Take a Smarter Approach to Bidding

Contractors risk bringing trouble to their business without a planned approach for taking on more work.

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For contractors looking to expand, it may be tempting to significantly ramp up bidding output by firing off as many quotes as possible on various types of projects. But an overly zealous approach to taking on new business can easily backfire.

“It’s important to evaluate your business and have a clear direction where you want to take it,” says Jim Gaffney, owner of Goshen Mechanical in West Chester, Pennsylvania. “Taking on too much in a short period of time can put a lot of stress on a business and can lead to serious problems.”

Those problems could include not having sufficient labor to handle the work, taking on projects outside of your comfort zone, taking on projects with questionable clients, and impeding cash flow.

What to consider

Prior to commencing a push to take on more work, contractors are well-advised to establish a clear strategy and approach to a ramped-up estimating effort. “There’s a lot to consider when determining what type of work to take on,” says Vitaly Kontororovich, owner of Vital Plumbing in Brooklyn, New York. “The first consideration is the type of labor being used. If you’re a union shop you’ll never be competitive bidding nonunion work against open shop contractors, and so quoting those jobs is a waste of time for estimators.”

The next consideration is the size of projects you’re comfortable taking on.

“If you have a few employees and a bonding capacity of $3 million, you can’t be looking at new apartment complexes and other projects that will require a lot of capital and manpower,” Kontororovich says. “It makes good business sense to err on the side of conservativeness to ensure you don’t bite off more than you can handle at a given time.”

Kontororovich notes that it’s better to have multiple smaller- to moderate-sized projects running simultaneously rather than managing one large one. If something goes awry or the money doesn’t flow as fast as expected on one project, it’s much easier to handle if there are multiple projects running.

The actual customers being quoted are another key consideration when looking to expand. “It’s important to run a Dun & Bradstreet report and have a good sense of the credit history of a prospective account,” says Bill Soper, senior estimator at Calvert Mechanical in Baltimore. If you’re on the fence about a particular new client, Soper suggests treading lightly by starting with a couple of small opportunities.

The bidding process

It’s relatively easy to get on a lot of bidders’ lists and in short order have more projects to quote than you can get to. Trying to estimate jobs too quickly, however, can undermine diligent practices and result in costly mistakes. It’s important to allow ample time to review vendor quotes to ensure they are accurate and pricing is optimal. On projects where multiple manufacturers are noted as acceptable, estimators are well-advised to have at least two of them provide figures, especially on moderate and larger jobs where a lot of the same items are called for.

There’s a fine line between putting proposals together expeditiously and putting too many together too fast. “You don’t want estimators under so much pressure to churn out quotes that they end up making costly mistakes,” Gaffney says. “General contractors rely on competitive bids to win their work, so if they rely on a quote with a mistake, they will do whatever they can to hold you to that number.”

Gaffney notes that a couple mistakes with bids will quickly spread within the contractor community.

Following up on bids is nearly as important as submitting them. General contractors and end users are busy juggling many things at once, and quite often, those who are diligent with follow-up will be a top contender when it comes to buying out that package. “Sometimes things get very hectic, and we are trying to purchase many different trades for multiple projects at the same time,” says Bill White, senior estimator and purchasing manager at Walsh Brothers, a Boston-based construction management firm. “I appreciate subcontractors who follow up weekly because it gets my mind thinking about that package, and I turn to that subcontractor when I need to ask questions or confirm scope.”

Staying organized

Though it may seem like an obvious point, maintaining an organized bid schedule and updating it daily is extremely important. It’s easy to get caught up and neglect a handful of bids or begin reviewing certain bids the day before they’re due. By maintaining a schedule and adjusting bid dates as necessary, estimators can prioritize and focus on those jobs that are due sooner.

Lastly, it’s important to not take jobs below the margin threshold you’re comfortable with. “Just adding a lot of volume at tight margins is not a good approach,” Kontororovich says. “You need to have some cushion in it in case labor goes over budget or the money doesn’t flow as fast as you expected. You’re in business to make money and passing up bad jobs and jobs with no money in them is just as important as getting proposals out and negotiating good work.


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