August 26, 2014

Why are we bidding this anyway?

By Anton Takken

Hard lessons on hard-bidding for the hard-headed.

Most estimators are working for someone else.  For simplicity’s sake I’ll refer to that person as the boss.  The boss often weighs in on pre-construction decisions to include what makes the bid list, what margins to carry, and what jobs they don’t want.  It’s their company and they call the shots.

As an estimator, you’re looking for low risk, high profit, easy wins to keep the company working.  That seems like something the boss would be after as well.  A lot of estimators end up wondering to themselves why it doesn’t always seem like it.

Everybody’s coming from somewhere

Entrepreneurs are remarkable people who see opportunity in adversity and often move in opposition to safe, secure, and easy ideas.  These traits help define why they’re successful and also explains why they’re often not…  The point here is that the opposition to an estimator’s priorities is a natural one.  They hired you to provide the counterpoint to their perspective, not that it’s a guarantee you’ll change their direction.

Why are we bidding this anyway?

Sure boss, I see exactly where you’re going with this…

What is the mission?

Despite repeated failures, the boss is pushing for yet another bid just like those before it.  Nothing’s changed and the outlook is bleak, why won’t the boss see the obvious?  Sometimes the answer is frustrating: the boss doesn’t have the same definition of success as you do.  Some bosses don’t view estimating as pre-construction so much as an amalgam of marketing, posturing, testing, and placating.  The endless marketing pitches about “building relationships” dissolve into playing head-games with the market.

Here are a couple of examples to illustrate how this can happen.

Imagine if you’d spent half a year getting on to a new clients bid list. You can hardly turn down the first invite when the job turns out to be a stinker. 

Going another direction, imagine you have a valued client who’s added a disreputable competitor to their bid list.  A good client will only need a few bad experiences before they reject disreputable firms.  Depending on how frequently they bid projects, you may have to lose several jobs before the client has learned their lesson.

What if your current market sector is shrinking?  A boss would need to find new sources of work which means trying out new things.  Not all sources of work will have the same profit margins so they might need to test the waters in several markets to see if regional differences change anything.  In effect they’re generating bid results.

Conversely, what if your market is expanding?  Does it make sense to chase work in new areas with local staff, or should a satellite office be opened?  Is there an existing subcontractor base capable of supporting the venture?

Planning for success      

Few companies have a corporate culture where the long-term planning is accurately and convincingly presented to the estimating staff.  A boss who views bidding as “turning the crank” on the estimating machine is unlikely to harbor much sympathy for anyone asking why they’re bidding bad jobs.  As an estimator you may not have much latitude on the decision-making but that’s not a reason to give up trying to improve the situation.  Bid results when presented properly can reveal constructive options that the boss may have overlooked.  Some estimators feel as though they must reflexively apologize for every lost bid. This fosters the notion that every bid was really an opportunity.  It should be obvious that many factors influence the likelihood of a profitable win. Unless all the jobs are literally the same, the odds must be different.  Learning to define, to accurately define what influences winning should be the cornerstone of your craft and the basis of your counsel. Be advised that excuses are not a substitute for knowledge or fact.  Some losses will be your fault and some wins will be too.  Credibility builds on honesty.

Getting to the wheelhouse

If you don’t have an impartial and informed insight, you can’t reasonably expect corporate planning to be shared with you.  Respect is often earned through consistently knowing what you’re talking about. Depending on the individuals involved, you might be able to help steer towards better opportunities once you understand where the boss wants to end up.  Understand that the people in charge may be reluctant to divulge their plan, especially when they lack one!  Go with caution.

Why are we bidding this anyway?

“What you’ve gotta do is make sure everyone’s on the same level, then you’re home free.”

Learning by erosion

It’s a fact of life that some bosses are better than others.  Despite our dearest hopes to the contrary, sometimes life brings unqualified people to leadership positions.  The boss may have irrational, uninformed, emotional, and philosophical reasons to do something stupid and most of the time, it’s their right.  Estimators dealing with this frustration should take heart.  Incredibly hard-headed bosses can learn by erosion.  The Grand Canyon wasn’t carved in a day.  Erosion is slow but it’s sure.  To be effective, it’s important to understand that you’re seeking to avoid “I told you so” moments where you become the lightning rod for their frustration.  The goal should be to give a high level analysis of the situation including a survey of the project’s high and low points.  Try to deliver them in equal detail and enthusiasm but be sure to define how a stack up of low points creates a failure mode.

For example: “This job is a remodel of a very large building which means we’ll be busy for the next six months out there.  We’ve got strong competition on it so our number needs to be tight.  The design calls for a bunch of new roof top equipment and the architect put a note on the plans calling for us to field verify and design as needed.  There was no job walk or as-built drawings and the building’s currently occupied so we can’t just get in and see what we’re up against.  The client requires all bids on their forms which don’t allow for exclusions.  Our competitor did one just like this last month only it didn’t have the roof equipment and the note’s buried on an elevation drawing so they’ll probably miss it.  If we include money for engineering and structural support, we’ll surely lose.  If we bid without the structural revisions, we may win but we’ll have to pay for it leaving us stuck on an unprofitable job for half a year.”

The idea is to patiently explain how the influencing factors are pointing to bad outcomes. If the boss decides to pursue it anyway and it goes as you predicted, they’ll remember your insight even if they won’t give you credit.

Sometimes it’s not the bid that’s the problem, but the client.  Here’s another example.

Following the bid, the client sends additional pricing requests for items that were not on the plans claiming it’s necessary to make a snap decision.  It starts with one or two items, then grows to a long list of several items that the client wants priced separately.  After some delay the client calls and says that the project is over budget $X amount but that they “really need” all the items you’ve priced.  The client says they’re hoping you can “find savings” to hit their budget and do the extra work for free.

This is a textbook example of how unethical clients begin a job.  It’s been said that “you can’t change human nature, you can only change how you feel about it“.  Bid shopping is unethical and serves as an insight into the clients values.  These clients are telling you who they are, only the most  naive or foolhardy interpret this as anything but a promise to screw you over every chance they get. There are few guarantees in this world, but you may rely on this: a bid shopped job will eventually cost you money, and diminish the standing of your profession.

Nevertheless, your boss may elect to take that bait.  These are the jobs it behooves you to warn Project Managers about.  No change order work should be priced without documentation from the design team.  No additional work should be started until a signed change order has been physically produced.  Informalities and “trust me” moments cannot exist.  Any gap will hemorrhage losses with unscrupulous clients.

Teaching by evaporation

Some bosses stubbornly refuse to admit when one of their initiatives is failing.  A pattern emerges where the work isn’t profitable and there’s never enough of it.  The boss answers this by demanding more bidding of the same kind of work.  The estimator is putting in considerable hours fruitlessly landing a small percentage of terrible work.  This is like being knee-deep in a swamp where continued struggle only traps you further.

There are a few things to get clear on.  Number one: the swamp is killing your business. There is no opportunity and it’s consuming resources that could be successfully applied elsewhere.  Hard headed bosses who learn by erosion are often “swamp dwellers”.

Number two: You must find somewhere to be successful while you’re stuck in the swamp.

Why are we bidding this anyway?

Pro tip: STOP DIGGING!

Landing a low risk, profitable job, for a good client is like having the sun dry out the swamp.  The boss wants success – giving them something more likely to be successful is leading by example.  The difficultly about an exemplary action is that it’s really, really difficult to do.  Some bosses will be willing to concede to a pitch where you might say “hey instead of bidding swamp-thing, let’s try this job instead”.  It’s more likely they’ll allow you to bid swamp thing and the new thing.  This means you’re required to invest your own effort into your idea.  Uncool bosses will mercilessly undercut you if your idea doesn’t pan out.

Try anyway

A consummate professional rises above the challenge.  Your job is not only to bid jobs, your job may also be to protect your company (and your job) by performing above your pay-grade.  Life is long and you never know who’s watching.  You can be helping an unworthy boss and furthering your career.  It’s important to remember who you want to be regardless of where you are.

Remember that wherever you are on your way to the top, turds float.

Leadership

Poor morale can be like cancer to a company.  Dissent grows until it overtakes all motivation and positivity.  The economy won’t always be on your side and making headway can feel like you’re swimming against the tide.  A subtle feature of depression is that it saps motivation to change course which threatens its existence.  It’s a parasitic mindset that feeds off the status quo by believing everything would improve if only life were fair.

Life isn’t fair which is why market constructs are so complicated.  Contracts seek to protect parties from undesirable outcomes.  Which is another way to contain risk.  The risk eventually boils down to life not being fair.

An estimator must maintain perspective.  The unavoidable risk is why you’re there.  Make the most of the opportunities and lead with enthusiasm.  Act with wisdom and follow your conscience knowing that not every invitation to bid is an opportunity, not every win is a success, and not every job is a career.

Communication

There’s an old proverb that reads: “If you want to go fast, go alone.  If you want to go far, take a friend.”  Long term plans should be clear and inspiring to everyone.  Effectively communicating the long-term plan and the enthusiasm to everyone builds trust and commitment so the group moves in unison.

However when things are going wrong, a company can be like a stampeding herd. There are only two ways to affect the course of a stampede.  Be an immovable force like a mountain, a cliff, or the person who signs everyone’s checks.  The second, is to outrun the herd and make your path the one they want to follow.

In practical terms this means building a personal plan to bring new opportunities to the front.  Research what’s out there, who’s winning it, and how you can emulate their success with your firm.  This also means adding more bids to the workload as mentioned above.

Stay focused on fixing the situation through sound decision making and things will improve.

Why are we bidding this anyway?

 

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© Anton Takken 2014 all rights reserved

About Anton Takken

I chose to focus on estimating for a few reasons. Chief among them was that it's a position that's hard to fill in most companies. Job security and advancement is easier as a result. Unique to this job is a higher vantage point over the company and its place in the market. Bids are generally over in a few weeks which keeps things from getting boring. The reasons few of my colleagues pursue estimating comes down to a few misconceptions. The first is that it's the builders version of accounting - perceived as a lonely and quiet life among the charts and plans. The second is that it's not engaged in the construction process. Lots of the appeal of the construction industry is the sense that individual effort brought a plan into reality. The teamwork and camaraderie present among tradesman seems conspicuously absent at the estimators desk. Finally, I think the last reason is that it's daunting to be responsible for setting the price of something that's never been done. The good news for folks in estimating is that it's much more social than advertised. An estimator's phone is constantly ringing. Taking the opportunity to build relationships with the bidders creates a positive atmosphere and encourages everyone to do their best. It can be too much of a good thing which is why it's common to arrive at their voicemail when you're calling with a question. A strong rapport with the bidders can be invaluable. Subcontractors have much more exposure to what's going on in the market and they're often eager to share their knowledge. Learning from these experts is a priceless opportunity that's often overlooked. More on this in a bit. I decided to start this blog because I noticed that estimating has applications in many arenas. Over the last few years I've helped estimate in fields ranging from software development to blacksmithing! The more I thought about it, the more I realized that it's not about knowing what everything costs, it's about knowing how to figure that out. I believe the very first step to knowledge is to seek it, the second is to retain it, and the third is to pass it on. I hope to share some insights into how estimating is done and hopefully have some fun doing it. My experience is mostly commercial construction, but I'll try to make everything as generally applicable as I can. There are many aspects of business that all markets share yet it's remarkable that one of the most consistent is the failure to recognize that estimating is the very first step to a successful project. So if you're frustrated that work isn't profitable, or exasperated that there's never enough time to get the job done, this blog will be worth your time. Feel free to email me at: estimatorsplaybook@gmail.com View all posts by Anton Takken
This entry was posted on Tuesday, August 26th, 2014 at 3:26 pm and tagged with , , , , and posted in Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed.

58 responses to “Why are we bidding this anyway?”

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