Tag Archives: Subcontractors

December 17, 2017

Power tool safety for estimators Part 2 : Headaches and Hard hats

In part 1, I touched on some of the dangers presented by estimating software along with some advice on how to work and bid safely. In part 2, I will be looking into estimating hazards that are uniquely human. A lot of frustrated and unsuccessful estimators get that way by overlooking human nature. While estimating involves lots of facts and figures, we must keep in mind that we are working with, and working for, people.

Submitted without comment…

In my experience, people define organizational policies according to their outcome. Bureaucracy generates lots of work that is peripheral to the task at hand. In contrast, Leadership aligns people and resources with the task at hand. Within the context of competitive bidding, effective leadership involves communicating expectations that are aligned with the interests of everyone involved. This starts with considering the interests of parties outside of the estimators office.

The four P recipe

Perspective What do people expect to see? How does that compare with what they actually see?
Predict How could people do things differently than you might have planned?
Prepare What can you do to accommodate the inconsistencies, differences, and individual choices of others?
Perform How can you coordinate the interests of everyone involved to maximize your odds of delivering a successful outcome?

Schools, academies, and trade associations promoting “best practices” in estimating tend to put great emphasis on process uniformity, deference to design professionals and obsequious devotion to every client request. While tidy spreadsheets and good manners are part of being a professional, they hardly define the estimators purpose.

Losing estimators are often telling me how they were “just doing their job” because “their hands were tied“. While some contractors do micro-manage their estimators, this mindset is more common among estimators who prefer to believe their job security is a function of avoiding accountability. If they were making and communicating the right decisions, they’d win more profitable work which is why the job exists in the first place. When a process interferes with your purpose, it won’t be the best practice to follow.

There is no more important safety rule than to wear your reading glasses

Estimates are used to compile and condense a great deal of information into a single number. Even the spreadsheets illustrating what’s going into the single number can be densely packed with information. Since everything must balance utility against clarity, the location of the information in an estimate is almost as important as the quality of the information.

Estimators working by hand are used to categorizing the information according to Construction Specification Institute (CSI) Masterformat guidelines. The Masterformat assigns a unique serial number to commonly encountered building materials arranged so that the materials generally align with similar materials that broadly align with trades. As anyone with experience in actual general contracting could tell you, the CSI divisions aren’t a good indicator of how the work is actually divided among contractors. For example, division 9, finishes may involve a dozen or more trade-level subcontractors, whereas division 14 Conveying systems will ordinarily involve only one.

There are a lot of estimating programs which are configured to organize the Quantity Take Off (QTO) according to CSI divisions. While this is great in terms of adhering to a standard, it doesn’t lend itself to compiling the relevant information to scope subcontractor bids. For example, there are a lot of “flooring” subcontractors (subs) that will install vinyl flooring as well as carpet, but they won’t do any ceramic tile or wood flooring.

The CSI codes place vinyl flooring and carpet in separate areas of the estimate that are often surrounded by completely unrelated trades. This means that on bid-day, the estimator is figuring out how to make one bid apply to two scopes of work which might be separated by hundreds of lines of information. When the deadline is fast approaching and low bids trickle through the door, this creates an arbitrary obstacle that can trip the estimator when they least expect it.

Lizzy was following the instructions perfectly, but then everything went sideways

If you’re using a spreadsheet program to compile your estimate, it’s possible to temporarily move relevant divisions to conform with the sub proposals that are coming in the door. Time invested in building a “working” worksheet that is linked to a “formal” estimate worksheet can make it possible for the estimator to have a streamlined layout for bid-day revisions, without sacrificing the uniformity of a formal layout.

Make sure it works seamlessly because spreadsheet errors on bid-day are serious problems. The “old school” approach to this problem was to print separate pages for every CSI division including a row for bidders and columns to verify, add, or subtract relevant scope items. Each of these sheets were put into binders with tabbed dividers. “Bid tabs” is industry slang for these comparison sheets which “show the math” for how the estimator scoped the bids of every relevant subcontractor on bid day.

Combo bids: Two for one, or double the trouble?

Subcontractors rarely specify which CSI divisions they’re bidding which means the estimator must not only sort the CSI divisions being bid, but must attribute them separately to their estimate. Despite all the heated rhetoric, the subcontractor (sub) is not an employee of the General Contractor (GC). GC’s can “demand” pricing breakouts from subs in direct proportion to the goodwill they’ve cultivated from fair dealing. GC’s cannot afford to ignore competitive bids from subs who are reluctant to provide breakouts that may be used to help a competitor win the job.

This means that GC estimators must be prepared to take the best subcontractor number they can get, even if it combines several “separate” scopes of work. Estimating programs will often generate error messages for any CSI Division that is left empty. If one bid applies to multiple divisions, most programs won’t allow the estimator to group them together. Instead, estimators are forced to use workarounds.

Let’s say a flooring sub’s bid for carpet and vinyl flooring is cheaper than any combination of independent carpet and vinyl flooring bids. They didn’t provide separate prices for vinyl or carpet because they want an “all or nothing” award.

The GC Estimator needs to enter the “combo” bid into the estimate but this raises several issues. Everything they enter in as a quoted value will be documented which means the Project Manager (PM) running the job will expect to find a subcontractor bid for the exact same amount in the bid file. If the estimator arbitrarily divides the quoted amount into plausible-looking amounts for carpet and vinyl respectively, there’s no bid in the file that actually matches either number. Now the estimator could put the entire bid amount into just one of the CSI divisions. That solves the problem of quoted numbers matching bids in the file. However, this causes two new problems. First, the default of most estimating programs is to “select” the lowest available bid in each entered quote. If the combo bid was entered into the carpet division, it would likely be higher than the carpet-only bidders because it’s also including vinyl flooring. This means the default setting for that division must be overridden in order for the estimate to select the combo bid. The second problem is that the vinyl flooring division needs to have a quote entered and most programs will not accept zero as a valid bid. Some estimators enter $0.01 for the quote as a workaround because no PM would go looking for a one penny quote for the vinyl flooring.

CSI Masterformat is tremendously helpful for design and management professionals who want a uniform system for coding information. Many Project Management programs include estimating functionality which not only imposes the CSI structure, but also includes the accounting structure for the job that follows. The estimating program’s lack of flexibility means that on bid-day an estimator might enter a one penny bid for a subcontract amount which later causes administrative issues in accounting and project management.

Breakouts are the leading cause of breakdowns

Alternates can multiply the estimators labor to an incredible degree. In their simplest form, Alternates are a request to add or subtract something to the project. In their most complex form, they’re a multi-dimensional problem that generates its own risk for the bidder.

For simple additions or subtractions, the alternate needs its own mini-estimate to address what’s going on. When the changes become more convoluted, the Alternate essentially replaces the original bid. Estimating programs may feature user-defined breakout tags which allow the estimator to sort, group, and compile the different breakouts into different schemes that reflect the alternate. Unfortunately, many estimating programs with breakout functionality are unable to compile multiple breakdowns into a cohesive estimate. This is very common for trade-specific estimating programs.

For example, let’s say there is an alternate which substantially changes the vinyl flooring scope. Some areas grew, other areas got smaller. As there are several alternates pertaining to the vinyl flooring, the estimator would have breakouts defined by the rooms involved.

Rather than a single line item for all the vinyl tile in that alternate, the program would output each room’s vinyl flooring separately. As silly as it sounds, some estimating programs will not compile the breakdown information into a cohesive estimate the way it does for an ordinary bid.

“With our new mirror technology you can double your horsepower!”

When GC estimators call the subcontractor wanting to make changes to the Alternates, the Subcontractor ends up going into intense “manual override” to answer relatively simple questions. The sub is usually under incredible pressure to answer quickly because the deadline is rapidly approaching. It’s much worse when the GC calls the sub whenever they are away from their desk, and unable to wrangle a simple answer from an obstinate program. I know of at least one competitor who guessed at a breakout price on bid-day that dramatically under-bid one portion of a project. That mistake was the first of many cascading events that ended in bankruptcy. Learn from their mistake, professional estimators do not guess! It’s much better to replace a lost opportunity than it is to “win” a project that imperils your company’s survival.

Bigger blocks, fewer breakdowns

One successful strategy to counteract an estimating programs clunky breakdown system is to use the definable breakdowns for complete alternates. Picking up on the earlier tile example, the estimator would conduct separate breakdown-level QTO’s for each alternate separately.

Let’s say there were four rooms pertaining to the base bid and two alternates.

In the base bid, rooms one, two, and four get vinyl flooring.

In Alternate #1, rooms two, three, and four get vinyl flooring

In Alternate #2 rooms one, three, and four get vinyl flooring.

This means that one definable breakdown would be named “base bid” and the estimator would conduct their QTO for the rooms as normal. Then the estimator would name a definable breakdown “Alternate #1” and would do a QTO for rooms one, three, and four. Note that this repeats the QTO of room four. Finally, the estimator would name a definable breakdown “Alternate #2” and would do a QTO for rooms one, three, and four. At this point, every room has been measured twice, and the vinyl flooring has arguably been estimated three times.

However, the estimator can now output their reports by the individual breakdown with all the pertinent information correlated normally. This means that the Alternates will display the total vinyl flooring as a single line item, tremendously simplifying the information you’re reading at Mach 6 when the GC calls. Only in estimating do we have situations where taking the long way around gets us to our destination faster than a direct path.

Quoth the vendor: “It costs more”

Quoted goods pertain to items with requirements that influence the price such as custom-built equipment. Some quoted goods are unique materials represented by an agent or a firm that promotes the material to design professionals to secure exclusive sales rights. Wherever competition and transparency are discouraged, artificial pricing hikes are sure to follow. As a result, the quoted goods can constitute an out sized proportion of the total estimate.

Quoted goods can be material exclusively, or they can be materials plus some labor or service. “Parts and Smarts” is industry parlance for a proprietary system of components that the contractor must install themselves, according to the design and programming requirements of the quoting firm. This is most common in fire-alarm and HVAC controls systems. “Turnkey” proposals are generally understood to be standalone quotes to deliver a completely built system. At the trade-level estimators desk, it’s critical to correctly attribute labor hours to the quotes you expect to receive.

Trade-level estimating program defaults can be very complex. For example, a fire alarm vendor supplying a “parts and smarts” quote will provide the fire alarm devices which the electrical contractor must install on a dedicated system. The electrical contractor is expected to furnish the junction boxes, conduit, and wire, for a fire alarm system that has not been designed yet. Estimating programs might have a “helpful” default for fire alarm takeoffs however they will only quantify the quoted goods. This means the estimator must carefully supplement the “fire alarm” takeoffs with all the parts and pieces that the fire alarm vendor omitted. Unless the whole system is attributed to a dedicated breakout, the quoted aspects of the fire alarm will be separated from the costs to furnish and install all the stuff needed to make the vendor’s quote work.

It’s good practice to conduct separate breakout estimates for any quoted goods that involve bidder groups with inconsistent levels of scope delivery. For example, the breakout combined with parts and smarts quotes can be directly compared to turnkey proposals.

Getting more information out of less data

Reading along, it would be easy to conclude that the best approach is “more breakouts”. Being better informed certainly helps when making decisions. To serve its purpose, the estimate must be a condensed explanation of what a project entails. Specifically, the estimate should reveal what is driving the cost, duration, and risk, of the project. I’ve encountered plenty of estimates that were so detailed that they buried the meaningful project attributes. This can be described as the “noise to signal ratio”. If you’ve ever been listening to a radio station when an adjacent station intruded, you can appreciate how difficult it is to understand what’s being said.

The Request For Proposal (RFP) may list alternates the owner requested alongside breakdowns the Architect wants to see. The intention and implication of each may serve different purposes which occasionally makes them difficult to understand.

I’ve seen projects with twenty or more breakout requests on the RFP get whittled down to three alternates in the course of a single exchange with the client at the job walk. Clients and Architects aren’t always considering the quality or the context of the information they’re requesting in the RFP. It’s often easier to generate a long list of things they might want, than it is to consider which things they would actually be willing to combine. There’s also a tendency to be additive rather than reductive when tasked with writing a wish list.

For example, lets imagine a project which is comprised of three connected buildings named A, B, and C. The client asks that all buildings be included in the base bid. They then ask for an alternate to move building B to the other side of building A, and to omit building C altogether.

Their second alternate request is to build only building’s A and B as originally aligned, omitting C altogether.

At this point, we’re up to three prices due on bid day. To bid them separately, all the estimating for buildings A and B would be repeated for all three prices.

In contrast, we could arrive at the same answers by answering two questions. What does building C cost? and “What cost difference is there in moving building B’s alignment with Building A?

That’s one breakout, and one alternate which is never repeated elsewhere in the estimate. More importantly, the estimate for building C generates 100% of the accuracy with 50% of the data compared to estimating A and B together. It’s probably a whole lot easier to review an estimate for building C against the drawings than it is to check a “combo bid” against multiple buildings. If your process is the same for all the buildings, the check on building C will be instructive towards determining if there are issues with your estimate for buildings A and B.

It’s also very significant to note that the building alignment question is pulled out as a line item cost. This allows careful consideration of what the result implies without the “noise” of building A and B’s total factoring in. I really can’t stress this enough because alternates are often sparsely documented by the design team. It’s fairly common for a complex alternate to be completely and exclusively defined in a few sentences on the RFP. What may sound like a simple “add this” or “take away that” alternate request can generate a long list of subtle consequences to the project. The knock-on effect for the client is sticker shock. Estimators who’ve carefully constructed their approach to reveal the subtleties are better equipped to present a solid explanation.

Savvy estimators will have already noticed that this advice could lead to a situation where you win the job and the client selects one of the alternates. Now when you go to hand off the estimate to a Project Manager (PM), you don’t have a single estimate which perfectly reflects the contract scope of work.

Your options will depend heavily on your software. In some cases, an estimator can copy the Building C breakout into the base bid and “multiply” the new version by -1 thereby generating a subtraction amount in all takeoffs. When grouped with the original total, and the relocation alternate, the output would be reconciled to the actual quantities needed.

Without question, this will require additional work, however it’s important to note that most estimators don’t win every bid. Spending a bit of extra time on those you win is an easy trade to make when you’re sinking less time into the losing bids. Negotiated agreement or “sure shot” bids should be done so that the estimates can be handed to a PM without confusion, rework, corrections, or delay.

Estimating is about controlling risk to secure profitable work. We can worry about risk created by the limitations of people and machines, or we can build our operations to accommodate them. I’ve provided a few examples to show how applying the four P’s can lead to opportunities that competitors only saw as obstacles.

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4 Comments | tags: Best Practices, Perspective, Risk, Strategy, Subcontractors | posted in Uncategorized

February 24, 2016

Why people won’t follow instructions

By Anton Takken

If you work long enough, you’ll eventually have a moment where you’re stuck wondering why someone didn’t follow your instructions. Estimators, especially estimators working for a General Contractor (GC) struggle to get their subcontractors (subs) to follow instructions all the time. It would be easy to suppose that typical explanations such as inattention, or laziness explain this behavior but there are overlooked reasons that could be playing a role here.

Why people won't follow instructions

“Wait, I can explain…”

A reflection on risk

Let’s start by considering something that all estimators have in common; risk. Risk is the uncertainty of a return and/or the potential for a financial loss. If we really think about it, controlling risk is more important than simply winning work. For example; winning a risky job is worse than losing a profitable opportunity.

The GC’s contract exchanges the liability of the entire project scope for their bid amount. The GC controls the risk by contracting portions of the project scope out to subcontractors. Once the project scope is divided and attributed to the subs, the GC’s remaining risk is greatly reduced because they have the contractual means to enforce performance.

This means that the GC estimator is primarily concerned with “complete” sub proposals. Exclusions, clarifications, or limitations that leave uncertainty for the GC estimator are considered potential “holes” in their plan. It’s understandable that subs not following instructions is a common frustration for GC estimators.

Perspective on the plans

The sub estimator has a profoundly different perspective because there is very little contractual latitude when it comes to accepting liability for their scope of work. Sub estimators are keenly aware that they must bear responsibility for misunderstanding, overlooking, or underestimating the scope of work shown in the Contract Documents (CD’s).

It’s incredibly rare for design teams to accept financial responsibility for misleading, incomplete, contradictory, or incorrect information on their designs. Specifications often stipulate that any design errors or omissions must be brought to the design teams attention BEFORE the bid via a Request For Information (RFI). Many projects obligate the bidders to walk the job. Some specifications even require bidders to verify hidden conditions during the walk regardless of how impractical or impossible that really is.

Why people won't follow instructions

“We’re all along for the ride, but Engineer’s hate field trips…”

Essentially the design team expects the CD’s to be vetted and reviewed for constructability before the bid deadline, free of charge, and they believe this is grounds to dismiss change order claims based on the inadequacy of their design at bid time.

A competent GC estimator understands that they are empowered to write RFI’s, and bid directives to communicate the questions and answers necessary to work around issues with the CD’s. Sadly, many GC estimators assume a passive role when it comes to inadequate CD’s because timelines are tight, Architects might get cranky, and it’s a lot of extra work. Some GC’s won’t write an RFI unless there’s a subcontractor “revolt” where all the subs of a given trade refuse to bid unless an issue is resolved. This attitude starves the subs of any recourse to address uncertainty in the plans, so they resort to exclusions, clarifications, limitations, or outright declining to bid.

Last minute bidding and why we’re all in a hurry

Lots of GC estimators maintain a rigorous bid schedule. There’s lots to do, and little time to get it done. Subs rarely have the luxury of working for a single GC, so they deal with exponentially more projects than the average GC. Their scope is limited, however they’re liable for every single component which makes it very stressful to keep up.

As I mentioned earlier, RFI’s are part of the bid process which inevitably leads to changes in the CD’s or scope of work. Design teams love to answer all questions a day or so before the deadline. Maybe this is because they’re hopelessly optimistic that they’ve resolved every possible issue for the bidders. In truth, it’s very common for addenda answers to actually create more problems than they solve.

Why is it so hard to know what changed?

Every year, fewer and fewer design teams bother with addendum change narratives which itemize the changes made to the CD’s. The assumption is that the Architectural standard practice of “clouding” or “bubbling” changes to the CD’s makes it clear what they’ve done. In reality, there are often changes made that aren’t bubbled. Presumably the assumption is that everyone is using digital take-off systems that can do overlays to reveal the hidden changes.

Overlays can take a lot of time to do. Minor changes shown on an overlay can induce eye-strain, making the addenda a literal headache! Often it’s less work for the Architect to simply revise the entire drawing set and transmit it digitally. This can mean overlays of pages without any changes at all. Larger projects may have several such Addenda, which can quickly overwhelm a subcontractor.

For the sub who’s always several bids deep, the most efficient way to handle this deluge of information is to do their quantity take off (QTO) at the last moment. Bidding off the final addenda set avoids all the misery of earlier overlays, but it leaves them with little time to complete their estimate.

GC estimators looking for less drama on bid-day should itemize the changes made in each addenda according to their bidders scopes. Maintaining a running list of changes and supplementing with instruction/ direction where necessary limits the amount of scrambling a bidder has to do to deliver a complete proposal. GC estimators who strive to lower their subs risk get better pricing. The GC with the best sub-pricing can be simultaneously cheaper, AND more profitable than their competition. I know of a few GC estimators who’ve rejected an Architects addendum until they provided a change narrative and bubbled drawings. Setting a precedent with the design team at the start of the project kept the addenda from becoming unmanageable.

Email mountain

The ease with which information can be transmitted via email can lead to inboxes that are inundated with messages. Bid letting software allows an estimator to mass-communicate with all the invited subs to share every document, file, and change. Many bid-letting programs automatically send out reminders to bid, often to multiple contacts at each subcontractor. On the receiving end this can mean upwards of a half-dozen emails per project, per client, and per contact. Projects with short deadlines can go from invitation to bid, to addenda, to bid day reminder within 24 hours. Many of these systems don’t communicate the basics about the project in any of the emails. Subs have to log in and navigate to files they must download in order to find out what they’re being asked to do.

Sure, the information is available, but it’s parceled out into several “Go find what I sent you” exercises that waste the subs time. If GC’s want their instructions followed, they should put themselves on the receiving end of their systems to see what’s going out to their bidders.

Why people won't follow instructions

“Our servers improve your fitness by exercising your patience”

Cloud based file sharing has become incredibly popular because all the documents are constantly available to everyone. Some teams are careful to separate different editions of the CD’s to maintain documentation of the changes. Other teams make no real effort to retain older CD’s which means the documents can and do change between the invitation to bid and the deadline. This can create a real hazard to the bidders who may not receive any notification of the changes. I’ve worked for unscrupulous GC’s who replaced the CD’s after the contract was written in an attempt to avoid paying for change orders. All the supposed benefits of shared files pale in comparison to the risk of being unable to prove what was and wasn’t on the CD’s at bid time.

I encourage every estimator to download and save the most current CD’s on bid-day into a time-stamped file. Keep that file for your records, because it may not be there later on.

Smarter than you think

So far, I’ve focused on information and risk management reasons why a bidder won’t follow instructions. The GC estimator should provide leadership to clarify, consolidate, and communicate what needs to be done. There is a lot of trade-specific knowledge required to understand and bid the scope of the skilled trades. A lot of GC estimators aren’t sure what to do when they’re presented with a complex issue, so many default to asking for alternate or breakout pricing. Alternates can double or triple the amount of work to bid a project. Not only is it more work, alternates might be misunderstood, misapplied, or used against the bidders interest. Arming the client with information that leads to wrong decisions is bad business.

If the GC estimator don’t understand the issue, it’s unlikely that they will clearly communicate the alternates to their client. Some GC estimators in this position will simply add up all the alternates just to “be sure” they’re covered. Subs see these GC estimators losing bids because they don’t exercise good judgment with the information presented. In some cases the sub is truly trying to help the rookie or fraidy-cat GC estimator win, by ignoring their alternate request.

Don’t kick the hornets’ nest

Material specifications don’t happen by accident. Design teams are paid to select, define, and enforce the material specifications for their projects. This becomes a very contentious issue when a specified material is overpriced. Corruption thrives wherever transparency, competition, and accountability are lacking. Some material vendors and distributors have extensive relationships with design teams who protect them from competition by sole specifying their product. Lots of GC’s will request alternates for Value Engineering or Alternate equal pricing to replace overpriced material. If the difference is significant, they present it to the client.

Subs may refuse to provide this pricing for several reasons. First off, the design team has a vested interest in their specified vendor. It’s therefore unlikely that they will happily accept an alternate product that would expose their budgetary irresponsibility. Second, the more extensive the corruption, the more control the malefactors have in the system. Releasing material pricing just before the deadline is a favored tactic because it precludes bidders from seeking another option before the deadline. The subs may simply not have time to find an alternate solution. Finally, the sub understands that solving the GC’s budget issue isn’t a guarantee that the sub will be awarded a contract. Many GC estimators see no problem using one sub’s alternate in conjunction with another subs proposal. They figure their low sub will be able to find the same deal on the alternate material later on. So the sub who kicked the hornets’ nest gets noncompetitive pricing on all their material bids, while their competitor lands a contract.

Why people won't follow instructions

Chris has plenty of time to consider how his hard work left him in the cold.

A lot less than nothing

It bears mentioning that lots of GC estimators entertain endless post-bid client requests to value engineer the job. Some clients instruct their design team to incorporate all the best ideas, then put the job back out to bid. I call it “Design by bid” and it’s an incredibly expensive way to give your competition a job.

GC estimators looking for a solution here should consider writing RFI’s requesting alternate specifications for sole-specified overpriced materials. In some cases, it’s smarter to ask for performance specifications because it’s difficult for a design team to go on the record refusing to accept an equally performing product.

Most design teams stipulate that alternate materials must be submitted for approval before the bid. Since it’s virtually impossible to know precisely how overpriced the material will be before the deadline, it’s hard to tell when this will be worth doing. Experience in a given market will expose the relationships underpinning the corruption, so long as you’re paying attention.

Defensible decisions beats conditional clarifications

Contradictory, misleading, and confusing requirements are part of an estimators life. Controlling risk often comes down to judgment calls on the information you’ve got at hand. It’s a weird quirk of estimating that people tend to overlook justifiable confusion during the bid because they’re sitting on the post-bid answers. “Of course they wanted X instead of Y, here’s all the supporting reasons that make it obvious…” Nobody cares that there may be just as many compelling reasons to support a preference for Y, because now the client’s telling you what they want.

This mindset carries into reading proposals at every level. The presumption is that your proposal is presenting a complete scope of work for a bid amount. Clarifications, especially complex conditional clarifications are seen as fine print or worse; weasel wording. Anything that savors of sneaky dealing works against the estimator. From a practical standpoint, it’s better to articulate your scope of work in terms of defensible decisions. The more simple and defensible your decision-making is, the more your client trusts your motivations.

Let’s say there’s an obvious conflict in a design that could potentially go three different ways. If a sub sent over a base bid with two alternates to cover all the options, they’re taking a risk that the GC won’t know how to scope their bid against their competitors who didn’t price any alternates on their proposals. These alternates make the GC estimator responsible for the outcome of their decision-making. Lacking knowledge, experience, integrity, or time, the GC estimator may make the wrong decision. These moments can have real costs in terms of bids, relationships, and reputations.

The imaginary alternate

Some projects have a long list of alternates that are scarcely defined in the CD’s. I’ve seen projects that had four elevation drawings of a single occupant restroom, yet an alternate for an additional building was defined entirely by three sentences in the specifications! I call these “imaginary alternates” because they exist only in the client/architects imagination. Experienced estimators know that any price you provide can be used against you. Imaginary alternates offer no tangible defense for decision-making. The only defensible decision, is to not price them. Estimators should respond to imaginary alternates with “To Be Determined”, or “Price Pending Design”.

The bid template

Just about every rookie GC estimator who has scoped a stack of sub proposals gets tired of how difficult it is to simply compare one against the other. The myriad ways that bidders word their way around promising to “have everything” can be very frustrating. Their grand solution is a bid template which not only orders the information, but neatly prevents the subs from excluding anything inconvenient to the GC. The GC estimators plight is understandable, but misguided because they’re ignoring the autonomy of the subs. It’s the subs autonomy that makes them an effective risk diversification strategy for the GC. Attracting market-leading subs not only lowers the GC’s prices, and raises their potential profit, but it also reduces the risk of subcontractor failure. GC’s with a myopic focus on bid templates convey higher risk to the subs. We’re estimators because there is uncertainty. If we can’t address the uncertainty via clarifications or exclusions, the risk becomes unmanageable without raising the price. Bid templates are an excellent way to efficiently lose bids and repel market leaders.

Why people won't follow instructions

A better alternative

A bid checklist is a subcontractor level list of applicable scope items with columns to confirm, add, or subtract funds to correspond with the GC estimators plan. Not only does the form automatically tabulate the “apples to apples” amount between bidders, it provides all the bidders with the same criteria, and equal time to respond. Getting the subs “on the record” in terms of unclear scope inclusions is invaluable for when Project Managers are writing contracts. Perhaps best of all, the checklist allows the subs to protect their interests and control their risk by supplementing rather than replacing their proposals. If done correctly, it’s possible to use the GC estimators actual estimate to output bid checklist forms, thereby saving considerable time for everyone. It’s easy to overlook just how much time a GC estimator spends trying to call the subs individually. Bid checklists can be mass-emailed to all bidders. The answers return in black-and-white terms that simplify decision-making.

Clear, well-reasoned instructions backed by good faith efforts to make the project successful make all the difference. Bidders want to be on the winning team, and will happily do their part to the extent they believe it will benefit them. This means that ignored instructions communicate something counter-productive to the bidders. Estimators who build on this feedback may find ways to re-focus their efforts and get the results that matter. If our purpose as estimators is to win profitable work, we should evaluate our processes with clarity of purpose and keep only what works.

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2 Comments | tags: GC, Incomplete plans, Instructions, Perspective, Risk, Strategy, Subcontractors, Uncertainty | posted in Uncategorized

January 21, 2015

Training

By Anton Takken

It’s been my experience that most estimators were trained on the job. In fact most professionals in the Construction industry studied at the “School of hard knocks”. Construction Management programs at Colleges or Universities will typically include a course on estimating. Speaking from personal experience, I can say that these programs focus primarily on “bean counting”. That is to say that Quantity Take Off’s (QTO) utterly dominated the lesson plan. Cursory instruction on material pricing guides like “RS Means” were provided to allow students to generate pseudo estimates. Some classes required group project presentations on the mock estimate.

The mechanics of estimating

Quantifying the work, tabulating your results and correlating market pricing is the over-arching mechanical process of estimating. There’s a continuum for detail ranging from entirely conceptual to unit pricing. Much ado is made of the differences between square foot costs and detailed estimates. In fact, I had a teacher who insisted that EVERY estimate should progress from conceptual to square foot, to detailed as a means to “hone in” on the “right” answer. In practice I’ve found that “free” estimating work should be proportional to design completion and client commitment.

Sometimes hot air is a structural element.

“Pricing” and “90%” drawing sets are often budgetary exercises with no sincere client commitment to hiring the low bidder during slow markets. Design teams inundate the market with pricing exercises that rarely lead to contracts. Since most pricing exercises are quick turnaround it’s important to understand that being too cheap is a problem because the final design invariably involves costly items not present on the budgeting plans.

“Hurry up and tell me how much I’ve got to spend”

There’s an old adage that applies here; “Quick, Accurate, Cheap, you can only pick two”. As a result, most conceptual estimates strive for accuracy over low bidding.

A conceptual estimate might be done on the basis of several references. The most common is comparing the conceptual project to similar completed jobs. Rough approximations of gross assemblies are very useful here. Think in terms of ” X number of restrooms, and Y number of floors”. Square foot costs can be helpful for conceptual estimating when the area is fairly homogenous as in a large office or a warehouse building. A lot of square foot costs fall apart when decorative elements and existing structural concerns are undefined.

The ball and bucket

Lots of people confuse detailed with accurate. As a thought exercise consider the following.

Let’s say you’re trying to perfectly center a ball in a round bucket. A very small, perfectly round ball would obscure the least amount of visible area and might allow for measurement tools to gauge how well centered it is. Being small, it’s unlikely to sit still for measurements, leaving you chasing it around.

Now imagine a ball that’s the size of the bucket. It can’t help but perfectly center itself. What it lacks in fine detail, it makes up for by being error-proof.

Estimating is about controlling risk which is how centered the ball is in this example. In order to quantify the risk it’s important to work from more than one direction. Myopic focus on minute differences might well reduce risk. However the risk you’re concerned about is what can actually hurt your firms ability to profitably complete the job. Controlling that risk is about an overall process that’s scaled to fit your specific challenges.

Pictured: Room for improvement

For example the price gap between low and second low is one means of defining the risk in a given scope of work. If that risk is too high, it’s indicative of a substantial difference in bidders, scope inclusions, or adherence to specifications.

Lots of instructors teach trainee’s to relentlessly pound through the low bidders scope looking for holes to explain the price gap. Truthfully, a great deal of an estimators time on bid day is doing just this. However, time is short so prioritizing is a necessity. A great deal of risk is alleviated by working with reliable, trustworthy and professional bidders who are committed to working with your firm.

Spending an hour on the phone de-tangling the riddled mess of a hack bidder is its own risk because it consumes time to review other more professional proposals.

Warning; the clowns are out there.

The project risk is collective, so time spent firming up the bulk of your bids can have a profound impact. Balance your efforts accordingly.

If an estimator was perfectly certain they had put together the most competitive and complete bid covering all the project scope, it shouldn’t be possible to have a lower bid without making a mistake and/or losing money.

This is a crucial aspect of estimating that is not driven by detailed QTO’s or orderly spreadsheets. If your bid depends on subcontracted work, you are relying on your bidders to secure your victories. Established firms with good reputations have a profound advantage in this regard. Estimators in training must understand the absolute necessity of maintaining a good reputation.

Most training programs fail to show students how to avoid making bad impressions. There are many aspects of the bid process that revolve around pushing information. Getting the plans out to the invited subcontractors, communicating job walk dates, sharing addenda, and so forth. Faceless emails blind copying hundreds of subcontractors are indistinguishable from a computer-generated message. The information needs to be disseminated, and it’s often routine. However the reason you’re bidding is to capture an opportunity. Bids are won via group effort, be sure to communicate that you’re picking players for the winning team.

Training programs should stress the leadership aspects of estimating. Subcontractors will have lots of questions. Plans aren’t perfect which is why an estimator exists in the first place. Firm decision-making is paramount to success. CD’s are sometimes ambiguous so you must commit to a plan of action and deliver on that commitment via clear direction to subcontractors. RFI’s should be written so that even weak design-team responses generate clear directives. “Yes or no” questions are particularly appropriate even if it means you’ve got to draw a sketch to make the question clear. RFI’s should be written so that owners, contractors, and tradesman can fully understand what’s going on.

Artistic rendering of the Architects perspective.

Going hand-in-hand with decision-making is enforcing the stated expectations. Deadlines are necessary tools of your craft. Everything has a deadline including RFI responses, Addenda postings, and proposals. Bidder instructions should provide all necessary information in an organized and readable fashion.

A quick review of “typical” invites to bid would reveal how technological reliance has eroded professional standards. Emails from anonymous addresses demanding commitment to bid jobs that aren’t defined are common. Some don’t include the bid deadline, their own company name, or even the city in which the job is located. Links to password protected websites crammed with enormous files (and long download times) are commonplace.

The “mechanics” of estimating are fairly straight-forward but won’t necessarily lead to winning work or controlling risk. Few training programs involve a developed decision-making process to get traction with your individual bids. Much like modern management training programs, a great deal of “there are many ways to achieve your objectives” is presented instead of a more compartmental (and successful) approach.

Priorities

There are some basic priorities/ directives that every estimator should have to “ground” their decision making. I’d outline the hierarchy as follows:

Be ethical, honest, and forthright with everyone all the time.
Protect your firm, your client, and your subcontractors best interests.
If it’s in the construction documents (CD’s), you should know about it and bid accordingly.
- If you’ve got subs bidding, it’s YOUR responsibility to make sure they know (and include) all the scope.
- If you know something’s missing from the CD’s, it’s YOUR responsibility to bid reasonably.
Bid to win. Know your market, and where you (and your team) fit. Estimates are not free.
If you don’t have it in writing, you don’t have it at all.
If you don’t know, don’t guess. RFI’s, exclusions, clarifications, allowances, and alternates offer options to reduce risk.
Keep track, stay current, communicate, and you’ll constantly improve.
A “win” is only a success if the risk is managed and the work is profitable.
Time is of the essence so you must;
- Prioritize on high-value issues
- Make your estimate system nimble, understandable and reliable
- Communicate efficiently, effectively, and consistently.
- Constantly seek to accelerate QTO’s.
Make concrete progress with every effort.
Get “above the fray” to see what’s really going on
- Job costs are driven by many factors including the schedule, client, and site logistics.
- Politics, relationships, corruption and institutional inertia play a role in every market.
- Weak design teams, bad clients, and indecisive leaders add to project risk
- Hiring a sub for work that’s too big for them is a serious risk for all concerned.
Check your work THEN trust your results.

Think like an estimator

So much of estimating is considered a blend of accounting and voodoo when in reality it’s just a way of thinking. Sure you could painstakingly add up everything you can think of that goes into a project. Assuming you’ve thought of everything, and that you knew what everything costs, you’d eventually arrive at a number.

It’s harder than it sounds.

Alternately, you could look at the project as an object bounded by expectations. Training an estimator should involve teaching them what entire projects actually cost. So much time is spent memorizing the square foot cost of paint or the unit cost of a faucet. Very little time is spent developing a perspective on what market value is for the entire project.

From there, estimators need to learn what drives the cost of certain projects. Define the key players. As a surprising twist, it’s not always driven by the most costly trades. If a particular scope of work is hurting productivity, it can dramatically influence the prices of other trades. Many successful estimators capitalize on an opportunity to do things differently.

Teaching on the job

When it’s your turn to teach someone about estimating, remember the investment others made in you. The margins of error are small so it’s critical to have high expectations of anyone taking this work on. That being said take the time to explain why something must be done a certain way. I’ve spent years developing an approach that works for me. In many cases, I have tried a different way of doing things which didn’t work as well. Share those lessons right away and save them the time.

Hey we got you some help, just teach them how to get started…

I’ve never had a reduction in my workload when taking on a trainee. In fact, trainee’s were most likely to be hired when the work was so demanding we needed help! Despite the difficulty of meeting onerous deadlines with inexperienced staff it’s critical to maintain perspective. I firmly believe that concrete progress is the only measure of training success. To start it’s your responsibility to establish clear standards, expectations and deadlines. Correct the work as needed before moving on. Balance the need to teach the material against demanding a perfect report. Lots of estimators get hung up on any detail being wrong. This can stall the process by demanding edits, revisions, edits, revisions, and so on. Wherever possible catch everything that’s wrong on the first review, follow them to their workstation and have them correct it so you can give them their next assignment.

“Hey Chief, one quick question…”

Some trainee’s will struggle and that’s part of the process. Make sure that tasks are brief enough that there isn’t time to wallow in a problem. If you’ve struck the proper balance, you won’t be interrupted in the mean time. Be sure to gradually include more opportunities for judgment calls on their part. The goal should be to develop decision-making skills. Asking why they did what they did gives them credit for thinking things through. Explaining what you’d do differently respects their intelligence and guides their next efforts.

At each step review that you’ve made concrete progress towards what you want them to know. Too much emphasis is laid on “practice makes perfect” which leads to talented trainees counting doors for way too long. Once they’ve done it right, make it clear that you expect good work in the future. Sure it’s a lot of pressure, but remember that you’re checking their work just like someone did for you. Estimators must learn to work as though there’s no net to catch them.

“I wondered if you knew where I’d find this thing you asked me about?”

Along with judgment calls, it’s necessary to teach trainees how to find their own answers. Most firms default to “ask the person training you“. I believe it’s necessary to develop fact-finding skills early on. When an opportunity presents itself, demonstrate a question you’re looking to answer. Whether you’re calling trusted subs for insights, or internet searches for related topics, it’s important to show how you get this done. Gradually task them with new searches to guide their judgment. Lots of time can be lost looking for these answers so monitor their progress.

Firm foundations

As trainees gradually move on to active projects, make sure you’ve equipped them to do the job. Weak communication skills are best addressed before trainee’s are contacting bidders, architects, and clients. Lots of firms have shaky-voiced interns stammering their way through calls to subcontractors. Five word responses may be fine for texting friends but it’s inappropriate in business. Making the wrong impression can limit their potential.

“No Wally, you’re not getting a promotion this week either”

Give trainee’s the direction they need to start off on the right foot. Above all, focus on outcome rather than intention because that’s how the world responds to your actions.

Lead decisively and expect trainees to act decisively. Cowardice, hedging, and sand-bagging have no place in professional estimating. It’s an honorable pursuit that can be very rewarding for those who apply themselves. Encourage trainee’s to act on principled thought, and calculated reasoning instead of fear. We’re all concerned that we’ll miss something. A sound process with solid execution silences doubts better than any amount of guesswork. Teaching others has a way of bringing clarity to what you know. Contributing your knowledge can build a legacy that will outlast all the projects you’ve won.

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1 Comment | tags: conceptual estimates, square foot costs, Subcontractors, training programs | posted in Uncategorized

August 13, 2014

How to lower prices

By Anton Takken

A common follow-up question to “How much to build this?” is “Could it be done for less?”. If you are losing to competitors frequently enough , the answer would be yes, yes it can. There’s a tendency to look at a bid as if it’s simply the total of all the subcontractor quotes. This perspective has limitations in that it implies that cheaper subcontractor quotes is the only way to arrive at a lower total bid.

But why are their quotes so high? Risk is the most common reason. Subcontractors must assess factors that go beyond a narrowly defined scope of work listed in their contracts. For example market conditions may have created a labor shortage that limits the amount of projects the subcontractor can safely take on. Bid invites for projects that are planned to start during peak seasons will create a twofold risk for the subcontractor. First, if they win the job and labor is scarce, they will have to pay a premium to adequately staff the job. Second, if they fail to land enough profitable work during peak season they jeopardize their annual earning potential which may leave them saddled with a fastidious low profit job, which is a very serious problem.

GC Estimators can address this risk by carefully evaluating bid opportunities that are leading up to and during peak season. Are the plans ready for permit? Does the client have funding? Can they start when they claim they will? Could they start earlier or later? Lots of ambitious clients choose to break ground in the summer to reduce weather delays. School remodeling typically takes place when the kids are out as well.

From traffic signals to hand grenades – timing is everything!

This is not the time to be optimistic and giving the client the benefit of the doubt. If a client looks wobbly or has a history of late starts tell your subs you anticipate a later start date. If the client is obligated to timelines for contract awards and project closeouts include that on your invitation to bid. Specification manuals are sometimes thousands of pages long and Architects can’t be bothered to list pertinent details like start dates, completion dates, liquidated damages, bonding requirements, Taxes, or Davis Bacon Wage requirements in one place no matter how much it would benefit mankind (but I digress). Honesty counts, I have been involved with bids that were upwards of 20% higher than the best we could do on bid day because we couldn’t count on the client to start when they said they would.

Projects that get pushed back inevitably collide with work for responsible clients. These collisions can be immensely expensive especially when small projects “just won’t end” to free up needed resources.

Order of operations

Projects with limited subcontractor scope may still require several mobilizations to the project to complete. In extreme situations, the mobilizations are more expensive than the scope of work. Imagine a project that requires a new doorway to be cut into an existing wall. The painter might be tasked with painting the wall around the new opening, the door frame, and the door itself. If the painter were allowed to paint the wall after the frame was installed ,they could get the wall and the frame painted in a single trip. Shipping the door to the painters shop allows them to paint it when convenient and bring it with them when they come to paint the wall. Cutting 50% of their mobilizations and allowing them to paint a door in a less chaotic environment reduces their labor and risk on the job without changing the scope of work. Be creative and find alternate solutions. Taking this door example a different way, let’s say the door is wood and must be stained to match the wall trim. A painter is going to have to obtain a stain sample, mix, match, and apply that finish. The millworker will bring pre-finished trim to the job site to install. They have all the equipment to stain and finish the wood door and bring it with them when installing the trim. The stain WILL match because it’s the same material from the same equipment. Again, the staining can occur in a controlled environment at the subcontractors convenience. The painter ends up with a single mobilization, so does the millworker.

If the work is inconvenient or likely to interfere with more profitable pursuits subcontractors will price it higher. Don’t let dogmatic tradition dictate the schedule, look for the efficient approach. Don’t be afraid to make things cheaper for a “little” scope of work.

House cleaning

Part of what defines the work is the GC. Many firms are monoliths of unresponsive yet demanding bureaucracy. Estimators who don’t have a rapport with their subcontractors are rarely well-informed as to what influences each bidders view of the job. Giving prompt, uniform, and firm direction in reply to subcontractor questions builds a positive association with your firm. They will be more inclined to speak honestly with you about their limitations, interests, and concerns. Dithering, weaseling and CYA replies achieve the opposite.

Project Engineers that hastily reject submittals without explanation create administrative log jams that delay critical path deliveries. Project Managers who fail to develop, maintain, and manage project schedules often become “screamers” as the deadline approaches with long punch lists. Taken together, these “dynamic duo’s” are artery clogging masses in the project’s bloodstream.

GC’s who have their project managers bid their own work often receive different subcontractor rates depending on which PM is going to run the job. This is why.

“You could say workplace tension is a factor…“

None of which is to say that everyone at a GC must be everybody’s friend or always “play nice”. GC’s that win work that’s run smoothly and profitably without screwing anyone will have plenty of admirers.

Working around the situation

The modern bidding environment is very formal and compartmentalized. The GC’s are not permitted to informally ask the design team questions. Subcontractors are not permitted to ask questions of anyone but the GC’s. Bureaucratic delays ensue, forcing critical decisions to the end of the bidding period (if then). Then the bids come in and often the client is displeased with the price and all value engineering suggestions. After all, they paid the design team to get everything this far,now they’re forced to choose what to amputate from their vision of the project. The client doesn’t see much value in the ritual of the Request For Information (RFI) exchange. So take the opportunity to push the project back on track by providing leadership BEFORE the job is off the rails.

“An appeaser is one who feeds a crocodile hoping it eats him last” Winston Churchill

Many GC’s seek to avoid exposing an Architect’s mistakes in hopes that “playing ball” will naturally resolve complex issues. Assuming the Architect will fully grasp all the issues and costs of a problem is how we get half answered questions, cost over-runs, and project delays. Often these problems are apparent at the bid stage. Cost additions post bid are change orders that the owner doesn’t appreciate. Ambiguity in the plans can raise moral dilemmas that unscrupulous competitors exploit to snag a job. Closing the gaps BEFORE the bid levels the playing field and protects the client.

Subcontractors may feel the same way only they must rely on often feckless GC’s to get direction from the design team.

Start on the right foot by writing RFI’s in a professional manner. Reference an actual drawing that you’ve cropped to the area(s) affected. Wherever possible ask Yes/No questions to simplify things. Offer reasonable solutions and imply that you think that’s what they intended.

Here’s an example: Detail XYZ has a note requiring process X however detail PDQ has a note requiring process Q. ABC Construction believes the intent is to use process X at only West facing openings and process Q at all other openings. Is this correct? If not, please define the desired process for the openings in question.

If the architect writes “yes” on your RFI and sends it back to you, you’ve generated an easy to follow instruction for subcontractors to bid on. Legalese or weasel wording makes for ambiguity which is risk.

Now most estimators will just send this RFI to the Architect and steadily grow their frustration as the bid date advances without a reply.

Get what you need as soon as you can

It may be possible to call the Architect off the record before sending the RFI. Phrasing and tone are important. Portray your efforts as striving to make an easy to answer RFI. The intention is to establish your desire to honor their design, not list mistakes you found in their plans. If done with diplomacy, it’s possible to get the answers you need before you send the RFI. Some Architect’s will formally answer all RFI’s at one time for their convenience. Typically via addendum just before the deadline.

Broadcast the answer’s

Knowing the answer early means you can create a bid directive for your subcontractors well in advance of that addendum which will confirm and formalize your instructions.

GC’s that aren’t afraid to give accurate and precise direction are rare in the market. If you make it easier to bid to your firm, there’s an excellent chance that you’ll attract bidders to your projects. Be advised that asking for alternates for scope of work that “could go either way” depending on an Architects reply can be a sizable request. It’s typically much harder to precisely “break out” some scope of work after the bid is complete. Get such requests out an in front of your bidders as soon as you can.

“I’m too busy to answer you right now”…

Subcontractors bring a profound level of specialized knowledge and diverse experience to the bidding environment. They typically have far more customers clamoring for their attention than the average GC could imagine. Subcontractors do not have the luxury of analyzing a single project from the invitation to the deadline. They may only be able to invest a small amount of time in bidding the work because their scope work isn’t valuable. GC’s are who are unwilling to “spoon feed” subs looking for answers are missing the bigger picture. “It’s in the plans” is a pithy response that results in a furtive hunt for as long as their charity outweighs their frustration. Trades with limited scope, or with scope of work that’s only shown on an obscure detail drawing are likely to come up short on bid day if you don’t let them know what you’ve found. The interplay of alternates is immensely frustrating for subcontractors. Items that are affected by trade overlap are likely to have conflicts when decisions are left to interpretation. Does the roof top unit come with its own fused disconnect or does the Electrician have to supply it? Is carpet demolition by a demolition subcontractor of a flooring sub?

A well-defined estimate should output scope of work checklists that you can send to your bidders to reduce bid-day confusion. Try to remember that competitive bidders default to EXCLUDING anything that’s questionable in their scope. If you don’t know enough about the item in question you should call trusted subs and get their input. Not everything with pipe connected to it is in the plumber’s scope, not everything with wires is an Electrician’s job. A skylight might be handled by a Glazier, a Specialty skylight subcontractor, a roofing subcontractor or even a carpenter depending on the specifics of the situation. Be advised that there’s more than one way to address a scope of work. Sometimes the cheapest option is overlooked.

Plan wrangling

99.99% of the time bid documents are transmitted as Portable Document File (.pdf) files. This can be a blessing or a curse depending on several factors. First of which is the way the document is formatted. A fair number of Architects will transmit one file with all the plan pages included in order. The advantage is that there’s no chance that any single page will be omitted. The disadvantage is that this makes the file large and cumbersome for the majority of bidders. Alternately, the plans can be transmitted by sets defined by group i.e. “Architectural, Structural, Interior Design, Civil, and MEP,”. Finally the plans can be transmitted as individual sheets.

The naming convention of the file is very important. Individual sheet files need to be renamed to match the sheet name. “Sheet #21” is meaningless whereas “A5-3 West Elevations” defines the page. Don’t assign this task to folks who lack construction knowledge, the results are uniformly awful.

Be advised that re-naming sheet files tends to scramble the page order if the page names aren’t alphabetical or sequential. In those cases, I find it easier to put the page number at the beginning, followed by the sheet name. From the example above you would have “23 A5-3 West Elevations” as your file name. Keeping the plans organized, and accessible is absolutely critical for reducing the amount of time a bidder has to spend trying to get what they need. Imagine you’re making highway signs for the autobahn, decisions need to be made quickly so the information must be clear.

Welcome to the FF&E Rodeo

This becomes much more challenging when you’re bidding work in certain markets. The multi-family, retirement, and assisted living, market often use interior design teams who create “Fixtures, Furnishings, and Equipment” (FF&E) packets. Those that have crossed my desk are a perfect storm of inefficiency. Cut sheets for carpet, chairs, paint, wall covering, light fixtures, plumbing fixtures, appliances, etc. are combined into one continuous file that’s generally riddled with nomenclature not shared by anyone else on the design team. Carpet types on the Architectural plans do not correlate with the FF&E types because these teams don’t coordinate. There is no effort made to place similar materials together so it requires a comprehensive search to find all specified material for a given trade.

Start by breaking down the FF&E files into individual cut sheet files. Use naming conventions to sort them to either Construction Specifications Institute (CSI) number or trade name. Maintain an inventory of what you’ve found on a spreadsheet. The next step is attempting to match the cut sheets to the types listed on the plans (a daunting task). RFI’s need to be promptly filed where applicable.

Be advised that very complex RFI responses are often delayed. If you break your list down to trade specific materials it should help focus the design team’s resources. Presenting your subcontractors with a completed schedule for the material in the FF&E documents reduces their risk immensely. Avoid “narrative” responses wherever possible. Provide highlighted drawings showing the locations you think they’re addressing. It’s been my experience that Interior Designers are loath to use plan notation for RFI replies. This tendency wastes your precious time. If they won’t draw a picture, draw one for them. Be advised that information like room numbers is frequently missing on consultant plan pages which compounds the confusion with narratives.

Drive the bus or get taken for a ride…

Similarly, conceptual or design/ build efforts can be based upon a hodgepodge of plans, pictures, and narratives. It’s incredibly annoying for subcontractors to read through all the pages of a narrative looking for their scope of work.

Subcontractors are bidding to YOU, so YOU need to put your assumptions out in a comprehensive manner. List out the presumed scope of work for every trade you’ve invited being careful to add precise direction for areas of trade overlap. For example, if there’s a kitchen, YOU must declare if the equipment will be gas or electric. If the client intends to furnish material, then list that too. If you’re competitively bidding, define what you expect the budget to be. Leaving everything up to the subcontractors means you’re riding the bus, not driving. Define desired level of finishes using unit costs wherever possible. If there are hard specifications or special inclusions, make sure that the affected bidders are aware of this. List things according to trade to make it easier for them. If it sounds as though conceptual or design-build estimates are more work than a traditional hard bid, you’re right!

To the subcontractor, missing information on conceptual bids generally equals “excluded”. Design-build presents an onerous situation for subcontractors. They’re expected to “protect” the GC from uncertainty but they must also compete. Exclusions are costly – limit their risk by defining what is and isn’t in their scope of work. The MEP trades are facing a significant amount of work to design-build a project. Weak, weasel-worded, or unknown requirements will push them to simply bid high to let someone else take on the troubled job.

Bids are not free

Sometimes the reason a GC fails to attract low bidders is due to the image they’ve cultivated on the market. Constant losses are an indicator to subs that it’s time to change horses. Subcontractors don’t know who was second, third, or fourth low, the awarded GC is all that really matters to them. A lot of GC’s assume that their competitors were working off the same subcontractor numbers. In fact, it’s common for subcontractors to give better pricing to low risk or better clients.

Closed doors and open windows.

There are also a lot of cases where a GC has a low bid subcontractor all to themselves. GC’s that enjoy this situation have a few things in common. First off they are aggressively promoting acceptance of qualified subcontractors. Many firms are enormously insular about widening their list of pre-qualified vendors. Striking the proper balance between competitive pricing and risky subcontractors is a process of continual refinement. If you’re consistently not winning, you need to be widening the list of acceptable subs. Unsolicited bids or late bids from subcontractors who just heard your firm was bidding are prime candidates for review because they are already bidding work in common with you.

Winners pick winners

Another thing these GC’s have in common is that they are conscious of wasting subcontractor time. It’s senseless to invite subcontractors to bid work they’ve consistently lost in the past. Just as it’s unethical to invite a sub you wouldn’t hire, it’s not ethical to invite a sub knowing they are going to lose. Classify subcontractors according to their key markets will help immensely in ensuring that they’re paired with the right work. Too many estimators focus on “at least three” subcontractor bids per trade. If one sub has never won similar work, it’s time to find another contender. Be advised that subcontractors are often in “sales mode” when answering questions about their firm. Base your classifications on their verified performance. Keep in mind that often subs are much larger than they may appear from your desk. A mid-sized GC employs a fraction of the people that a mid-sized subcontractor does. It takes a lot of resources to actually perform the work.

When times are good, it’s imperative to bid Subs on select lists. When times are bad – it’s critical to show subs you’re picking market leaders. Prove it by winning.

Your voice

Many GC’s employ an intern or hapless office worker to manage bid communications and invitations. The least sophisticated firms have someone on the phone nagging subcontractors endlessly for bids. “The personal touch” is considered a benchmark of getting things done in the bid world. Possibly there are subcontractors who feel this is a much-needed aspect of the bid courtship. For most others, this is a mindless intrusion into an already hectic day. If the project, GC, or client strikes the sub as a bad opportunity, forcing them to explain the situation to an intern or receptionist won’t help.

Sometimes the subcontractor will ask a question intended to help quantify the job. Inevitably the caller lacks decision making authority to adequately resolve the issue.

Lots of businesses create customer service positions with authority but no allowance for decision making. The Department of Motor Vehicles is a prime example. From the receiving end one message is quite clear:

“We don’t care, and it shows…”

I’ve heard GC estimators discussing this situation and several claimed that they had their lead estimators making such calls because the interns or secretaries didn’t get results. Its better to ask: “why don’t subs want to bid?”. Not getting nagged enough is the least likely reason. It’s exponentially more likely that the Subcontractors don’t see a viable opportunity. If these GC’s were honest about their chances on an average bid, they’d likely admit that they’re wasting their subcontractors time to an alarming degree.

Targeting specific work should entail having a select list of excellent subs who pursue the same kind of work as you. Those subs will bid because it’s a great opportunity and they’ll have better pricing because it’s what they’re good at.

Honesty: the great amplifier!

Nagging, cajoling, withholding, and threatening are symptoms of a backwards relationship. If you’re looking at work that’s a good opportunity for you AND your bidders, you won’t need to shout to attract attention. I have found that voluntarily providing bid results attracted more bidders than nag calls. It’s less work if you publish them using the same system as your invitations. Also, it reduces the nagging phone calls you receive from subcontractors looking for bid results.

A friend at the gallows

Subs bidding to GC’s over time will notice patterns. If your firm never wins a certain type of work, you can’t reasonably expect help from them. Lots of false hope is pinned on loyalty bidding. Subcontractors may choose to bid to a GC they’re loyal to, knowing that GC won’t win. Time is precious so they need to get on to better opportunities. Padding the number and pushing the bid out the door lets them maintain the relationship without the GC consuming all their time. It’s common to hear such GC’s claiming that “no subs are bidding this job” as they beg bids out of their subcontractors. Meanwhile, the winning GC has plenty of bids.

The situation could be fixed in several ways. First off you must quit chasing losses because it’s senseless to repeat an action that’s failed in the past. Second, maintain market pricing by cultivating new subcontractor bids. Third, provide pertinent feedback to your loyal subs . For example they may not know that you lost by $50 last time. Teamwork relies on communication.

Commitment

Just about everything in the modern bid environment is about stalling; whether it’s commitment to relationships, contracts, using a low bidder, or even admitting bid results. The pervasive mindset is that stalling for time is the best move since any other action might play against you. Jobs are often advertised using terms like teamwork. In fact, teamwork tends to mean whatever’s convenient to the GC.

For example, three bids for one trade arrive. The high bidding sub has breakout and alternate pricing that illustrate a very high level of thoughtful detail. The low bid sub has very little information and the inclusions don’t mention several items the high bidder listed in breakouts. The middle sub may list all the inclusions of the high bid but without the alternates or breakouts.

Taking low bidder’s total plus the high bidders breakouts gives a sum just below the middle bidder. Let’s say you call the low bidder and get the adds which come in within a percentage point of your earlier tallies which tells you that they’re now complete. Using that bid is now very low risk.

…who’s the fairest of them all?

Consider for a moment the subcontractor’s view of that example. The high bidders proposal enabled the GC to ask the right questions of an incomplete bidder to arrive at a sound proposal. Knowing what each answer was worth before asking is huge. The middle bidder was the legitimate low bidder based on original proposals alone.

How would things change if all three bidders had held their proposals till the last-minute? The first option is to disqualify the incomplete proposal and carry the 2nd low. The second option is to take the high bidders adders plus the low bidder’s bid and accept the risk that their formal proposal may not tally as expected. Jobs are won and lost on these terms all the time.

“Teamwork is everybody doing what I say”.

At the estimators desk, the “teamwork” here allowed the GC to hire the most irresponsible and incomplete bidder. Without the 2nd and 3rd high bidders, the low bid proposal would lack comparison data . This creates a significant trap to the unwary or uniformed estimator. If this situation persists over several bids, it would become obvious that there is little incentive for bidder #3 to continue submitting proposals. If bidder #1 is consistently missing scope items, this may be a sign that they are attempting to snag change orders. This is an insightful example of how that GC’s brand of “Teamwork” may be perceived!

“Better call in the D team…”

Lessons learned

It’s reasonable to compare proposals. Sometimes unexpected items will come to light on a proposal which prompt follow-up questions to other bidders. There is a certain duality to be expected where conscientious bidders may include so many details into their bids that they drive themselves out of competition. Likewise, the lax or harried bidder may miss something that makes their bid low. It’s the estimators job to sort all of this out, to include calling and scoping apparently incomplete bids.

This is entirely different from maintaining a subcontractor list intended to facilitate hiring hack bidders. The GC must offer value to the subcontractors if they are to receive bids. If the GC will accept incomplete bids, the playing field is tilted against the professional subcontractors. From the outside looking in, this is little different from bid-rigging since legitimate bidders cannot expect a contract in good faith.

Correcting course

Hack bidders should be directed to submit complete proposals or risk disqualification. The estimator must fortify the GC position by more thorough take off pricing to back-stop these risky subs. Unsophisticated subcontractors may offer attractive pricing that’s worth the risk. Be cautious of staffing projects with such firms. As the saying goes, trust but verify.

GC’s must strike a balance between subcontractor sophistication and market value. Those that do, find themselves winning competitive work profitably. Those that don’t are either losing money or losing bids. Don’t let it happen to you.

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6 Comments | tags: Ethics, FF&E, How much?, Incomplete plans, Losing, RFI, Subcontractors | posted in Uncategorized