Estimating is a deadline driven vocation that can be equally exciting and stressful. Many estimators are expected to manage multiple projects concurrently. With time at such a premium, anything that goes wrong on one estimate has the potential to disrupt several projects. Estimators must keep a wary eye on their entire system from Request For Proposal (RFP) to the Project Manager Handoff meeting.
Much of what goes into a reliable estimating comes down to a consistent process. The focus here is on building a consistent and flexible process to accommodate the various projects you’ll encounter. Estimators must balance the speed of modularity, against the need for specificity for every part of their process.
Nobody figured the “kids eat free” special would have caused so much trouble…
Request For Proposal
The RFP gives an estimator some information on the project, deadline, client, where to get the plans, job-walk date, and potentially some narrative of how the client wants the bid to be handled. Nearly all of this information is as useful to the subcontractors (subs) as the General Contractors (GC’s). Yet very few GC’s will share this document because the prequalified /selected GC bidders are listed. Nobody wants their subs bidding to a competitor. RFP’s also convey when the GC was notified of the job.
GCs may have a lengthy evaluation process for RFP’s to decide whether they will bid. Some GCs wait until the job walk before committing to an opportunity. This hedging can consume the lion’s share of the allotted time to bid the job. These GC’s are always rushing their subs to bid in a fraction of the time allotted. Revealing that their ever-present urgency is a bid tactic might encourage their subcontractors to pursue their more forthright competitors.
GC estimators may be hard-pressed to find time to evaluate an RFP when they’ve got hard-bid deadlines peppering their bid-board. The urgency of the short-term, consumes the planning for the long-term. The only way out of this pattern is to streamline the front end of the process so that there are fewer problems consuming time later on.
Invitation To Bid
An Invitation To Bid (ITB) is how the GC invites subcontractors to bid on their projects. It should be obvious that the ITB should include all the information from the RFP. This is where we meet our first opportunity to balance modularity against specificity.
The ITB is a simple document conveying the Who, What, When, Where, and Why’s of the project. Estimators looking to quickly get through this process might opt to provide scant detail on the ITB since they can readily refer bidders to the Construction Documents (CD’s). A currently popular approach is to insert a hyperlink into the text which leads the sub to a website where the files are available. From the subs viewpoint, a virtually meaningless document arrives, obliging them to further inquiry just to know why it was sent to them.
On second thought, maybe I’m afraid to ask what this is about…
Estimators making templates should configure the template to show only relevant information. An itemized list with check boxes is a tedious means of communicating vital information. I recommend configuring the templates to sort each common job requirement into separate lists for inclusions or exclusions. Forcing the GC estimator to answer these questions, obliges them to become sufficiently familiar with the job to know what they’re asking subs to bid.
The entire purpose of the ITB is to solicit subcontractor proposals which will only happen when subcontractors are interested in the opportunity. Whenever obviously necessary information is buried, it makes subs wonder about the GC’s motivation. Maybe the GC isn’t really trying to win the job or perhaps the information is buried in hope that mistakes will lower prices?
Does this document make me look bad?
Unprofessional ITB’s do more harm than good to a GC. Every savvy sub could rattle off a list of GC’s they’ll never bid to again. Most of the time, the firm was just as bad as their ITB.
Most GC’s use some kind of bid-letting system. Quality ranges from excellent to terrible. The only way a GC can really tell what their subs are getting is to create a false subcontractor with an email address they can check throughout the bid. If this was done, I solemnly believe that nearly half the bid-letting systems would go out of business in a fortnight. The ITB’s out of some really popular systems are an embarrassment to the industry.
Efforts to shed light on code development are ongoing…
Translating to trades
Before we can begin selecting subs, we need to know about the project scope. Unless you’re bidding repetitive projects, odds are excellent that you’ll need to go through the plans carefully considering how you’ll get everything handled. Since everything relates back to the estimate, this process should follow some basic principles. First and foremost, is organizing the project scope according to the Construction Specifications Institute (CSI) Masterformat system. The CSI format codifies every conceivable construction scope into a numerical section broadly defined by divisions. The advantage of this system is a universal organizational structure for everyone in the construction industry. The disadvantage is that CSI divisions are not always related to how subcontractors will bid the job. For example, an Electrical contractor’s proposal will often include everything in division 26 (Electrical) , however it might take a dozen or more different subcontractors to cover everything in division 9 (finishes). Even a fairly modest project may generate an extensive list of CSI numbers. Adding further difficulty, some trades cover multiple CSI numbers, or even multiple divisions.
This is where estimators face an entirely unique problem. Most companies maintain haphazard contacts databases that are tied to Project Management/accounting software systems. It’s incredibly rare for these databases to be searchable for fields like trade or CSI numbers. Some bid-letting systems include extensive subcontractor databases and they are generally categorized by CSI numbers. The GC estimator simply checks every applicable CSI division, and the system generates a list of subcontractors for the GC to send an ITB. Most GC estimators end up creating their own in-house contacts database using a spreadsheet program.
If you decide to build a database of your own, stick to the significant details. GC Estimators virtually never need a subcontractors mailing address, yet they always need the name, email address and direct phone number of the subs’ estimator. I recommend that the subs contact information be listed in rows, ordered by a column defined for CSI numbers. If a sub bids multiple CSI numbers, copy their information for each individual number.
Estimating is a time-sensitive operation, you’ll need fast answers from subs. If one company doesn’t answer, you’ll need another one to contact right away.
Estimators keen to save time might consider using the specification manual’s table of contents to list out the applicable trades. A very complete specifications manual might include a CSI number for every applicable scope on the project. Far more often, the specifications manual will include sections on work that doesn’t apply to the project. Architects often recycle their specification manuals from larger projects without culling the items that don’t apply. This thrifty approach creates huge files with small pockets of useful information.
GC’s who use the specifications manual to list out applicable trades invariably invite subs who find there’s nothing to bid. The wasted their subs time which eventually leads to ignored invitations. What’s worse, easily overlooked notes on the drawings may still require trades not mentioned in the specifications.
The an old adage; personnel is policy has a tremendous bearing on a GC’s ability to profitably win work. Pick the wrong players and bid-day prices aren’t going to be competitive without being risky. This is probably the single most common mistake of GC estimators. They use the same bid-list for absolutely everything they bid. Somehow its assumed that “teamwork” will compensate for fielding subs who are too big to be profitable, or subs who are too small to make production. Profitless work is rarely a priority so big subs get there when it’s convenient for them. The job languishes until suddenly they mob the scene. Change orders ensue then you’ll be waiting for them to return. Too-small subs can’t keep up and they can’t get out of the way. Either case ruins the job for any related trade that wasn’t causing problems.
GC’s spend fortunes on scheduling and project management software systems intended to fix this problem. Pick a better team and it’s amazing how little work it is to make them successful. Please note that better doesn’t equate to more expensive. Market leaders are cheaper AND better than anyone else. GC’s with stagnant bid-lists are the least likely to believe market leaders exist because it would disprove their favorite excuses for losing.
Every estimator needs to be clear on some fundamental points. First, the odds of winning are NEVER even. Second, the estimators who know the odds will either win, or they won’t be surprised at the loss. Third, bureaucratic inertia and dysfunctional relationships are responsible for nearly all the bidding problems between subs and GCs.
Bad relationships will trip you up and keep you down
Soft-headed software for hard-headed bidding
Think about how noteworthy it is that there are extensive bid-letting systems with millions of subs on file. None of them are tracking market-leadership. None of them are tailored to the GC’s interests. There is no such thing as a subcontractor selection system that’s based on anything beyond geographic proximity, CSI designation, Union status, and Minority Business Enterprise (MBE) status. The reason it’s not available, is because GC’s are insanely stingy with bid-results. Nobody knows who won the bid in each division, even among the losing GC’s. This code of silence means that every single estimator will need to figure this out for themselves.
These systems offer little more than a searchable directory of potential bidders. The idea is to blast the entire market, and hope that the market-leader sub will send you a proposal. This approach cuts both ways, since market leader GCs aren’t likely to use a cattle-call approach with their subs.
So what’s the solution?
The answer here is to generate your own classification systems to define the best fit for each subcontractor. Please don’t assume that classification based on dollar value is sufficient. Some subs excel at remodels and struggle with ground-ups regardless of the value. Every descriptive quality that makes a difference towards selecting a market-leading team should be part of your analysis.
Every bid-result should be used to tweak your rankings so you’re staying current. There’s no sense in inviting a sub who won’t be competitive, or worse, who wouldn’t perform. The entire system should be built to sort a subcontractor list based on the calculated likelihood of each sub being the low-bidder. Not only are these subs the most likely to help you win, they are the most likely to bid the job because it’s what they’re good at.
Pat’s really cheap on jobs that don’t require pants
I would recommend using a spreadsheet based system for this. Whatever can be done to format the output to match the ITB template will prove helpful. Building a worksheet which allows the estimator to select the job-specific qualities will leave the estimator free to consider what the job needs, rather than populating their sub list. If the job aligns with your job-tracking recommendations, it won’t be difficult to come up with the right subs. Chasing work that’s a bad fit for your subs shows up as low probabilities for everyone. That’s a strong sign you’ll lose the bid unless you find some new subs.
The hidden catch
Since this spreadsheet system is based on data you generated, it’s very critical to differentiate between internal and external perspectives. The GC estimator has very accurate bid-results on all their subcontractors. This internal data is your version of what happened. Unless you won the job, you aren’t looking at what happened on the market. What you must learn on every job you’ve lost is which sub was contracted for each trade. This external data will tell you with confidence which of your subs were market value, and which subs you need to add to your invite list. External results are much more significant than internal.
Even if you don’t know much about the sub, you do know all the descriptive qualities of the job they won. Entering what you do know about these subs allows you to run the probabilities and determine when it’s time to contact them. If they’re fiercely loyal to a competitor, you’ll know which jobs are going to be harder to win as a result.
Some throughput suggestions
If every job generates an estimate, it also generates a list of subs which can be ranked. Smart estimators will notice that it’s entirely possible to simply add your winning competitors sub to your sub rankings and list them as “low” when you don’t know their actual bid amount. This adjusts your job-level output to reflect the external market outcome. By not obsessing about dollar amount, you’re free to track by job descriptors which you can accurately define.
“Spiraling descent into madness” may describe a lot of jobs
Every estimate is for a job which has those aforementioned descriptors so useful to sorting subs. Estimate tracking for the GC is vitally tied to sub performance, all of this information serves that purpose.
Estimators should make their estimate template so that a separate worksheet is populated with the ranked subs and the job specific qualities.
Copying that worksheet into the sorting database file allows you compile trending data on all of those data points.
Making it easier to move this information around, makes it more likely that it will be done. Having a job-specific bid-list of bona-fide market leaders on day one is going to significantly increase your hit-rate which means you’ll be able to bid less often. Which means you’ll have more time to perfect your craft. None of that happens if you’re stuck updating spreadsheets for hours after every bid.
Reliable data relies on short memories
Big-data projects get out of hand quickly. The relevance of historical data falls off quickly beyond one year. Most construction work is seasonal, so last month is potentially less relevant than this quarter of last year. It’s useful to “freeze” weekly, monthly, and quarterly databases by saving locked copies separately on a server. Whenever you do a weekly freeze, take the calculated output of your week’s worth of bids and start the next week with that as your first bid. By never carrying more than one week’s worth of bidding in the database you’re able to re-create any files that were corrupted with a minimum of fuss and bother.
After a year’s worth of records, your weekly update would have the previous weeks rollover plus last year’s data for that week. You might run a bid-list search and be reminded of a sub who fell out of touch. GC’s who decide to re-visit an old revenue stream would be able to call up whatever year they were last doing that work. Old allies are better than cold calls.
Useful tools work in many ways
Take this concept and apply it differently, if a GC created a subcontractor pre-qualification form which helped to rank them according to their relevant job metrics, they could do a bid-list search based on that feedback. Appraising the new sub in the context of existing subs could provide meaningful comparisons and insights into how they might work out. Taking a different tack you could search your estimate tracking to see examples of past bids that were well aligned with this subs metrics. Lots of subs will be a poor fit to the work you’re pursuing. Being forthright about their odds and the frequency of relevant opportunities shows respect for their time, and keeps you focused on fruitful pursuits without offending anyone. Giving everyone an equal shot at wasting their time doesn’t breed loyalty. Calling them when you’ve got an awesome opportunity does.
They’ll love you for it!
Speed is your friend
Estimators are constantly interrupted by demands from projects that are all in different stages of delivery. Getting distracted at crucial steps is where lots of mistakes get their start. It’s therefore critically important to reliable estimating to work quickly and systematically. Every repeated process should have a systematic approach that’s complemented by templates, spreadsheets, and databases that are all built for speed and reliability.
People are very adaptable which can often cloud judgment about what’s faster or more reliable. Programs, databases, templates, or spreadsheets that force you to search through long lists for basic and repeated stuff are wasting time. Just because some program or spreadsheet has “always had” some quirk, doesn’t mean it should remain. It’s far better to have a short list of stuff you’re always using, than a long list covering every eventuality. Buried information is wasted time.
The estimator who can get their team rolling on an opportunity in less time and without skimping on information will have better coverage on bid-day. Bureaucratic estimators often take exorbitant amounts of time to get their invitations out to subs. Subs facing short deadlines and slow-moving GC’s are more likely to decline the invitation because it looks like that GC isn’t committed to winning.
A late hit is better than a fast miss
It takes a lot more work to fix miscommunication than it should. A typo may attract hundreds of emails asking the same question, even if you sent a clarification moments after it was initially discovered. Lots of contractors adopt a “do what I tell you” philosophy with their subs. If your instructions aren’t clear, the subs have little choice but to ask you about it. If their questions aren’t answered, they may withhold their bid until you call looking for it.
My next post will pick up from the ITB and will cover how to increase reliability in quantity take offs, communications, plan changes, bid scoping, and so forth.
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© Anton Takken 2015 all rights reserved
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