Tag Archives: Ethics

Honesty speaks

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?

Honesty speaks

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.

Honesty speaks

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.

Honesty speaks

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.

Honesty speaks

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.

Broadcast

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.

Meaningful marketing

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

 


Conceptual estimating, client capture or wasted time?

Where do projects come from? As estimators we’re often less concerned with the steps that came before plans landed on our desk that we should be. Everything starts with a client and their idea. There’s an awful lot that has to come together to translate a clients idea into a reality. The American Institute of Architects (AIA) has outlined the Best Practices for architectural design into three main phases.

Basic concept

Schematic design (SD) is the earliest phase and it’s where the required functions of the project are defined and refined. A lot of effort goes into the research and due diligence necessary to ensure that the project will conform to zoning, jurisdictional requirements, etc.  Estimators often refer to these as the “napkin sketches” because the intent is to convey the magnitude and orientation of major project features without necessarily providing much detail. Smaller projects may feature a narrative which can be as simple as a list of required functions, assumptions, and minimum requirements. The SD drawing set may be put out to contractors as a “gut check” to level the project requirements against the client’s budget. More on this later.

Conceptual estimating, client capture or wasted time?

“It may not look like it, but I’m here to help…”

Rough draft

Design Development (DD) is the next phase and it’s here that more detail is slowly added. Generally, (but not always) these plans lay out the Mechanical, Electrical, Plumbing (MEP) details as well as the structural and architectural details. It’s at this stage that signature elements are typically selected, often based on comparison between one or more schemes. When these plans are sent to contractors, you’ll often see them referred to as “Pricing plan” (PP) or clearly marked “NOT FOR CONSTRUCTION”. The DD phase is typically concluded with a formal presentation to the client in hopes of getting approval to proceed to the next phase.

Final plan

Construction Document (CD) phase is the final phase of architectural design. Complete CD’s are sent to contractors for final bidding and subsequent contract award. Many clients and/or architects require contractors to bid on incomplete CD’s which are marked with the percentage complete.

Concept to contract

Estimators are frequently asked to price SD and DD drawings as a courtesy to the client or the architect. It’s understood that designs must progress in order for there to be work for GC’s to do. Beyond simply aiding a design development, many GC’s seek to lay the groundwork for contract award or negotiated agreements by making themselves indispensable to the client and/or architect.

Conceptual estimating, client capture or wasted time?

Savvy bidders are quick to lock their competitors out

This tactic is called “client capture” and there’s a lot to recommend the practice because GC input early in the design can reduce prices, and increase the odds of project success.

Refine by bid

The GC’s motivation to capture the client is understandable, however their effort can stray into becoming an unpaid construction consultant.   There are clients who limit their design team’s scope of work to SD or DD level drawings, which are then sent out to bid with requests for “complete” proposals. Estimators pricing these projects balance between hard-bidding and design-build as they attempt to fill in the blanks. Each round of bidding provides the client with information to refine their drawings for re-bidding.   Bidding GC’s will find their good ideas incorporated on plans sent to their competitors to bid. It’s entirely possible to spend so many labor hours in conceptual bidding, that the subsequent contract work is no longer profitable!

Conceptual estimating, client capture or wasted time?

Window shoppers

Competitive bidding is the most reliable and consistent means to ensure market pricing. Clients who find their budget’s blown on bid day are getting valuable feedback on their projects. There are some clients who continually re-bid their projects hoping to “beat the bushes” for a better price. If the client can’t raise their budget to market-value, or reduce their scope to suit their budget, they’re not a real client. These “window shoppers” have no concern for the time and money they cost their markets. There are always more window shoppers than real clients, so estimators are well-advised to bid judiciously.

Some clients find themselves debating between two or more different addresses which require tenant improvement (TI). Metro areas often feature design firms that specialize in tenant planning for leasing negotiations. These firms specialize in drawing plans that facilitate conceptual pricing, but never lead to construction contracts. In fact, there’s little reason for these design firms to involve contractors because historical data coupled with some basic estimating skills would provide their clients with sufficiently accuracy to negotiate leasing terms.

Signs to watch for

Estimators looking to maximize their chances of success must develop judgment to pick the best opportunities to bid. There’s an old maxim that states : “Good judgment is based on experience you can only get through bad judgment”. As a logical starting point, estimators must understand that functional relationships are based on reciprocation. Bidders understand that submitting the lowest complete proposal (for free) by the deadline is their obligation, and awarding the contract to company with the lowest complete proposal is the client’s obligation. Bidding for “free” is the contractors commitment, awarding a contract on the basis of those bids, is the client’s commitment. Moral flexibility separates the window shoppers from the real clients.

Conceptual estimating, client capture or wasted time?

Here are couple examples of how life is better without gray areas.

Many ethical clients see conceptual estimating as an expected courtesy, if not an outright prerequisite for future invitations. If the client isn’t promising to select a contractor based on the outcome of a conceptual bid, the GC’s are forewarned that they can expect additional rounds of competitive bidding before the contract is awarded. Estimators are well-advised to pay particular attention to what is and isn’t promised at the “final” bidding opportunity. There are clients and design teams who expect “do-overs” whenever there’s hope of capturing some additional savings. An awfully old trick is bid the job before submitting plans to the building department, then re-bid the job after they’ve got inspector’s comments. Lots of value-engineering (VE) ideas from the bidders get rolled into that last set. This effectively gives your competitors a chance to capitalize on your good ideas for the client.

Clients who consider conceptual estimates to be a prerequisite to inclusion in the final bidding should be starting with a short list of pre-qualified GC’s. Pricing all the SD, DD, and CD revisions can range from three estimates, to dozens of pricing exercises that could take place over many months. Clients who expect this courtesy should reciprocate by limiting competition to a short list of qualified competitors.

Clients who demand extensive competition throughout conceptual bidding will generally accept any bidder on the final round. These clients may pay lip-service to GC’s making themselves indispensable but they’ll only award after they’re sure there’s nobody cheaper on the market.

Estimators should be especially wary of bidding projects which have different deadlines for participating GC’s. Sharp-eyed estimators will pay particular attention to the dates on the plans. It’s very rare for a legitimate conceptual bid to have plans that are more than a few days old at the time of the request for proposal (RFP).

Often Architects will revise the plan legend as progress is made on the sheets. “Final” or “Pricing set” drawings that aren’t quite 100% complete are fairly typical for hard-bidding, however estimators should consider the timeline of the updates in the context of the final set’s date. If there was steady design progress between updates however the “Pricing set” you’re looking at is several months old suggests that this isn’t the first time these plans have been out to bid. Especially long gaps between “Pricing” and “For Construction” sets, begs the question “why didn’t they award the job on the pricing set?”

Never underestimate the value of direct communication with the client and their design team. Job walks are a vital social opportunity to gain insight into the project and where it’s heading. Clients may freely admit that a project has been out to bid previously. Design teams may drop hints about expected changes, budgetary issues, or client expectations. GC estimators should cultivate their leads in the subcontractor community. Reputations are earned, and people have long memories when it comes to hard-earned judgment.

It’s much easier to close a deal with a client when you’re well-informed.

Tips and techniques

Conceptual estimating, even as a courtesy carries a certain amount of risk. Regardless of what qualifiers, clarifications, or exclusions you might make, the one thing that every client remembers, is the lowest number they heard. Estimators need to be VERY careful about how information might be misconstrued especially at the earliest stages of design.

We all understand that complex assemblies are built of smaller parts and pieces. Clients tend to think of these pieces as individual and uniform when it comes to cost. The cost to furnish and install any given thing seems like it’s an easy enough question. The problem with this thinking is that it’s simplifying the context, and ignoring the impact one part has on the larger system. For example, adding one more faucet may require another sink, which may require another drain which may exceed the design’s capacity in numerous ways.

To the estimator, “menu pricing” conceptual elements is not only risky, it’s potentially never-ending. It’s important to pull back a little, to get perspective on what the client is actually trying to achieve. Rather than indulging in micro-managing breakouts, the focus should be on guidance to achieve the clients project goals within their budget. Identifying cost centers and their proportional contribution to the total gives meaningful feedback on incomplete designs. Estimators looking to capture a client through conceptual pricing should look beyond pricing every request to address the clients root concerns. Helping a client with their problems should not give them the tools to hire your competitor. A pattern of brute-force low-bidding on multiple rounds of conceptual estimating isn’t a substitute for strategy either.

Conceptual estimating, client capture or wasted time?

Hitching their wagon to the wrong horse is a recurring trend in the estimating field…

Not every client will be interested in selecting a GC during the conceptual bidding. In many cases the courtesy bidders find themselves losing to firms that didn’t bid the conceptual rounds. If conceptual bidding won’t lead to client capture, it should at least lead to successful pricing strategies. There’s never an end to going-nowhere conceptual pricing requests because clients and their design teams are getting free construction consultants. It’s hard enough to win profitable work as it is without giving our best efforts away for free.

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© Anton Takken 2016 all rights reserved

 


Stuff nobody will tell you about estimating

I suspect every profession has a few hidden qualities you wouldn’t discover until you’d been at the job a while. Estimating has some interesting features that can really make or break your chances of success, provided there’s somebody to point them out to you.

Speed is your friend

On the surface, estimating seems to be about careful measurements, considered accounting, and an overwhelming obsession with minute detail. In practice, successful estimating is about time management. General Contractor (GC) estimators are responsible for getting the information out to their subcontractors (subs) as well as getting the subs questions answered by the design team. Every problem needs time to resolve so it’s really important to maintain rapid communications during the bid.

Stuff nobody will tell you about estimating

Mobile office solutions, speeding you on your way to the next crash…

It’s really tempting to silence your phone and ignore your email for a few hours to get something done. Which leads to the next item…

Leadership is more important than takeoffs

If your estimate relies on sub or vendor quotes, your first priority should always be to providing direction, insight, and encouragement to those bidders. Specifically, your efforts should be directed towards finding a unique and advantageous approach to the project. Ineffective estimators tend to assume that there’s something special about their company that will ensure that bidders will give them their best efforts. In a vacuum of leadership, subs will hedge towards protecting their own interests which never means low prices.

Perspective, then persistence

Hard work and persistence are admirable qualities that absolutely will not lead to success on their own. Lots of estimators assume that bidding and winning have a cause and effect relationship. It’s true that you can’t win if you don’t bid. However the reverse is not always true because there are insincere/unfunded clients with projects bidding that have no chance of being awarded. Sadly these clients consume the lion’s share of the slow market. While they can occur at any level of the market, these clients tend towards the bottom strata wherever they appear. They can be identified by their incomplete plans, short deadlines, multiple alternates, and resistance to answering questions. Everything is supposed to start right away despite the lack of permits, or even plans that would pass building department review. These clients range from uninformed neophytes, to jaded negotiators. What they have in common is the general belief that they don’t owe the low bidders a contract award in exchange for the free bids.

In the worst cases, the client will use the proposals to inform their negotiations for bid shopping. “Helping” an unethical client to award your competitor is a destructive use of your time. Morally flexible estimators might think it’s great to be the person such a client calls to “negotiate” with. Clients who bid shop are cheating all the companies who bid in good faith.   These negotiations open with two assumptions; the client is never fair to their contractor, and they think you aren’t smart enough to see that.

Any estimate that will not lead to contract is a waste of time. Better estimators don’t make better clients. Until such time as estimators can seek recompense for time wasted on feckless clients, we must protect our companies interests by declining to bid. In hard times, the estimator must be prepared to accept that this means precious few real opportunities will exist. This reality escapes those consumed with hope that behind every half-baked set of plans lies a great opportunity. The fact remains, when the good clients exit, the market declines. Down markets always have lots of terrible clients wasting everyone’s time with profitless jobs that rarely happen. It’s the only time they can attract bidders.

Stuff nobody will tell you about estimating

“Attention everyone, ship Desperation is now boarding..”

There is no market for bad news

Estimators looking to trade publications, and mass-media for relevant information on their market are bound to discover that there are precious few articles that will admit when things are bad in the present. Unless the article is written to influence an election, you can count on the article to refer to bad markets in the past tense framed in the perspective of steady improvement since then.

Periods of intense bidding with low backlog should indicate that contractors are starving for work and are chasing whatever is out to bid. Often, these times are couched in phrases like “Bidding picked up in the 4th quarter signaling potential growth this spring”.

Once spring rolls around and the summer rush work comes out to bid, these articles will say “Despite holiday season slow-downs, construction steadily climbs”.

This optimistic world-view is on display whenever you talk to other estimators. Go to a job walk and eventually you’ll hear someone ask; “You guy’s staying busy?”. With rare exception, the response is merely a list of the most impressive sounding projects that estimator won within the last nine months or so. Nobody likes a downer but it’s important to understand that what you’re hearing is not the entire truth. Estimators must learn to look beyond what’s said, and listen for what is missing.

If you’re struggling to land work, consider what you’re hearing from others. If the projects listed at a job walk are all finishing up, that’s a strong indicator that new victories aren’t newsworthy which may suggest that your problems are shared. Subs bidding to GCs should pursue bid results aggressively. GC’s are often more candid about the client, and the market after they’ve lost a bid. Estimators who speak truthfully and share what they see often benefit from information shared in kind. GC estimators are often listening intently to the nuance of what their subs are telling them. Don’t get too involved in trying to appear strong when you’re trying to find work.  Posturing sends the wrong message.

Decisions define us

Estimators exist because it’s not possible to simply “add everything up” like a cashier. Simply put, estimators must make decisions about what to do when things aren’t perfectly clear. The lack of information is a risk, making a decision on how to handle that risk means you’re accepting responsibility for the outcome of that decision. It’s easy to see that decisions based on the worst case scenario is the most likely to add money and time to your estimate. GCs who habitually sandbag their estimates are communicating their priorities. Competitive sub bids will go where they won’t be squandered.

While on the topic of unclear plans, it’s worth commenting on motivations. Missing, incomplete, or contradictory requirements may be a symptom of design team motivations. Estimators who’ve reviewed plans from a design-build project may notice that the plans have far fewer notes, and shorter specifications than projects developed for hard-bidding. Design professionals working on hard-bid projects are primarily concerned with their liability.

Design teams know that budget blowouts are a frequent outcome of bidding. Costly items are often sparsely mentioned on plans in the hopes they’ll be overlooked by the contractors. These buried notes are an owner-placating feature that the designer is trying to buy with the contractors money.

Stuff nobody will tell you about estimating

It’s rare to see such a perfect application for existing technology

Their decision to be predatory speaks volumes on their character. Exposing these traps through Request For Information (RFI’s) is how you can control risk without losing the job.

The advantage of ethics

Dishonesty is rampant in the construction industry. Incomplete plans labeled “100%”, or unrealistic schedules, are simple examples but this issue runs deeper. Information is withheld simply because it’s less risky to remain silent.

Bid results are traditionally provided upon request.  In practice, this typically means the GC estimator plays “keep away” with the information until it’s all but assured that the sub will never profit from it. Some GC’s are so focused on their own interests that it borders on cruelty. Providing bid results is seen as additional work that only benefits subs.

The deal offered to subs is to either award them a contract or furnish them with bid results in exchange for a free bid. GCs should promptly and publicly furnish this information to recompense subs for their bids. Better informed subs deliver better bids.

Acting ethically can present huge advantages beyond good-will. Trustworthy estimators benefit from stronger relationships with their vendors and subs. There’s less risk in working with honest people, lower risk means lower prices, which means you’re harder to beat and more profitable than your competitors.

It won’t do much good to pursue the bottom of the market with high-minded principles. However an established reputation for fair-dealing has a way of opening doors to quieter opportunities. The very best clients choose to work with honest contractors. There may be fewer opportunities compared to the hardscrabble market. However the work you’ll land is more successful, and reliably profitable than the high volume of profitless work out for public bidding.

Good estimators have pull

With all the information going back and forth, it’s easy to overlook a vital aspect of an estimators craft. GC estimators rely on subcontractor proposals to help define, describe, and value the scope of work. Attracting market attention is a function of a good opportunity, minimized risk, and profitability. Market leaders will avoid unprofitable, risky, or difficult projects. As an estimator it’s easy to think that the project’s intrinsic qualities aren’t under your control. To be sure, there are definite challenges in bidding ugly work.

The estimator must understand why they’re pursuing a project. Simply grinding out bids because a Request For Proposal (RFP) landed on your desk is what I call bid-milling. Bid-milling is the practice of chasing everything in the hopes that higher volume of bidding will create profitable wins.

Stuff nobody will tell you about estimating

It’s not a good look

This never works because each firm will be a market leader for specific opportunities. A contractor with a high volume of losses communicates that they’re not a real contender. The market-leading subs won’t waste a bid on GC’s who aren’t sincere about winning.

A GC estimator needs to understand that a mediocre project with a good client can be made into a profitable and low-risk opportunity through their leadership. GC’s who habitually work for good clients naturally attract market leaders. Contractors with a history of well-managed and reliably profitable projects are able to reduce the risk of less professional clients and their design teams. All of this starts with the estimators commitment to controlling risk.

Estimators who pursue good opportunities with accountable leadership, ethical dealing, and meaningful feedback are more successful than their competitors because they are the professionals, that everyone wants to work with.

I encourage you to consider those actions carefully. These simple actions are profoundly rare in professional estimating because most folks think their situation is different, therefore some aspect doesn’t apply to them.

Success in this craft requires clarity and intent above all else. There are no shortcuts with something this simple.

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© Anton Takken 2015 all rights reserved

 

 

 

 

 

 


Relationships and their place. Push vs. Pull

A quick view of most advertisements for the construction industry will reveal a few consistencies in how they perceive their client and their product.  Trite sayings hinging upon “building relationships” abound in construction advertisement.  Taken out of context, these same marketing efforts would have more in common with personal ads than custom manufacturers.

What would you say you do here?

Most General Contractors in the Commercial market do not self-perform the majority of the work.  In point of fact, they’re called General Contractors not builders because administering contracts is really what they do.  As a result most of them lack substantial focus on what they’re really there to do which is to faithfully execute the design according to the contract.  This means that the subcontractors are where the “rubber meets the road” so to speak since the subcontractors are the ones actually building the job.  Interestingly, few if any General Contractors make mention of their relationships with subcontractors when promoting their company.

Luxury car makers don’t advertise the special relationship they have with their clients.  They emphasize that they make the best car,  period.  Construction companies seem loath to admit that they  build what is designed; they don’t get to choose the level of quality, aesthetic appeal, or social prominence of their projects.

Relationships and their place.  Push vs. Pull

“Dang it Carl, I said move the Church AFTER the wedding.”

Put your back into it.

So what is a client getting when they call a GC?  Mostly they’re getting risk management, project control, contract administration, and subcontractor “pull”.  “Pull” in this sense is the market value of that particular GC to any given group of subcontractors.  GC’s with a reputation for not paying their subcontractors have less pull than better GC’s.  There’s a lot that goes into your pull.  For example, if a GC has been on a losing streak, they’ll lose pull with subcontractors.  GC’s that chase bad clients will lose pull with subcontractors.

Bringing focus back to estimating, the amount of pull you can generate has a lot to do with how you handle your bids.  For most subs, the only thing they have to go on is how you communicate with them.

Like a lot of things in life, it’s the outcome that matters not the intent.  Some folks get hung up on sending everyone the exact same message, without actually pausing to consider how that reads to an individual.

Bid invitations are a good example of this.  It’s fast and uniform to send everyone on the bid list the exact same message.  Often these invites cover a few key points like the deadlines, site walks, and such while excluding individual trade-level details for fear of it not applying to all recipients.  It’s pathetic how frequently invitations to bid fail to evoke any enthusiasm for the project, the client, or the opportunity.  Mostly they’re a bland memo directing the bidders through the GC’s particular brand of bureaucracy.  When coupled with bid-letting services, these invitations can end up appended to a “do not reply” email that conceals everything from the recipient until they summit the mountaintop of logins, sales pitches, and file downloads.

Relationships and their place.  Push vs. Pull

As an outcome, this is counterproductive to pulling subcontractors towards the opportunity the estimator is pursuing.  A great deal of what’s wrong in business relationships comes down to pushing when it would be better to pull.

Design relationships

Design teams fall victim to this process as well.  Traditionally, the Architect brought all the engineering disciplines together to develop a cohesive and thorough plan.  Like most industries, the concept of compartmentalization rose to the fore and now its common practice for a project to have a long roster of design consultants working in degrees of isolation from one another.

I don’t know what’s existing and neither do you, but it won’t be me that pays.  It’ll be you.

Projects that must refer to existing conditions are often riddled with notes declaring that all bidders have tacitly accepted responsibility for field verification of unknowable items.  These “gotcha” requirements are used in lieu of consultants making their own site inspection and designing accordingly.

Site inspections,  coordination meetings, and construction oversight are sometimes viewed as “add alternates” to the design package.  Clients often accept or decline these services based on their budget, schedule, and professional proclivities.  Clients pre-disposed to “hurry up” work can’t spare the time for consultants to fully fledge their designs.  Noteworthy examples are property managers pushing for Tenant Improvement projects that close the deal on a lease.

To the client, the savings in design fees and duration may appear worthwhile until the market pricing reflects the additional risk imposed by an incomplete design.  During market slumps, these clients use competitive bidding to flesh out the issues with the design which they ask bidders to solve.  Once they’ve got the answers, they incorporate them via addendum and put it back out to bid.

There’s no time to do it right the first time, but we’ll find time to do it again.

This “refine-design-by-bid” tactic initiates an unfortunate dynamic in the market.  Bidders who’ve invested in “helping” the client are rewarded with several costly rounds of bidding before the project goes to contract.  They know that rolling these expenses into their next proposal will all but guarantee a loss.  They also know that every answer they provide will be used to assist their competitors in arriving at a complete proposal.  Every round of bidding further diminishes the profitability of the project.  For some bidders the “solution” is to seek recompense in overpriced change orders.

This adversarial attitude angers clients who feel they invested heavily to see their project happen and feel exploited by greedy build teams.  Clients who’ve weathered this experience often arrive at the next bid with an enthusiastic commitment to pound out the issues before they sign another contract. Very rarely do they see the connection between “refine by bid” and overpriced change orders.

Perhaps the most frustrating observation to offer here is that the total pre-construction cycle on “hurry up” projects often end up matching the duration of having it properly designed in the first place.  Complete designs mitigate change orders, and bidding once restores profitability for the build team.  There’s more incentive to actually finish the job quickly when it’s clear the only profitable path is efficiency.   A critical aspect here is that clients need to comprehend that a request for proposal is supposed to be a commitment to actually hire the winning bidder.  Distorting the pre-construction process by eliciting free design help and  re-bidding is communicating a very one-sided  and unethical view of the Client-GC relationship.  It’s unreasonable to expect fair and ethical treatment when it’s not reciprocated.

Bringing this back to relationships it’s worth pointing out that departures from traditional responsibilities can’t and won’t happen without consequences.  Pushing off design responsibilities onto the build team will corrupt their relationships with the work and with each other. It also serves to alter the consultants relationship with the project in that they move away from taking responsibility for their design and move towards evading liability for every conceivable issue.  If consultants aren’t given sufficient time and opportunity to inspect existing site conditions, they tend to think there’s little alternative but to pass the buck.

Relationships and their place.  Push vs. Pull

Engineers haven’t been the same since we took the trains away from them…

Professional conduct

Much of the hijinks mentioned above is more prevalent during recessions than at other times.  Given the choice, most professionals would rather pursue legitimate work that offers sufficient time and opportunity to do a good job.  GC’s are by definition, subcontracting the bulk of the work they bid. Viewing the Construction Documents (CD’s) as a liability, many estimators believe their role is to ensure that every scope item is included in one of the subcontracts.  When the focus is exclusively covering your hind end, it’s easy to miss opportunities to better understand where the subcontractors are coming from.  Subcontractors bidding to notorious cowards will be reluctant to offer insights into how discrepancies in the plans may offer opportunities to win.

Opportunity may only knock once

GC estimators that don’t dig in and really make the effort to know what’s going on with a project are constantly caught flat-footed when subcontractors call with questions. Whether its incompetence, cowardice, or a lack of commitment, the result is the same; subcontractors will take their best ideas to wherever they’ll profit the most.  In practical terms that can mean competing GC’s will get better pricing or it could mean that subcontractors make tough decisions about how best to “play” the situation.

For example, I’ve encountered situations where subcontractors choose to take a chance on a scope discrepancy without telling the GC estimator because they had proven themselves to be unwilling and/or unable to take a measured risk. Since the subcontractor can’t rely on protection from the GC if their gambit doesn’t work, they hedge their bet by keeping a goodly portion of the potential savings.

Don’t be an obstacle to success

The GC estimator rolls into the bid carrying that subcontractor because they’re lower than their competitors but fails to fully capitalize on what that subcontractor relationship has to offer them.  The relationship becomes more about what the subcontractor can achieve despite the GC estimator than what the team can accomplish together.  It’s a short leap from not sharing the bounty achieved through special insight, to purposely working on deals to exploit weak GC estimators.  Subcontractors who view themselves as king-makers aren’t likely to be positive force in the market.  This is how they get their start.

“I don’t know what this is, what do I do?”

None of which is to say that a GC Estimator can’t rely upon their subcontractor relationships to help them with issues and scope items they don’t fully understand.  Skilled trades require an incredible amount of specialized knowledge that a GC estimator couldn’t be expected to possess.

There is however a difference between blind leadership, and taking the council of trusted allies.  The GC estimator should be consulting with trusted subcontractors on scope items they don’t understand with the goal of building a working knowledge of the issues involved.   It’s an odd thing but it’s often possible to change the dynamic of a bad relationship by asking for help in understanding what the other person is facing.   Be a good student and retain what you’ve learned to earn a reputation as a consummate professional.  Before long you’ll likely encounter a situation where you’re relating something you’ve learned to a bidder thereby re-paying the market for its investment in your education.  Keep that in mind the next time you hear a “dumb” question.

Once again, there’s greater benefit to all concerned when professionals actively seek out responsibility to pull the project forward rather than pushing responsibility for incomplete work down the line.

Civilization is in retreat because it’s become unfashionable to do the right thing.

Understanding the critical relationship between quality outcomes and individual professionalism at every stage is the metaphorical keystone supporting the project arch.   Every buck that’s passed get’s a “vig” tacked on and when the bill comes due (and it will) the project will pay.  It’s important to break from thinking of your task as being done in a small room with a door in and a door out.  What gets passed down the line matters.  Many projects with supernaturally bad design teams get built anyway.  Just because someone passed the buck to you, doesn’t mean you must pass it on in turn.  An estimator converts the nebulous construction documents into a real and enforceable, construction contract. Some Project Managers have a well-earned disdain for estimators who’ve bound them to build a disaster with a schedule and a budget. Don’t be that guy.

Actions have consequences, make certain that you are pulling in the right direction and that everyone “downstream” is as well.  Project Management needs to keep the promises made at the bid stage, and they need to ensure subcontractors hold up their end as well.  Otherwise subcontractors may again “game” the estimator knowing they can exploit Project Management once they’ve slipped past the bid stage.

What does the client care about?

An awful lot is put out about when to invest in this or that.  Terms like “Value” become little more than boardroom chaff.  In reality the client is very concerned with value, however what they value isn’t always so obvious.  Answering questions and making them feel good about their purchase may be contingent for a sale however it’s not what they THINK they’re paying for.  In fact, most of the talking, drawing, thinking, and demonstrating doesn’t really factor into their concept of what they’ve hired you to do.

What they see

To the client, actually making the thing is where the magic happens.  Those are the skills they imagine they’re paying you for.  Since they perceive your pre-construction time as “free” they indulge in every tangential thought that comes to mind.  During a project they perceive the job site to be chock-full of workers and materials so changing this or that seems easier than if they imagined that change as a separate job going out to bid.  Design teams are keenly aware that their mistakes, oversights, and mis-communications are costing time and money.  During construction the client typically views the design team more as an adviser and quality control enforcer than anything else.  GC’s’ are generally loath to expose design team shortcomings for fear of retribution.   Diplomatic efforts to price necessary change orders stemming from design shortfalls can devolve into bickering about cost legitimacy versus design integrity.

The client and design team camp may shake their heads at the gall of the build teams prices while the build team shares their exasperation with projects that are changing direction while the clock runs out.

The pattern of pushing project responsibility down the line without each tier pulling their own weight is the root cause.  Returning to the opening of this article; “Building relationships” need not be a vacuous and misdirected approach to success.  Clients are not in a position to actually know that decisions to short-change a fully developed design will cause the problems they sought to avoid by hiring a design professional if nobody has the courage to tell them so.

Relationships and their place.  Push vs. Pull

“Sure you’re attracting lots of attention, I’m just saying you might take a different route next time”

 Making mediocrity acceptable through placation, participation, and proliferation of stupidity is not “worth it if you get the job”.  Lowering standards and passing the buck are the stock in trade of hacks.  Blurring the line between hacks and pros from the clients perspective represents a strong deterrent to future business.

Be better, be honest, and don’t be afraid to speak up.

 It’s in everyone’s best interest to speak truthfully with the client.  Many incomplete designs are put to bid by design teams who are deeply (and silently) frustrated by the client’s miserly haste.  GC estimators often succumb to pressure from marketing and pre-construction directors to bid risky designs.  Pushing rather than pulling.  If instead the GC Estimator took the opportunity to present solutions before bidding, they might persuade the client to make changes that profoundly improve their odds of an ideal outcome.  At worst, the estimator could articulate the issues that could hurt the client, pulling them in the right direction.

Now it’s time to bring this all back to relationships.  In my experience, there’s a contingent of dubiously moral folks in the market who rely on “relationships” to cover or offset the fact that they’re neither a good value, nor a market leader.  They are “connected” and often use their connections to exploit or extort the industry.  It’s foolish and dangerous to allow these people to “do you a favor” because they’ll be sure to demand what you “owe” them.  Working around them will incur their wrath as well.  It’s bad business wherever they’re involved so pick your path with care.

At the opposite end of the spectrum are the people who are a veritable institution of good value, straight dealing, and integrity.  It’s a privilege to work with these rare individuals.  The sad truth is that they are rare no matter how common it is to read an advertisement extolling these virtues.  I hope this article has inspired you to choose that legacy for yourself.

 

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© Anton Takken 2014 all rights reserved


Why are we bidding this anyway?

Hard lessons on hard-bidding for the hard-headed.

Most estimators are working for someone else.  For simplicity’s sake I’ll refer to that person as the boss.  The boss often weighs in on pre-construction decisions to include what makes the bid list, what margins to carry, and what jobs they don’t want.  It’s their company and they call the shots.

As an estimator, you’re looking for low risk, high profit, easy wins to keep the company working.  That seems like something the boss would be after as well.  A lot of estimators end up wondering to themselves why it doesn’t always seem like it.

Everybody’s coming from somewhere

Entrepreneurs are remarkable people who see opportunity in adversity and often move in opposition to safe, secure, and easy ideas.  These traits help define why they’re successful and also explains why they’re often not…  The point here is that the opposition to an estimator’s priorities is a natural one.  They hired you to provide the counterpoint to their perspective, not that it’s a guarantee you’ll change their direction.

Why are we bidding this anyway?

Sure boss, I see exactly where you’re going with this…

What is the mission?

Despite repeated failures, the boss is pushing for yet another bid just like those before it.  Nothing’s changed and the outlook is bleak, why won’t the boss see the obvious?  Sometimes the answer is frustrating: the boss doesn’t have the same definition of success as you do.  Some bosses don’t view estimating as pre-construction so much as an amalgam of marketing, posturing, testing, and placating.  The endless marketing pitches about “building relationships” dissolve into playing head-games with the market.

Here are a couple of examples to illustrate how this can happen.

Imagine if you’d spent half a year getting on to a new clients bid list. You can hardly turn down the first invite when the job turns out to be a stinker. 

Going another direction, imagine you have a valued client who’s added a disreputable competitor to their bid list.  A good client will only need a few bad experiences before they reject disreputable firms.  Depending on how frequently they bid projects, you may have to lose several jobs before the client has learned their lesson.

What if your current market sector is shrinking?  A boss would need to find new sources of work which means trying out new things.  Not all sources of work will have the same profit margins so they might need to test the waters in several markets to see if regional differences change anything.  In effect they’re generating bid results.

Conversely, what if your market is expanding?  Does it make sense to chase work in new areas with local staff, or should a satellite office be opened?  Is there an existing subcontractor base capable of supporting the venture?

Planning for success      

Few companies have a corporate culture where the long-term planning is accurately and convincingly presented to the estimating staff.  A boss who views bidding as “turning the crank” on the estimating machine is unlikely to harbor much sympathy for anyone asking why they’re bidding bad jobs.  As an estimator you may not have much latitude on the decision-making but that’s not a reason to give up trying to improve the situation.  Bid results when presented properly can reveal constructive options that the boss may have overlooked.  Some estimators feel as though they must reflexively apologize for every lost bid. This fosters the notion that every bid was really an opportunity.  It should be obvious that many factors influence the likelihood of a profitable win. Unless all the jobs are literally the same, the odds must be different.  Learning to define, to accurately define what influences winning should be the cornerstone of your craft and the basis of your counsel. Be advised that excuses are not a substitute for knowledge or fact.  Some losses will be your fault and some wins will be too.  Credibility builds on honesty.

Getting to the wheelhouse

If you don’t have an impartial and informed insight, you can’t reasonably expect corporate planning to be shared with you.  Respect is often earned through consistently knowing what you’re talking about. Depending on the individuals involved, you might be able to help steer towards better opportunities once you understand where the boss wants to end up.  Understand that the people in charge may be reluctant to divulge their plan, especially when they lack one!  Go with caution.

Why are we bidding this anyway?

What you’ve gotta do is make sure everyone’s on the same level, then you’re home free.”

Learning by erosion

It’s a fact of life that some bosses are better than others.  Despite our dearest hopes to the contrary, sometimes life brings unqualified people to leadership positions.  The boss may have irrational, uninformed, emotional, and philosophical reasons to do something stupid and most of the time, it’s their right.  Estimators dealing with this frustration should take heart.  Incredibly hard-headed bosses can learn by erosion.  The Grand Canyon wasn’t carved in a day.  Erosion is slow but it’s sure.  To be effective, it’s important to understand that you’re seeking to avoid “I told you so” moments where you become the lightning rod for their frustration.  The goal should be to give a high level analysis of the situation including a survey of the project’s high and low points.  Try to deliver them in equal detail and enthusiasm but be sure to define how a stack up of low points creates a failure mode.

For example: “This job is a remodel of a very large building which means we’ll be busy for the next six months out there.  We’ve got strong competition on it so our number needs to be tight.  The design calls for a bunch of new roof top equipment and the architect put a note on the plans calling for us to field verify and design as needed.  There was no job walk or as-built drawings and the building’s currently occupied so we can’t just get in and see what we’re up against.  The client requires all bids on their forms which don’t allow for exclusions.  Our competitor did one just like this last month only it didn’t have the roof equipment and the note’s buried on an elevation drawing so they’ll probably miss it.  If we include money for engineering and structural support, we’ll surely lose.  If we bid without the structural revisions, we may win but we’ll have to pay for it leaving us stuck on an unprofitable job for half a year.”

The idea is to patiently explain how the influencing factors are pointing to bad outcomes. If the boss decides to pursue it anyway and it goes as you predicted, they’ll remember your insight even if they won’t give you credit.

Sometimes it’s not the bid that’s the problem, but the client.  Here’s another example.

Following the bid, the client sends additional pricing requests for items that were not on the plans claiming it’s necessary to make a snap decision.  It starts with one or two items, then grows to a long list of several items that the client wants priced separately.  After some delay the client calls and says that the project is over budget $X amount but that they “really need” all the items you’ve priced.  The client says they’re hoping you can “find savings” to hit their budget and do the extra work for free.

This is a textbook example of how unethical clients begin a job.  It’s been said that “you can’t change human nature, you can only change how you feel about it“.  Bid shopping is unethical and serves as an insight into the clients values.  These clients are telling you who they are, only the most  naive or foolhardy interpret this as anything but a promise to screw you over every chance they get. There are few guarantees in this world, but you may rely on this: a bid shopped job will eventually cost you money, and diminish the standing of your profession.

Nevertheless, your boss may elect to take that bait.  These are the jobs it behooves you to warn Project Managers about.  No change order work should be priced without documentation from the design team.  No additional work should be started until a signed change order has been physically produced.  Informalities and “trust me” moments cannot exist.  Any gap will hemorrhage losses with unscrupulous clients.

Teaching by evaporation

Some bosses stubbornly refuse to admit when one of their initiatives is failing.  A pattern emerges where the work isn’t profitable and there’s never enough of it.  The boss answers this by demanding more bidding of the same kind of work.  The estimator is putting in considerable hours fruitlessly landing a small percentage of terrible work.  This is like being knee-deep in a swamp where continued struggle only traps you further.

There are a few things to get clear on.  Number one: the swamp is killing your business. There is no opportunity and it’s consuming resources that could be successfully applied elsewhere.  Hard headed bosses who learn by erosion are often “swamp dwellers”.

Number two: You must find somewhere to be successful while you’re stuck in the swamp.

Why are we bidding this anyway?

Pro tip: STOP DIGGING!

Landing a low risk, profitable job, for a good client is like having the sun dry out the swamp.  The boss wants success – giving them something more likely to be successful is leading by example.  The difficultly about an exemplary action is that it’s really, really difficult to do.  Some bosses will be willing to concede to a pitch where you might say “hey instead of bidding swamp-thing, let’s try this job instead”.  It’s more likely they’ll allow you to bid swamp thing and the new thing.  This means you’re required to invest your own effort into your idea.  Uncool bosses will mercilessly undercut you if your idea doesn’t pan out.

Try anyway

A consummate professional rises above the challenge.  Your job is not only to bid jobs, your job may also be to protect your company (and your job) by performing above your pay-grade.  Life is long and you never know who’s watching.  You can be helping an unworthy boss and furthering your career.  It’s important to remember who you want to be regardless of where you are.

Remember that wherever you are on your way to the top, turds float.

Leadership

Poor morale can be like cancer to a company.  Dissent grows until it overtakes all motivation and positivity.  The economy won’t always be on your side and making headway can feel like you’re swimming against the tide.  A subtle feature of depression is that it saps motivation to change course which threatens its existence.  It’s a parasitic mindset that feeds off the status quo by believing everything would improve if only life were fair.

Life isn’t fair which is why market constructs are so complicated.  Contracts seek to protect parties from undesirable outcomes.  Which is another way to contain risk.  The risk eventually boils down to life not being fair.

An estimator must maintain perspective.  The unavoidable risk is why you’re there.  Make the most of the opportunities and lead with enthusiasm.  Act with wisdom and follow your conscience knowing that not every invitation to bid is an opportunity, not every win is a success, and not every job is a career.

Communication

There’s an old proverb that reads: “If you want to go fast, go alone.  If you want to go far, take a friend.”  Long term plans should be clear and inspiring to everyone.  Effectively communicating the long-term plan and the enthusiasm to everyone builds trust and commitment so the group moves in unison.

However when things are going wrong, a company can be like a stampeding herd. There are only two ways to affect the course of a stampede.  Be an immovable force like a mountain, a cliff, or the person who signs everyone’s checks.  The second, is to outrun the herd and make your path the one they want to follow.

In practical terms this means building a personal plan to bring new opportunities to the front.  Research what’s out there, who’s winning it, and how you can emulate their success with your firm.  This also means adding more bids to the workload as mentioned above.

Stay focused on fixing the situation through sound decision making and things will improve.

Why are we bidding this anyway?

 

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© Anton Takken 2014 all rights reserved