Whenever I think about the truly exceptional people I’ve worked with, there’s only one quality they all shared; clarity of purpose. Now it seems like fulfilling the job description that Human Resources typed onto your offer letter would succinctly define your purpose, sadly that’s not always the case.
Timely and tidy
I’ve worked for people who had well-defined expectations for their estimator, however they didn’t consider the estimators purpose in their organization. Delivering tidy proposals before the deadline is an absolute job requirement but that’s documentation (process), not procuring work (product). I’ve never seen an estimating job offer that stipulated how much work you’ve got to win, but I know plenty of people who “used to work in estimating”. The pervasive mindset of most firms is that executing a proscribed process known as best practices will lead to an acceptable number of awarded contracts. Anyone who isn’t successful must not be working hard enough. Estimating is viewed as a machine, and they’re hiring you to crank out wins. The problem with this perspective is that it only works when winning profitable work is easy.
Competition is different in a booming market
Too much and too little
Meanwhile, there are lots of estimators struggling with the estimators paradox: You lose because you included something extra, and you win because of something you left out. Knowing what to include in your bid can be a strenuous exercise in judgment. Balancing the gaps in information against the surpluses of available minutia can easily consume all the estimators time. Time is lost right at the start as some estimators struggle to get the invitations to bid (ITB) out to their subcontractors (subs). The struggle is compounded when questions arise and the estimator has to write Requests For Information (RFI’s). All this information management work is in addition to actually estimating anything. The problem is compounded by the standard practice of having several estimates in process.
What do you think you do here?
It’s a simple question, what’s your purpose in this business? The answer is emphatically not “estimate the cost of projects” because that’s the process not the product. Your purpose is to win profitable work. Working from that position, it’s obvious that there are immediate hazards surrounding the winning number. If you’re a little too low, the work won’t be profitable. If you’re a little too high, you won’t win. These hazards get more severe the further your number is from the correct answer. Way too low may irreparably harm your company, and jeopardize the project. Way too high, and you may harm your firms reputation, leading to exclusion from future opportunities.
How to get where you’re going
Effectively dealing with these hazards can be summarily described as controlling risk. Let’s take a moment to visualize uncertainty in the example below.
Guessing——————————————————————————————Actual built price
Greatest uncertainty Least uncertainty
The left side represents the least amount of work, and the greatest amount of risk. There’s a chance that you could guess perfectly, but it’s very small. This approach is better known as gambling. The right side represents the most amount of work and the least amount of risk. Companies obviously can’t afford to build models of every project to negate risk. They can, however compile past project information to help price similar work.
Above: Design driven risk
Estimators conduct Quantity Take Off’s (QTO’s) of the Construction Documents (CD’s) to quantify and value the project scope. The relative merit of their efforts will place their bid proportionately on the scale above. This is the reason estimators control rather than remove risk. If there was no risk, the bid would be done by a cashier.
So if estimators are supposed to win profitable work by controlling risk, and risk is controlled by QTO’s, how are contractors wrong for overemphasizing timely and tidy bids? The problem here is that not all risks are driven by project scope uncertainty.
If we recognize that not all clients are fully funded, we’re forced to admit that not all opportunities are equal. “Winning” a bid with a client who can’t/won’t award a contract is a risk that has nothing to do with how accurate your QTO’s are. Picking only opportunities that you’re likely to profitably win is a fruitless exercise if there’s no contract award.
Very successful estimators pick opportunities that they’ve got an excellent chance of landing a profitable contract award. Remember the estimators purpose is to win profitable work. No contract means no work. From this perspective, estimating could just as accurately be called “Contract targeting”.
Sheep’s dog, isn’t the same as sheep dog.
What defines an estimators chances of landing a profitable contract? Competition for one, efficiencies of scale for another. General Contractors (GC’s) by definition, contract portions of the project scope to subcontractors. The VAST majority of the actual work is completed by subs. GC estimators are competing on the basis of their relationships with subs. The GC with the most market leading subs has the best chance of winning. Success here, is all about building market leading subcontractor loyalty.
What defines if the work will be as profitable as it should be? In-house, the leadership and administrative abilities of the Project Manager and the on-site staff. Chasing work that’s aligned with their skills, abilities, and past successes is the best way to ensure profitability. On the other side of the contract sits the client and their representatives. Ethical clients with solid design teams are rare gems that attract fierce GC competition for their projects. Incomplete plans and short deadlines is the signature play of the troublesome client.
“Well our design isn’t complete but we’ve got cloud based computing to share the misery equally”
There’s never time to do it right the first time, but there will be time to do the work again. Unresolved issues handed from estimating to project management tend to harden in the arteries of a project, choking off progress until you’re lucky to simply escape. The estimators purpose is to win profitable work. If it’s not going to be possible to profitably complete the work, there’s no reason to pursue it. Estimators need to keep track of clients and design teams who’ve run contracts into the ground. Very often the client or their design team is the contractors greatest risk on a project.
Deductive reasoning and streamlining your process
Deductive reasoning is a process where you begin with premises that you must assume to be true. Then you try to determine what else would have to be true if the premises were true. Applying this to our situation, we have two premises; Estimators must win profitable work, and estimators work by controlling risk. Earlier I applied deductive reasoning to explain why we do QTO’s, or why it’s important to pick the best opportunities. My intention was to reveal the wider scope of what it really takes to be a successful estimator. If you’re already struggling with the stress and boredom of grinding out bids, this probably looks like I’ve dropped a whole lot more on you. Take heart, that’s not really the case. First off, MOST estimators are losing more than they’re winning. If you’re winning profitable work all the time, I implore you to start a blog! For the rest of us, this means that the majority of your daily work isn’t achieving your purpose.
A critical concept of successful estimating is that in order to win more, you’ll have to bid less. Winning comes from bidding only good opportunities that strategically align with both the GC AND their subs. It takes a lot more focused effort to bring all of that together on an individual bid. Losing bids diminishes the GC’s reputation with the market leading subs. Not only are you wasting your company’s time, you’re damaging your “pull” with subs. More bids means less focus which means higher risk which inevitably translates to lower profitability. Simple things offer no shortcuts.
Most estimating managers won’t consider reducing your workload until you’ve won more work than the company can handle. This circular pattern is why very few people want to become estimators. It’s a ton of work that’s rarely successful because the focus is on single-minded process rather than multi-faceted product.
Elevating the situation requires multi-level thinking. Being able to accurately identify your odds of success is a basic necessity. For more, read up on estimate tracking here. Once you’re clear on the odds, you should be tailoring your efforts to get things rolling quickly. Keeping momentum is how we keep the stress and boredom at bay but that’s not enough to really solve your problem. It stands to reason that you’re tasked with bidding something that’s an obviously poor fit.
“I can see this client has made some risky decisions…”
Treating every opportunity like it’s equally valid may sound like a best practice but it’s profoundly counter to your purpose. If you’re certain to lose the job, you’re not helping yourself by compromising better opportunities.
Many managers are amenable to courtesy bidding the turkey job to free up resources to land the great opportunity. Gaining a little leg room, then delivering the victory builds faith in your judgment. Backing your judgment with facts and figures, is how you prove your expertise. Trust is built through honesty, transparency, and accountability.
Overworked estimators often hear: “You can’t win if you don’t bid”. The unsaid counterpoint is:”It’s not the job you lost that puts you under, it’s the job you won”.
Clarity of purpose is a simple concept with powerful implications. Give yourself time to consider what you’re doing and ask how it achieves your purpose. We get a lot of encouragement to maintain disciplined process like a regiment on the march, but very little for picking the right direction. It’s only after you’ve arrived at the destination that people realize you knew what you were doing.
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© Anton Takken 2016 all rights reserved