Why is everything a secret?

“Discretion is the better part of valor” : Shakespeare.

The life of an estimator involves a great deal of discretion for some very good reasons. For example, subcontractor (sub) bid amounts are kept confidential to maintain an ethical bid. Sharing subcontractor bid amounts with their competitors to achieve advantageous pricing is bid-shopping which is unethical.

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Bid shopping: Not a good look

Beyond the mechanics of maintaining a fair bid for the subs, an estimator must be aware that their competitors are watching. Revealing how you’re winning bids can be a costly misstep. Developing leads can be a very expensive proposition, so it behooves the savvy estimator to be discrete. The same goes for a subcontractor distribution/invitation lists. These are the “nuts and bolts” of an estimators operation and should be considered confidential.

Design professionals face an incredible challenge to generate a perfect set of drawings. GCs should show deference and discretion when they find mistakes in the plans because strong working relationships are built on respect. Embarrass an Architect at your peril!

Code of silence

Many estimators are tight-lipped about everything. This code of silence begins to work against them in quiet ways.   It should be obvious by now that communication is a vital aspect of successful business. Feedback is the first victim to overriding caution. Most General Contractor (GC) estimators have a bid results policy of “given when asked” which means the subs must hound the GC for bid results. Often the answer is a terse and nearly meaningless reply such as “we lost“, “you were third“, and the perennial favorite: “your number was competitive“.

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“I’d like to give you better answers but getting to those files is tricky…”

Forcing subs to bid blindly means they’ll spend more time missing than hitting. GC estimators who won’t share timely and meaningful results leave little incentive for subs to continue trying. GCs who expect bids anyway are communicating a lack of concern for wasting the subs time.

It bears mentioning that its standard practice for estimators to withhold bid results on projects they’ve won in order to allow the project manager (PM) time to review the bid for errors, omissions, and inconsistencies. Obliging the PM to contracting with a sub who was not actually the legitimate winning bidder is a serious problem . As a result, many firms have a policy against providing bid results before contracts are settled.

GC estimators should nonetheless provide bid results whenever they lose, and they should actively circle back after contracts are settled to provide feedback on wins as well. Proving that you’ve nothing to hide is an excellent way to build subcontractor loyalty. It’s seldom mentioned but the typical exchange between GCs and subs is like this: GC invites the sub to bid, the sub bids the job. The next reciprocal, logical, and ethical step is for the GC to provide bid results to the sub voluntarily. It’s a huge waste of everyone’s time making the subs nag for bid results that could easily be emailed the moment you know you lost the job.

Honest dealing is the hallmark of a professional which attracts market-leading bidders. It may seem counter-intuitive, but sharing how you lost directly leads to winning more often. Rapid bid results and high hit rates are constant companions in the hard-bid world.

Avoiding responsibility

The pre-bid stage of a project can be a very fluid process involving changes to the plans, scope, and budget. Often there can be substantial contradictions in the Construction Documents (CDs) that need clarification. Some estimators don’t bother to do Quantity Take Offs (QTOs) of subcontractor scope. This invariably means they aren’t pursuing Requests For Information (RFIs) like they should. Worse still, some GC estimators are afraid to “appear stupid” for asking a question that may be answered in the plans. The subcontractors questions go unanswered by the GC, whose “strategy” is to simply demand all subs bid per the plans and specs.

secret

“Pssst!  Dude! You’re giving away my trade secrets!”

This is bid collecting instead of estimating. Some firms have secretaries collecting bids which is arguably better because at least the secretary will reliably answer their phone .

Since the subs are barred access to the design team, they have no way to know if the GC wrote an RFI or not.   Lacking acknowledgement or direction, the sub is left to decide what the GC’s silence implies. Jobs can be expected to suffer any time there’s an obvious lack of leadership, accountability, and communication. This adds to the subcontractors risk which raises their prices. This kind of secrecy is costly.

GC estimators who quickly acknowledge the issue, state that the RFI’s been submitted, and provide intermediate direction for everyone affected earn their subs best efforts.

Match existing: I don’t know what’s existing and neither do you. But it won’t be me that pays, it’ll be you!

There are design teams that offer discounted services to clients which cut out site visits and fully vetted plans. Low-end remodels are particularly given to notes requiring “field verify”, “match existing”, and so forth. Imagine trying to bid a job where the finished items in question are 30′ off the floor in an occupied space. How would a bidder go about determining the make and model of existing materials during their site walk? Bidders trying to price the work off these plans often wonder why this information is a secret. The design team doesn’t know what’s existing, so they place design responsibilities on the bidders. It’s unprofessional, unfair, and it happens all the time. The only way it will stop is if these designs fail to attract bidders.

If the client couldn’t or wouldn’t provide the team with as-built drawings, the design team will often resort to depicting minimal areas of the project to reduce drawing costs. This creates many predictable problems for bidders.

architect50

“You may notice that the addition is better suited to…  a different building entirely”

For example: A grocery store remodel may have a frozen foods section with miles of wire running to a panel that’s not located on the plans. RFI’s asking for the panel location go unanswered because the engineer never made a site visit and doesn’t have access to as-built drawings!   Rather than admit they don’t know, these design teams opt for silence. The risk this creates for bidders is unconscionable.

Remodel projects are the most likely to omit basic information like; utility locations, deck heights, even the correct address!   GCs seeking to help these clients can contribute greatly to resolving these problems with well-written RFIs. Alternately, these GCs could provide bid directives that provide the stipulated conditions of the GCs proposal. By limiting what you’re promising to do, you can reduce the risk for everyone. Be wary of landing a hornets’ nest in the process. Some of the worst projects start with trying to “help” a client with their poorly drawn project.

Transparency: The great reducer of risk

GC estimators who make it a point to ensure that every bidder gets the same information, the same opportunity, and the same amount of time can actually spend less time running down loose ends. In today’s age of communication it’s easier than ever to instantaneously share information. Subs can run an estimator ragged trying to answer all their calls about a project issue. Letting them pile up on your voicemail leads to a whole lot of incomplete proposals on bid-day.  One email to everyone can make the phone stop ringing.

But what if I don’t know the answer?

If the subs are stuck on; do I do this or that, questions, you might respond by admitting you don’t know yet, but that you’re rolling with option 1 until told otherwise. The GC estimators goal should be to provide uniform, and reasonable direction whenever there isn’t a firm answer. Telling them “I don’t know, I’ll have to ask and get back to you” is a huge mistake because you can’t be sure the answer will come before the deadline. Pick a direction that you’d be willing to stipulate to on bid-day as your fall-back plan. If the design team response is completely different before the deadline, adjust accordingly.

paddle

Your approach may change but the goal is the same.

Show your team that they have a leader at the helm. Leadership isn’t gifted guessing, it’s about taking risks, accepting responsibility, and maintaining momentum.

On some occasions it’s appropriate to ask the sub what’s at stake. If a given issue has only two reasonable solutions, it might be best to price them both. Asking the sub what the approximate cost, schedule, and risk differences are between options can quickly narrow things down. If the “premium” option is nearly the same price, but take substantially longer to get, you might clarify that detail on your proposal rather than asking the subs to price each option separately.

Wait and see…what a mess you’ve made.

An awful lot of GC estimators respond to questions with a request for alternate pricing. The intention is to “wait and see” if the question really merits their investigation or not. In practice, this tends to generate a maelstrom of prices which may not be presented in the orderly manner you imagined. Each sub might choose a different way of adding up all the options. As the deadline grows closer you’ll be burning up the keys on your calculator trying to sort it all out. Unwarranted alternates are a terrible burden to put on yourself when time is short. They can also increase the subs workload exponentially. In some cases alternate requests are so burdensome subs will decline to bid.

GC estimators should make decisions when they’ve got time on their side. Plus there’s always the possibility that you’re the only responsible GC estimator answering questions.  The entire subcontractor market may default to your directions which keeps your competitors from receiving incomplete (and cheaper) proposals. Being a professional can pay dividends in unexpected ways.

Time bandits

There are some subs out there who will find a question to worry about no matter how straightforward the CDs are. Entertaining their anxieties is worthwhile in direct proportion to their ability to deliver market-leading prices. Risk is costly, so anxious bidders are rarely market leaders.

Warningsign

I’m not saying you should ignore the worry-wart bidders. In good market conditions, these folks won’t send a bid until they’ve been answered. Their bids tend to be very thorough and low-risk which can be a huge help on complex projects. The questions with merit are worth the full effort, whereas the anxiety is best handled through mutually understood default assumptions.

Nurture the nature of the best bidders

Still, there are some really excellent subcontractors who’ve got an estimator who simply won’t bid unless you actually talk to them beforehand. As a GC estimator, you’re trying to reduce risk by attracting market-leading subcontractor proposals. Sometimes that means maintaining relationships with difficult people. If it’s any consolation, these people are just as difficult for your competitors who might lose out on the winning number for lack of patience.

Discretion vs. Secrecy

Discretion is sharing information judiciously as opposed to secrecy which is simply withholding information. Earlier I touched on bid-results being withheld until contracts were resolved. This is an act of discretion to allow reasonable precautions. Every businessperson can understand the need for discretion. However, making necessary information a secret is bad business. Secrecy is a poor substitute for knowledge as it serves to keep out as much as it keeps in. Business depends on relationships which are social at their roots. Short-changing the social obligations brands a relationship as one-sided.

Like a wall blocking the sun, secrecy stifles growth. Discretion can quietly move mountains by building trust in relationships.

 

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© Anton Takken 2015 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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