always take the time to go through the bid thoroughly.
DeHorn says, “If we decide to bid a job, we always begin by downloading the complete bidding documents, which we then print out and read through with a fine-toothed comb.”
RFI any points of uncertainty. You need to request additional information for any points that do not make sense. This not only to level the playing field—to make sure your competitors are bidding the same project you are—but also to ensure that you truly understand the scope of the job.
A complete line-item breakdown of specific tasks and costs. The bid should contain full details about the costs of all tasks and materials required for the project. The GC needs to know exactly where he stands if he awards you the contract. Optionally, you might consider showing your overhead costs and anticipated profit.
“We measure all of the parts and pieces (quantity take-off), put production rates to the units taken off, obtain material quotes from three vendors on all of our bids, get subcontractor bids (scaffold and engineering of the exterior metal stud system), and look at wage rates for the time frame of the project,” says DeHorn. “All this is included in the response.”
The bid response should also demonstrate your capability to do the job (including references to similar jobs successfully completed in the past). Your response should inspire the GC’s confidence, and it could include the following: company background; qualifications and credentials; personnel and prior experience; project strategies; work plan processes and tasks; and schedules.
Attention to detail. Answer any and all questions asked by the bid, and address them in detail. A bid response that generates no further questions from the GC is a good response.
This attention to detail will make you stand out (often head and shoulders) above the rest.
A professional appearance. If submitted on paper, the bid should be printed on your firm’s letterhead.
It should contain all the pertinent information about the project, including the full name of the client, his or her address, the address of the job site and the completion date.
Also, proofread the bid response carefully; mistakes or typos reflect poorly on your professionalism. Ensure that the response is well organized and looks neat and tidy.
If at all possible, deliver the bid by hand.
Charles Antone, a consultant with R.J. Kenney Associates in Massachusetts, stresses the human factor: “The human connection is still a factor. And these days you have to go the extra mile. You have to show up for pre-bid meetings, because even in this climate, clients want to feel comfortable about the guy they sign the contract with.”
All-inclusive proposal. The completeness of the response is hugely important, and could include your own shop drawings, as needed. The goal is to avoid any change orders not originated by the owner or GC.
Still, be sure to include the phrase “as per plan” to stress that you have taken off and are bidding the plan provided.
State your payment terms as clearly as you can.
Also include line items for services that other contractors are likely to omit, such as disposal of wastes, cleanup and the protection of the rest of the site or other trades.
Greg Koppman, president of Cornerstone Plastering & Drywall in South Dakota, sees eye to eye with this approach: “I try to cover everything to make it a complete scope of work, and I make the response as detailed as I can in order to leave no questions.
“I also try to take on as much of the job as possible to make it easier for the GC to handle the project.
“Basically, it’s back to fundamentals. Sweat the details.”
Then he adds, “Also, I honestly think it will not be too long before things will turn around and GCs will go back to quality subcontractors. They are being burned too often by subs that don’t complete the jobs, and that leaves the GCs in a world of hurt.”
The completion date. Be very clear about when you expect to complete the project. That said, always include a contingency clause about factors not under your control, such as bad weather, delivery delays in specified materials or delays among other trades.
A timely submittal. Always submit your bids on or before the due date. Timeliness is another sign of professionalism.
By the way, one way to circumvent bid shopping is to deliver the proposal a minute or two before the deadline so the GC cannot use your number to beat down other contractors.
Speaking of which …
All subs run into bid shopping, some more than others. Let’s dissect the beast.
Bid shopping is the unethical practice of a GC disclosing the bid price of one subcontractor to another in an attempt to drive the bid down.
Included in bid shopping is “bid peddling,” in which subcontractors offer to undercut the known bid of another subcontractor.
Bid shopping can occur both before and after the project owner awards the prime contract to the GC.
Pre-Award Bid Shopping. Many consider pre-award bid shopping an acceptable expression of free competition. The theory being that this benefits the owner by arriving at the lowest possible bid, and consequently the lowest cost, for the project.
Of course, in this world, you get what you pay for.
Post-Award Bid Shopping. In post-award bid shopping, the GC tries to obtain a lower price from a second subcontractor, after having already been awarded the prime contract through the original subcontractor’s bid.
This serves only to benefit the contractor, as monies from such cost cutting pads the GC’s profit margin and are never passed on to the owner.
How to Handle Bid Shopping. “When I find that a GC has actually shopped my number,” says DeHorn, “I tend to give him a higher number next time and lower, more competitive, numbers to the GC that we have a good relationship with.”
“GCs who bid shop,” says Antone, “are GCs who don’t realize that they are only as good as their subs. It’s an effective way of burning your relationships with good subs.”
Jim Weaver, president of Mirage Plastering in Arizona, concurs, “We avoid the bid-shoppers, and instead leverage the relationships that we have. Even though quality is no longer always appreciated, and the number of GCs that appreciate reliability and quality is dwindling, we always try to provide every service we can, and as well as we can.”
Can a bidding war, in fact, be won? The consensus is: no.
“My suggestion,” Antone says, “is only to go after the projects that fit your business model. If your business model is to serve high-profit high-end projects, you’re not set up to go for lowest-bidder commodity work, and you will not fare well.
“With current margins, it is very hard to make up a project loss with future projects, so don’t go with a low number to get cash flow going. You have to be very wise and only bid on things that fit your business model.
Says Little, “Do not drop your price. Stand strong for what you believe is the correct price for your company to make money and do a good job.”
“In a bidding war,” says DeHorn, “you have to know when to hold ’em and when to fold ’em. We know what our costs are. When you go below your known costs, you are just hurting your company. I think some of our competitors don’t know what their costs are and therefore, tend to go too low on a job.”
Riley agrees: “Do not bid at a loss.”
The Stand-Out Bid
So how do you stand out from the bidding pack?
Gerry Roach, owner of Forks Lath & Plaster in North Dakota, has a good answer: “By offering quality and dependability.”
“What stands out for us are the basics,” says Antone. “Is the bid form filled out right, and completely? Is the insurance in line? Has any asked-for bonding been covered? All professional and complete.”
“I give them a complete bid,” says Jarvis. “I make it as easy as possible for the GC to understand and accept my bid. It’s back to fundamentals. Be as detailed and clear as possible.”
Riley adds, “We hold our margins; we demonstrate that we know what we’re doing and can do the job. We try to be as complete as possible.”
The winning bid response is one that saves the GC time by being complete, and by not raising any questions. It is one that makes it easy for the GC to do his or her job. It is a response that demonstrates that you can complete the job, and on time.
It is a measured response for desperate times.
Coeur d’Alene, ID-based Ulf Wolf writes for the construction industry as Words & Images.