Five Steps for Building a Better Bid
Conley Smith, Sr. Business Writer, On Center Software by ConstructConnect
Posted: December 24, 2019 | Estimating
Ask any cost estimator: Estimating is perfected through experience, practice, and intuition. Bid too low and you may win the project and lose your shirt. Bid too high and you could be left wondering how you arrived at such bad numbers in the first place.
If you’ve ever worried about bid accuracy, you’re not alone. Construction industry insider George Hedley estimates 80 percent of construction owners don’t know the true cost of doing business. Even if your construction firm has a nine month backlog, you can still miss details in project scope or fail to meet all the requirements in your final bid.
The Hunt for Missing Details
Today’s estimators must doggedly pursue missing project details before finalizing their bid. Estimating can often feel like a high-stakes video game where you’re trying to avoid “Game Over” before your final bid deadline.
Whether leaning on subcontractors or digging for emails in a jammed inbox, managing late information and nailing down missing details are a common part of any estimator’s bid prep. For many estimators, today’s modern estimating scene can be predictably chaotic.
How do estimators cope? For Senior Estimator Jeff Eckes, digital tools are essential for helping him maneuver from project to project and gather last-minute details. Using digital takeoff and estimating tools, Eckes said he not only knows labor and material pricing is correct, but also can be confident his final bid is in order.
Inevitably, presenting an organized and polished final bid means knowing all quantities are counted and measured and all materials and labor are factored correctly into the final bid.
Catch Estimating Problems Early
For estimators, catching and communicating problems early is one of the best ways to master the art of estimating. Since projects are rarely perfectly timed, cost estimators should frequently communicate to make sure both the field and the office are on the same page.
For example, material shipments may run late, trades can fall behind, and schedules will typically need to be adjusted. Also, the field will need to be kept “in the know” about any special sequences of work or methods the estimator promised during the bidding process.
There can also be issues if an estimator takes shortcuts with their labor estimate by making assumptions. For example, an estimator may assume labor is the base wage plus 26 percent. Making sure to check with the accounting department can help any estimator determine what makes up the true labor cost. This includes the actual cost for an employee, aside from their salary. Also, don’t forget to factor in the accurate hourly rate when hiring specialty labor or craftsmen.
Don’t Forget the Pickup Truck
Estimators can count quantities correctly all day long but may still end up on the wrong end of a low bid if they failed to double-check their numbers. It’s crucial to make sure you’ve calculated for everything — including the long-ago, paid-for company pickup truck that runs to every job — week in and week out.
For example, if you only include the gas, plus a little extra, you may be making a big mistake in your estimate. Where is the accumulation of those dollars to replace the vehicle included in your estimate? Are you accounting for the maintenance, registration, or other costs?
Even worse, some estimators use a rate like $85 per hour without a solid understanding of how they arrived at the number. It’s critical for cost estimators to know whether this is just a generic overhead number. Regardless, it may be time for the estimator to sit down with accounting to make sure they are correct in their number and assumption.
Five Tips to Build a Better Bid
For most estimators and contractors, the success of any project comes down to how well they interpreted the original project design and how well they hold down rework and delays to a minimum. Much of this is tied to how well they manage the project, which includes keeping track of details and cost through to build-out, including material costs. This process always begins with a detailed takeoff and estimate. How can you build better bids? Here are five tips any estimator should keep in mind that could make the difference between winning or losing a bid:
1. Make sure attachments are clear so you can intentionally show specific things that are covered in your bid — especially those hidden items others may have overlooked.
2. Show real scope by telling the client how your work will be completed versus just what they requested.
3. Show quantities and details by over-communicating so the client is clear that your bid included the full scope of work.
4. Reference the specs as part of your decision-making process to show respect and knowledge of the project’s goals.
5. Anticipate what other trades will need to show that your trade/scope of work interrelates with another contractor’s work and how you will accommodate others.
Using Digital Tools to Win the Profitability Battle
How do estimators beat back some of the chaos and uncertainty when bidding in an era of razor-thin profit margins? Many contractors say using job costing software alongside takeoff and estimating software helps them gain even greater visibility into why jobs don’t go as planned.
Clearly, digital estimating tools can help any estimator and contractor gather better, more detailed information, and leverage historical records from previous jobs. As a result, they can accurately compare job cost against the original estimate and more efficiently boost profits and achieve growth. Sure, some cost estimators will get lucky with a project because they built fluff into their bid, or their crews will work faster than what was estimated. However, with pressure mounting to accelerate the bid process and win more projects, many estimators are risking accuracy and introducing errors based on assumptions or old numbers.
When the bid is on the line, no one wants to discover they’ve been miscalculating equipment costs for six months or forgetting to include site excavation work accurately. In On Center’s white paper—Overcoming the Pitfalls of Estimating—you can find out how to overcome your toughest estimating challenges to win more profitable projects for your construction business. Check it out now to ensure every bid awarded is accurate, not overcharged, or low-balled.
About the Author: Conley Smith is a senior business writer with On Center Software by ConstructConnect. She has been writing about technology and its impact on business for more than 15 years.
Need more information on Estimating? Standard Estimating Practice from the American Society of Professional Estimators guides you step by step through every aspect of estimating a construction project!