Barn Raising vs. Sausage Making; A lesson in perspective

I was recently asked what topic would most benefit estimators and I recall thinking that was a tough question.

seat

“Have a seat while you think it over”

It wasn’t until I reconsidered the question that an answer came to me.

What would improve estimators who believe they’re well-trained? This is a simple one. Perspective. Lots of otherwise skilled professional estimators are “too busy” grinding out bids to recognize that if your approach is wrong, you’re outcome will suffer.

Bids can become little more than deadlines for some estimators. Lots of GC ‘s assume that grinding out more bids increases your chances of winning. “You can’t win if you don’t bid”, so they bid as much as they can wedge into the schedule.

Let’s look at that for a moment. By equating winning with luck, the harried schedule consumes time which deters skillful bidding. If you’re not making an effort to win through skill, you’re not really working as an estimator at all. Secretarial staff could accept sub proposals, collate, tally and sum to the proposal without an estimator at all. The chances of landing profitable work this way are infinitesimal.

Grinding and stuffing

Perhaps worse, this practice grinds through resources far and wide. A subcontractor bidding to such a GC might give them the best price on the market only to see it squandered because the GC isn’t attracting other market-leader tradesman. So the great sub bids get fed into the same process as the bad sub bids. The GC is just grinding and stuffing the sausage one deadline at a time.

Interested

“Did you say sausage?”

There’s no time” is the stock reply to just about every pre-bid task a resolute professional estimator would handle. RFI’s, bid directives, job walks, clarifying alternates, running down oddball items, it all suffers with the sausage makers. Estimators are reduced to “hiding out” from bidders looking for direction or bid results. The entire situation is a farce where the estimator is never proud of what they’ve done or what they’re doing but they nevertheless expect subs to send bids.

Barn Raising

Farming communities come together for a barn raising. Everyone helps their neighbor because eventually it’ll be their barn getting built. It’s very significant point that the resources were scarce so great care and planning went into making every barn raising successful. Often barns were the largest buildings in the area, it wasn’t always possible to “add this or that later”. Once a wall went up, it was done. Farmers took great care to make sure the job was done right beforehand.

Once the barn was up, it was a tangible monument to the collective effort. Everyone had reason to be proud of the work they’d done.

Bidding is like barn raising. A good project is an opportunity to build something everyone will be proud of. Successful projects are rarely born of shoddy bidding. Even poorly designed projects for low-budget clients can be profitable ventures for a good build team. The best build team begins with an estimator committed to setting the right course.

contact

“Yes Earl, we’re headed to Anchorage… quit talking and just spin the prop!”

An absolutely huge element of “the right course” is professional acumen. The best team won’t come from a cattle call bid invitations. These are invitations to bid which go out to every potential subcontractor in the city or state. Further, respect for the bidders goes beyond good manners. Competition is a necessary part of the business to prove “best value”. However it’s become common practice to insist upon “3 bidders per division” way past the point of proving best value. Projects that come in over budget may require pricing revisions. It’s hardly reasonable to put all bidders through pricing revisions after the low bidders have proven best value. Pick your team and show them the respect they deserve. Leaving the bidder selection “in limbo” to facilitate further bargaining is not ethical.

The invitation to bid promised a contract to the best value bidder on bid day. Weathering several rounds of re-bidding only to end up bargaining over the final award is a “bait and switch”. This is bad advertising because subs learn to expect this approach and price accordingly. GC’s don’t get the subcontractors best efforts on bid day because they know they’ll have opportunities to snag the contract later.

Looking at this a different way, barn raising is about a shared commitment to success. Sausage making is only committed to pushing bids out the door.

“Yeah, sure buddy, like I’ve got time to tiptoe through the tulips on every little bid”.

Lots of estimators face pressure to crank out more bids. The pressure only mounts when there aren’t enough wins to keep the company busy. “Little” bids tend to have lower barrier to entry and they’re the first ones people gravitate towards when they’re looking for “fill in” work. Being smaller, these projects tend to bid quickly against less sophisticated competition.

Goat electrician

Pictured: Unsophisticated competition

Unfortunately “little” bids are much less profitable for all of those reasons. High competition drives profit down. If there’s no call for a more sophisticated or established firm, there’s no advantage in being the best. Even a minor error is likely to have dire consequences on low-budget bids. These “quick hitters” end up being strikeouts for the big firms.

If your team of subs isn’t aligned to the scope of work you’re bidding, you’ll have problems hitting market value. Plus it takes and awful lot of small contracts to equal a few “right sized” jobs. The tricky thing about “right-sized” jobs is that it often takes a great deal of work to find them in slow markets. As hard as it may be to believe, the time is better spent finding the right jobs than bidding unprofitable losses.

Getting back to teams, it’s been my experience that few GC’s have a firm grasp on what their key subs are good or bad at. It’s terribly common for GC’s to define subs as either “big” or “small”. Greater understanding can make a huge difference. Lots of GC’s start out with a new sub by having them bid limited scope or low-budget projects. The idea is that the sub will prove themselves on something less risky before they can be invited to the better work. This logic is tragically flawed because a big sub may not be particularly efficient at little projects. Trying to out-bid companies with a fraction of their overhead isn’t reasonable. As a result, a sub who’d be perfectly suited to that GC’s typical project never sees that opportunity because they can’t win the tiny jobs they’re forced to start on.

In the mean time, the GC is losing out on a market-leader sub who could be earning them victories.

GC’s and Subs should strive to understand one another and align themselves to greatest advantage. That requires forthright honesty which isn’t as common as it should be. Marketing pitches have no place here. GC’s should take this information to heart and avoid wasting the subs time on work that’s too small or too big for them to be competitive. Not everyone will align on every job, that’s OK. Subs will be more enthusiastic about bidding to a GC that wins profitable work with them. GC’s shouldn’t expect loyalty to override the subcontractors own interest. In fact, GC’s should pick work that perfectly fits their best team of subs.

Much of “what’s wrong” in the professional estimators day comes down to enduring arbitrary pressure and a tolerance for tedium. It doesn’t have to be all-consuming. Wining profitable work reduces pressure very quickly. Picking an opportunity aligned with the winning team is enormously satisfying for all concerned.

Imagine the farmers neighbors walking home with the new barns shadow over their shoulder. Proud of the accomplishment and secure in the knowledge that there are opportunities more to come.  That’s a worthy accomplishment achieved through proper perspective.

 

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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

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