Construction firms love to advertise their integrity, their honesty, and their commitment to doing their best. In contrast, we don’t see a lot of advertising space used to mention on-time deliveries, site logistics, or accurate accounting. Surely the client cares about their project’s timely completion as much as their contractors integrity, so what’s going on?
Maybe we need to put up more safety banners?
If advertising exists to encourage clients to select your firm over your competitors, it would appear that most construction advertising operates on the assumption that contractor selection hinges on the client’s perception of your honesty. By extension, this communicates that there aren’t noteworthy differences in abilities, experience, equipment, trade-craft, market share, or purchasing power for the client to consider. In most companies, the estimating staff is a huge portion of their marketing efforts. Often it’s estimators who form the clients first impression of their firm. How well does the estimators actions align with the firm’s message?
Standards versus statements
Taking another approach, if we assume that the principles of these firms are simply advertising based on their deeply held beliefs, we must then ask how they go about ensuring that their staff meet these expectations. Without enforceable standards, these are merely hollow statements. In my experience, most of them are. There are discussions among various estimator groups about how to create some form of ethical guidelines or integrity-based mission statement for the vocation. Lacking a means to enforce standards, it’s more likely to attract scoundrels seeking legitimacy, than it is to attract honest professionals seeking company.
Don’t be fooled by the diploma he bought online, Eddy didn’t study like his classmates.
Gray areas and grease
The first stumble towards enforceable standards will come from folks who are surrounded by “gray areas”. Absolutely every opportunity to do the right thing is carefully weighed against an opportunity to feign confusion that just so happens to lead them to a more pleasing outcome. I’ve personally encountered estimators who thought nothing of revealing their dishonest choices, right before they asked for my help.
For example: “I know we bid this one several months back with the promise that we’d hire the subs on that round of bidding, but you only beat your competitor by a few hundred bucks so we figured we’d have the two low bidders go another round to see what we could save…”
They broke their first promise to hire the low bidder on the last round of bidding. They’re specifically telling me that they knew that hiring me was low risk because I’d just barely beaten a competitor thereby proving the price was market value. Now they’re telling me that they’re hoping to “save money” on another round of competitive bidding.
The GC won the job on the basis of my bid. Now they’re pretending that it’s “too close to call” to see if they can eke out some additional profitability (at no risk) by making me compete on the job I already won. Plus, they’ve likely provided my competitor with bid results so we both know what the GC’s maximum price is for our scope of work.
The impressive thing about this person is that they think it’s fair because both companies have an equal opportunity to win on this round. It makes no difference if the mechanism is a formal bid, backroom bid-shopping or a verbal auction, this person won’t do the right thing unless it’s the most profitable option.
Your reputation is like a shadow that reveals the outcome before the game
Ethical obligation to win
I’ve written before about how estimators must have clarity of purpose. Estimators exist to win profitable work. Some folks interpret this to mean that they must win, then make the job profitable via bid-shopping, collusion, and other deplorable (if not illegal) actions. This self-defeating approach ignores that successful businesses will need to reliably win work in your market continuously. Cheating the subcontractors (subs) will only work until the General Contractor (GC) burns their last bridge. These are the GC’s who are constantly begging for bids. They’re not calling with a great opportunity, they’re simply out of trusting subs. Estimators should consider their reputation to be a vital means of winning work. GC’s who attract market leading subs will not only win more, but they’ll get better pricing allowing them to achieve higher profitability than any of their competitors.
Accurate estimating, and proving the truth
Construction estimating has a paradoxical relationship with the truth. Consider how best practices for estimating call for detailed quantity take offs (QTO’s) that are tabulated according to material, labor, etc. Every effort is made to accurately reflect the real world costs of the project. Upon request, the estimator can provide facts, figures, measurements, and detailed illustrations to prove any aspect of the project’s cost. Yet when we consider estimating in relationship to the market, specifically focusing on how an individual estimator may prove they’re acting with integrity, the trail goes cold.
Bid results are supposedly provided “upon request”. On the rare occasion that a GC provides bid results on the record, the information provided will often be stripped of accuracy, context, or actionable content. Off-the-record bid results are far more common because there’s plausible deny-ability for the GC.
Silence and plausible deny-ability are rarely good when you’re on the receiving end…
Considering that the underlying agreement of an Invitation to bid (ITB) is to solicit free sub proposals in exchange for either the fair award of the contract, or bid results, it would seem rather obvious that proving fairness is a basic estimating necessity.
GC estimators are already mass-communicating project information to the sub market. Everything is optimized for efficiency, speed, and competition before the bid deadline. This is because even a small delay could spell defeat. After the deadline, everything goes to silence because the winning GC will need time to check the bid for errors, and to be sure of which subs they will award.
The losing GC’s have no such obligations or concerns. In fact, timely, accurate, voluntary, and public bid results would give their bidders the information they need to curtail any cheating. More to the point, sharing the information as a public broadcast provides transparency and accountability. This incredibly simple approach is much easier than answering hundreds of subs asking for bid results. It’s just as easy to publish bid results when you’ve won, with the notable requirement that it’s delayed until the letters of intent are sent out. Subs will happily accept this modest concession to discretion, to have proof of fair-dealing.
If Clients are seeking Contractor virtue in terms of integrity and honesty, it’s time to have enforceable standards, made meaningful by transparency. Estimators are uniquely able to prove they walk the talk by publishing bid results publicly. Giving clients an insight into how the company acts with integrity to respect and protect their industry makes for a great first impression. Perhaps more importantly, the client would be empowered to identify what an honest firm does differently.
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© Anton Takken 2016 all rights reserved