April 24, 2015

The real obstacles to successful bidding

By Anton Takken

“May you live in interesting times” – Chinese curse.

We do live in interesting times. Technological advances have made it possible to communicate faster allowing more to be done in less time. Estimating in particular has benefited from software programs seeking to provide faster measurements, more accurate materials pricing, and so forth. Most Architects are using Computer Aided Design (CAD) at a minimum. Many have moved to Building Information Modeling (BIM) which further expands their capabilities. More can be done with less.

clean lines

“This efficient design gives you clean lines and a place to lie down when your air runs out.“

The curse of the lowest common denominator

Despite these awesome innovations, a simple poll of the industry will show that problems our ancestors struggled with are still with us. Technology, innovation, and horsepower have yet to overcome one simple concept; much of society performs to the lowest acceptable standard. Whether it be price, project duration, code requirements, laws, or professional standards, standards tend to define minimums rather than ideals.

In the manufacturing industry there’s a failure mode described as “tolerance stack-up” which is when all the associated parts are made to extremes of their individual tolerance range. When all the parts come together, the whole assembly fails as a result. This happens in construction estimating as well.

For example: Many projects are put out to bid with incomplete drawings, a short deadline, and a limited budget. The lack of information raises the risk of the project. Limited time to develop an accurate estimate raises risk as well. High risk reduces profitability, so prices are raised to restore balance. The risk stacks up, driving the price which often exceeds the clients budget.  

Backing up a bit, we might ask why the minimums fall short of preventing avoidable problems. I believe it really comes down to how individual professionals choose to balance their efforts against what they believe are the current performance standards (minimums) of their profession.   Incomplete plans are common on projects with a client who’s short on time and money. Design professionals may forgo site visits and investigation into as-built drawings to keep their costs competitive for low-budget clients.

chicken

Drones for remote architect site inspection still have a ways to go.

Incomplete plans in this situation are a function of design professionals balancing professionalism against economic pressures.

The final cost of a cheap (but incomplete) design is hard to prove because competitive bidding is assumed to prove market value. The market consensus on a high-risk job is not the same as the going rate for similar work. Clients can’t be expected to initially realize the impacts of short-changing the design when there’s no mechanism to prove the difference. Architects can’t be expected to turn away paying clients when work is scarce. General Contractors (GC’s) can’t be expected to hit the clients meager budget when the plans are incomplete.

Technology will not solve this problem because it’s not about abilities, it’s about choices. Perspective and professionalism would go a long way towards removing these obstacles. I’m often struck by how simple the solution is to these stubborn problems.

Honesty.

Design professionals know what steps are necessary to produce a complete design. If the client wants to skip steps to save money, they don’t get complete work. Admitting this truth starts with plan labeling.

Design professionals with incomplete plans marked “100% build documents” are rightfully criticized.

If critical information is missing because the client wouldn’t pay for it, the plans should be labeled for the percentage of work they did pay for. Clients should not be lead to believe that 100% designs come at 50% prices. If that were possible, it would imply that the service is over-priced, or the work isn’t complete.

It’s unprofessional and unethical to expect GCs to assume the liability for the intended (but intentionally incomplete) project scope.

in the air

“The design is up in the air,  you’ll need to get under it before we release anything.”

GC’s who enable this falsehood are rewarded with a new normal of incomplete plans and reduced profitability.

Do you know what pros who don’t know do?

Good Architects could reduce the project risk of incomplete designs by stipulating budgetary allowances for unresolved items. Even a simple listing of details the design team knows are missing would be an enormous step in the right direction. Just like burying something critical in an obscure note, the “scavenger hunt” mentality builds distrust and animosity over critically important information. Incredible amounts of time and energy are expended looking for information that isn’t there.

GCs who choose to bid on these incomplete plans could categorize all undefined, missing, and erroneous information into an incomplete design contingency line item. This is the conceptual sum-total of not paying for a full design. This is not an indictment of the Architect, and it shouldn’t be presented as such. GCs are not in a position to know what the Architect was paid to do. It behooves them to make charitable and respectful assumptions of the Architect while remaining truthful about the state of the plans.

inspector

“Erik, I see what you’re looking at but I really think somethings missing here…”

Depending on the situation, it may be wise for GCs to choose not to bid. Clients competitively bidding their project with half-finished plans, short bid deadlines, and impossible start dates are obviously not real opportunities. GCs could cite the plan development percentage as reason for declining to bid. Bids are not free. Bidding a false flag project just to assuage client anxiety, or to avoid upsetting an Architect consumes enormous amounts of time, energy, and money from the market.

By extension, these GCs could reasonably expect the same actions of their subcontractors (subs). Stopping the madness of (over)pricing incomplete designs would benefit everyone.

Compensation in the form of negotiated agreements, or paying for design assist services are reasonable alternatives the client could consider when their project fails to attract market attention.

 

“The best time to plant a tree was 20 years ago. The second best time is now.” – Chinese Proverb

The real obstacle to successful bidding isn’t recognizing that the system has flaws, it’s recognizing how your flaws impact the system. Clients should not expect minimum design to render maximum project value. Architects should not leverage their position as gatekeeper of job opportunities to force GCs to bid incomplete designs. GCs should be honest and forthright about development discrepancies. Playing politics to protect the incomplete design from criticism while overpricing the project serves to encourage these ruinous practices for everyone.

Think it through

Here are four truths we should all be able to agree upon:

  • Nobody’s work is free.
  • Risk is expensive
  • Time is money
  • You get more of whatever you encourage
  • In you’re not aiming at your target, you’re missing

The real obstacles to successful bidding/business come wherever professionals act in contravention to these truths. Pretending that business pressures excuse deliberate choices to short-change professionalism will inevitably lead to higher costs, lower quality, and market constriction for everyone.

In college management course I recall how the professors stressed that there were many different ways to handle business problems. While I can’t prove this to be false, I can say that giving professionals a chance to be honest and forthright will work a certain percentage of the time. As to the rest, I’ve found that working with dishonest people tends to give you lots of opportunities to hone your management skills!

My advice is to avoid them since their motivations are guided by malice.

heat

It won’t stop their sinking, but taking shots at you warms the water…

Philosophically speaking, life is like a path. If we live according to tolerances with the aim of meeting minimums, we’re rewarded with insecure footing on a dark and narrow precipice. In contrast, if we live according to targeted beliefs, we’re rewarded with wide open lanes which reveal more of what’s to come.

The obstacles on that path aren’t about logistics, data sets, or market trends. The real obstacles are the choices we make knowing they’re wrong. Simple answers often demand hard choices. Ask yourself if professionals fifty years from now will still face these obstacles or if this is the generation that removed them for good.

 

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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
This entry was posted on Friday, April 24th, 2015 at 11:39 am and tagged with , , and posted in Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed.

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