Tag Archives: Uncertainty

Who pays the price for being wrong?

I’ve spent most of my working life in the construction industry and it’s a rare day when everything goes to plan.  Mistakes, misunderstandings, or simple lack of thinking things through causes a whole lot of negotiation about what comes next.  Change orders can be immensely profitable, indeed many businesses depend on them to be profitable.  That being said, negotiations don’t always land in your favor so it’s important to understand what’s at stake.

I’ve seen situations that escalated because one or more parties’ lost sight of the bigger picture.

“You know, I think we’re looking at this negotiation all wrong, we’d love to have you for dinner tonight”

For example, let’s say the client is on a shoestring budget.  The design team didn’t get paid to investigate existing conditions, so lots of surprises are popping up.  Further, let’s say the client decided to purchase salvaged materials that turn out to be different from what they told the design team to include.

So far, it sounds like this is all clearly the client’s fault, and they’ll have to pay to remedy the situation.

Let’s say this client is desperate to open on time because they would otherwise miss out on peak season that accounts for nearly all their annual revenue.  To protect themselves, the client required a payment and performance bond for everyone on the job and stipulated liquidated damages of $10,000 per day for being late.

The client is in a tough situation, so they’re particularly concerned about overpaying on change orders.  This leads to squabbles that go on much longer than they should.  To be efficient and productive, the work at issue needs to happen before other tasks so the job doesn’t progress like it should.  A lot of low-budget construction clients aren’t very experienced.  They’re not concerned with how this squabble is affecting the overall job because they have contract terms and bonds ensuring their deadline.

So, who pays the price for being wrong?  In situations like this, the immediate answer depends on timing.  If the squabble drags on long enough, the client may call in the bonds to replace the contractors and get their project built.  The replacement contractors aren’t going to be cheap because they’re getting paid for by the bonding agency who can (and likely will) seize assets to settle the exorbitant tab.

Now I’m not a lawyer, nor do I play one on TV, so none of this should be misconstrued as legal advice.  I suppose it’s possible that a contractor could win a case against the client, but that will take a lot of time and money.  Keep in mind that said legal battle would probably take place after you’ve had assets seized by your bonding agency which likely preclude you from conducting business anywhere else.

For most contractors, getting their bond invoked is an “extinction level event”.  I’ve seen situations where a particularly malignant client drove the project into delays, then used the threat of invoking bonds to demand extreme discounts.  Over the years I’ve had several situations where it was considerably cheaper to pay for the clients mistake so we could avoid more costly problems.  That’s something to consider the next time the client wants to change something on the project.

I’ve found that more contractors go out of business because of problems with a job they won, than from all the jobs they lost.  Don’t let it happen to you!

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© Anton Takken 2019 all rights reserved

 

 

 

 

 

 


Are pricing revisions costing you work?

Sometimes the estimators job isn’t done at the bid deadline.  Clients, Architects, or the Owners Representatives may have questions for the bidders as they review the bids they’ve received.  In some cases, the estimator will need to make revisions to suit the client’s needs, or to facilitate direct comparison against a competitor.  So far, so good.

Estimators are under pressure to respond quickly because the client is planning to award the contract as soon as they are satisfied with the winners bid.   Clients can be very difficult to reach following a bid so it behooves an estimator to make sure their attention doesn’t drift to a competitors bid.  Most contractors pack the calendar with bids so there is always another deadline looming.  This means that every post-deadline revision is taking time away from the next bid.  Leisurely clients with lots of questions rarely understand the estimators need to hustle.

Are pricing revisions costing you work?

“Sam had a terrible feeling that the client wasn’t going to let the meeting end.”

 

Making the right moves

In times of stress and pressure, it’s helpful to prioritize your tasks.  A client requesting a revision to your bid presents a significant reward for the additional work invested.  Compared to an oncoming deadline for a competitive bid, the client’s request will often take priority because it’s more likely to result in a contract award.  However it’s possible that the Client is calling about a small job with limited profitability compared to the upcoming bid.  The estimators purpose is to secure profitable work for their company by controlling risk.  When everything demands speed, accuracy and competitive pricing, the estimator will see the truth in an old adage.

“Fast, Accurate, or Cheap, you can only pick two.”

With time always in short supply, the estimator must constantly decide between delivering a cheap or an accurate revision.  It’s worth pointing out that the estimators’ wages are generally funded out of overhead.  For many firms, estimating is the only advertising or marketing for the firm.  Time sunk into answering endless questions for a client who awards the contract to a competitor is a costly proposition.  While estimators must make decisions considering uncertainty, their bosses see the outcomes as though there was never any doubt.  Post-bid work is rarely noticed unless it leads to, (or costs you) a contract award.  Many estimators have gotten into trouble this way.

Often smaller General Contractors (GC’s) and subcontractors (subs) aren’t qualified to pursue larger projects for established clients.  Smaller projects are more likely to be for “one-off” projects for sole proprietors who’ve never built anything before.  Inexperienced clients and small budgets are constant companions, which brings us to cost-effective design teams.  Here again, the above adage comes into play.  Incomplete, erroneous, and misleading construction documents (CD’s) are common with clients who have neither the time nor the money for a professional design.  Estimators may expect the number of post-bid revisions to be inversely proportional to the professionalism of the CD’s.

Building a pyramid is an iterative process

Not all client questions are  focused on arriving at a defined outcome.  For example, let’s say a client is trying to reduce cost or waste in their project.  They might ask a question intended to generate a data-point which drives their next question.  With each “layer” of inquiry, they believe they’re cutting away the unnecessary, so that each iteration is better value.  We might imagine this process to look like a pyramid where each layer is successively smaller than the preceding one.

Are bid revisions costing you work?

Above: “An elegant process leading to a difficult position”

The pleasing aesthetics of this process are based on several assumptions that seldom hold true in real life.  For starters, estimators who are competitively bidding have market pressure encouraging them to reduce cost and waste from the project.  It takes great individual knowledge and skill to win competitive bids.  Unless the scope of work, or the risk involved in the work has changed, the client is asking the contractor for information to be used against them.  Estimators know this, so the information provided takes this into account.

Providing information that would reduce profitability, or increase risk is obviously detrimental to the contractor.  As much as possible, the contractor will seek to provide answers to the client in terms of reduced scope, or reduced risk.  Clients are quick to notice that anything that can be cheaply omitted, might be cheaply expanded.  This means that every price the contractor provides has the potential to work against them. Once a price for something has been provided, it becomes a “fact”  separated from the conditions that define it.  Clients will consistently remember the cheapest price they heard for something, and woe betide any estimator who tries to change their mind later on.

In situations where the client requests revisions to revisions, the estimator and the client are poring over the same information repeatedly.  Since the earlier revisions are “fact”, there’s a built-in incentive to assume the earlier work was correct.

Are bid revisions costing you work?

“Good news! We’ve defeated the camouflage but now we’re seeing double”

Between the pressure, the drudgery and the desire to move things along, the estimator may be making quick-but-wrong revisions just to get the client to contract.   Clients obsessively focused on culling waste may talk themselves into cutting out critical project scope.  Estimators foolish enough to price their demands will be rewarded with an angry client, who feels cheated when the critical scope must be restored.

Like most things, it’s pretty clear to see where things went wrong in hindsight.  Clients may have several motivations for their actions, and it behooves the estimator to quickly identify what can be done to bring them to a decision in as few iterations as possible.  It’s my considered opinion that there are three client motivations that should inspire patience and diligence in the estimator.

  • Curiosity
  • Testing the contractors
  • Scope to budget alignment

On the contrary, I believe there are three client motivations which should be cause for concern and reservation.

  • Distrust
  • Dishonesty
  • Incompetence

Answering questions that speak to the client’s curiosity, budget, or desire to vet their contractors will give them what they need to enter a contract that’s beneficial to all concerned.  Conversely, questions driven by incompetence, dishonesty, or distrust are likely to move the project further from an honest and practical effort to award the contract.   “Helping” an incompetent client by pretending every ill-advised question is valid is how a lot of estimators end up with a profitless job and an angry client.  It makes little difference whether the client is distrustful or dishonest when their condition prevents them from awarding a contract in good-faith.   Scoundrels will sometimes feign distrust on the grounds that they don’t know enough to properly protect themselves from greedy contractors.  Demands for post-bid breakout pricing to “prove” that the bidders aren’t overcharging is a common and fundamentally dishonest practice.  The goal here is to make the winning bidder compete against the losers’ breakouts.

Imagine watching a 1600 meter race in the Olympics.  The winner is the one who finishes in the least time.  Should it matter if they were winning at the  400 meter mark?

The client intentionally misled the bidders to believe the contract would be awarded in good faith to the lowest bid submitted before the deadline.   Pretending that it’s “too close to call” is the favorite line of the scoundrel.  Extending the “competition” to continually solicit “run-off” bid revisions for better pricing quickly devolves into outright bid shopping.  It should go without saying that the construction industry’s policy of withholding bid results enables this chicanery.

I’ve awarded half-million dollar contracts that were won by less than $50.00.  I did so cheerfully because my risk of the low bidder having missed something was negligible.  While we’re on the topic, I can only think of three ethical and honest reasons to conduct a “run-off” bid.

#1 The project scope has been significantly changed following a budgetary blowout.  This means that contract award based on the original bid is not possible.   This is notably different from having a “run-off” bid where the two or three lowest bidders are asked to deliver Value Engineering (VE) proposals.  This is dishonest because any VE ideas lifted from contractors who weren’t hired constitutes a theft.  Any estimator who participates in this kind of run-off should seek easier ways of helping their competitors!

#2 A contract was terminated after the project started, but before it reached completion.  The contractors who originally bid the job are in a better position to estimate the cost of taking over the project.  Taking over a failed contract presents a lot of risk which will deter bidders.  Asking only the second and third place bidders from the original bid for a run-off bid reduces their competition which may encourage them to bid.

#3 Two or more bidders sent proposals for the exact same amount.  If this is the case, the client should be careful to disclose the actual bid amount so all the affected parties know the client is conducting an honest bid.

So how do we apply all of this?

Estimators who find themselves with a client whose revisions seem endless should create an opportunity to speak directly to the client. Emails, faxes, and messages won’t do because there is no control over the narrators tone in our reader’s imagination.  A direct conversation provides nuance that is essential to diplomacy.

It’s been my experience that offering gentle resistance by presenting questions or your own, can disrupt the iterative patterns to reveal the clients motivations.

For example, I called one client who was on their fifth iteration of the bid in as many hours.  When I was on the line with the client, I explained that whenever a client requests so many changes, I assume I’m not getting them what they need.  This little disruption shifted our dynamic from call and response, to collaboration.  From there I could help them to define their problem, along with thresholds for acceptable solutions.  Working within that understanding, I was able to bring everything to conclusion with one final revision.

That’s not to suggest that all clients will respond as well.  I had a similar situation where I tried the same approach.  This client was only interested in breakout pricing to see “who was really low”.  Everything was presented as though the decision was just one unanswered question away, yet it’s just “too close to call” the original bid.  More than one such client, added scope of work in each revision over the span of several days, then called (to avoid written record)  to say they’d like to hire me if only I would do all the extra work for my original price.

Are bid revisions costing you work?

“If you show them where to cut, you won’t like it when they do.”

I’ve also had GC’s as clients who blustered officiously about how it’s their “standard procedure” to  answer even the most perilous questions from a client.  They didn’t care that it was potentially ruinous to the trust of all parties involved.  A question was asked, and it’s their duty to answer it.  It would be difficult to imagine another situation where someone could honestly work so hard to  appear incompetent, dishonest, and lazy to their client. As a sub, it’s not “good optics” to let a GC put your name on their mistakes.  Rookies at the GC level are particularly likely to cause this problem, which is why their subs won’t follow instructions.

Good reputations can take a lifetime to earn, but only a moment to lose.

Estimators inclined towards a more charitable view of their incompetent or dishonest clients should consider how costly a failed project can be.  The people involved can either generate, or ameliorate the projects risk.  Estimators should consider their part in the projects risk.   How did the pricing revisions affect the project risk?  How did the outcome of your efforts compare to your intentions?  If pricing revisions are costing you work, look back on your efforts to identify where you might have taken a different approach.  Estimating is more than measurements and spreadsheets.  Thinking beyond the obvious process reveals opportunities to set your work apart from competitors.

 

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© Anton Takken 2017 all rights reserved

 

 

 


The five estimating personalities that make or break your bid.

One of the greatest misconceptions about construction estimating is that it’s a solitary profession.  It doesn’t matter if you’re an estimator for a General Contractor (GC) or a subcontractor (sub), there’s always someone calling, emailing, or popping into your office to discuss something.  I’ve written before about reliable estimating practices that improve the coordination, clarity, and timeliness of communication between the GC and the subs.  I focused on practices that reduce the need for estimators to interrupt one another to get or give pertinent information.

I’ve worked in offices where the incessant phone calls consumed far more time than any other aspect of the job.  The constant interruptions dramatically increase the chances of making a quantity take off (QTO) error, or a transcription mistake in your estimate.

The five estimating personalities that make or break your bid.

Mistakes are often easier for others to see

It’s been my experience that there are five personality types that tend to work against an estimator who’s trying to work efficiently.  The companies these people represent can be market leaders which means the competitive estimator has to find ways to deal with difficult personalities.  Everyone is coming from somewhere, which is to say that sometimes a difficult personality is a product of their environment.   I strive to be thankful for difficult people, as they remind me of what I don’t want to be.

Obsessive

We’ll start with the most common personality type in estimating, the obsessive.  Estimating offers the detail-oriented person a lot of information to focus on.  Lots of companies focus on best practices  in estimating which are often simplified to only detailed estimates are accurate.  Their intense desire to quantify and categorize every detail is continually thwarted by missing, incomplete, or confusing information inherent to construction documents (CD’s).

If all the needed information was presented in the CD’s, there would be no need for estimators.  Detailed estimates may indeed reduce the uncertainty of an estimate, but it’s entirely possible to have an accurate estimate using other methods.

Obsessive’s are rarely able to cope with uncertainty, to the extent that many of them feel it’s wrong to make any kind of assumption.

The five estimating personalities that make or break your bid.

Steve likes to be sure nothing changes

In extreme cases, these folks won’t bid at all if they don’t have an “official” direction in the form of an answered Request For Information (RFI), an addendum,  or a bid directive.

It’s important to understand that a lot of obsessive estimators work for companies that see estimators as cashiers ringing up a long list of very obvious stuff.  Most projects are bid before the building department has completed their review of the CD’s so it’s very common for Architects to add a great deal of information to the construction set.  Many people see a bid-day uncertainty as an obvious decision when they’re holding the Architects revised plan.

This extends to bid results as well.  If the estimator bids a job, they’re expected to get bid results to show their boss how they did.  Bidding the worst-case scenario can lead to losing by large amounts.  The consensus view of competitor bids will be seen as the obvious judgment call.  This fundamental ignorance of the estimators role leads to negative performance reviews.  Estimators in these companies learn to see uncertainty as future punishment.  This is why they’d rather withdraw from competition, than bid on incomplete information.

Advice for GC estimators working with an obsessive sub

GC estimators working with obsessive subs need to understand that the driving issue is one of accountability.  GC estimators cannot expect these subs to exercise good judgment if it means the sub estimator will face accountability for their actions.  The GC estimator must be willing to provide accountable direction to the sub.  I encourage GC estimators to seek these subs insights into the issue because they may be highly skilled and experienced estimators in their field.

Advice for sub estimators working with an obsessive GC.

Obsessive GC’s tend to go looking for any uncertainty in the sub’s proposal.  They’re driven to distraction by exclusions, clarifications, and exceptions.  If they direct the subs to bid a certain way, they will badger anyone who doesn’t conform.  Subs must understand that the obsessive GC is focused on avoiding any potential judgment call.  They want to know that the subs are taking full responsibility for everything whether it’s perfectly clear or not.  Obsessive GC’s are virtually never competitive bidders so unless they’re bidding a negotiated project, subs should expect their bids to be fruitless and time-consuming.  These GC’s rarely attract market-leading subs, even when they have negotiated work out to bid.  Patient subcontractors may find they can win highly profitable work with obsessive GC’s on negotiated projects.

Insecure

The next most common personality type is the insecure estimator.  New and inexperienced estimators fall into this group, however they’re only half the population.  Construction estimating is a unique vocation that relatively few people seek out.  An awful lot of estimators came from the field following a significant injury that would have otherwise ended their careers.  Knowing how things go together is certainly a critical skill set, however estimators draw confident conclusions based on analytical techniques, market observations, computational skills, and management fundamentals.  I started this blog because the majority of construction estimators I encounter lack most of these skills.

Insecure estimators are constantly paralyzed by mundane issues because they don’t understand how estimating fits into the larger picture.  These estimators rarely see a lack of detail as an opportunity to present a uniquely advantageous solution.  To many insecure GC estimators, the bid is simply a process of collecting sub pricing, toting it up, and adding profit.  I call it bid collecting because they’re not actually estimating anything.  This is terrifically common among companies who have their PM’s bidding their own work.

Insecure sub estimators are often convinced that a proposal with several pages of boilerplate exclusions will protect them from the outcome of their mistakes.  Their bids emphatically exclude so much that it’s genuinely difficult to tell what you’d be paying them to do.

The five estimating personalities that make or break your bid.

“Dave’s a snappy dresser but nobody’s sure what he does all day”

In many ways, the insecure estimators are the opposite of the obsessive estimators.  Insecure estimators won’t communicate during the bid.  GC estimators who won’t answer their phones or email can’t be expected to draft RFI’s to the design team, or publish bid directives to clarify the intent to the subs.

Everything is reversed on bid-day as these insecure GC estimators often resort to begging subs for last-minute bids.  Conversely, the responsible GC is forced to play phone tag on bid day with the insecure sub in an effort to decipher all the exclusions.

Advice for GC estimators working with an insecure sub

Reliable estimating practices must be built around the value of time spent being inversely proportional to the time remaining.  The shorter version; an early hour is worth less than the last-minute.  With the majority of the sub proposals coming in an hour or two ahead of your deadline, the GC must be able to quickly scope the proposals looking for bids that could make or break the GC’s odds of winning the bid.

Time sunk in a promising proposal that turned out to be a dead-end, might have been invested in more fruitful considerations.  Insecure subs proposals are incredible time-sinks.  Their proposals are riddled with boilerplate exclusions, with the proposed amount inevitably buried in fine print, and there’s typically an innocuous-looking exclusion for some obviously costly and necessary part of the scope.

Rather than play on the insecure sub’s terms, the GC estimator should provide bid clarifications that stipulate the inclusions for all trades.  Requiring that the sub’s acknowledge the bid directives on their proposal allows a useful means to circumvent their chicanery.

Following up all proposals with a bid-checklist forces the subs to agree they’ve included, or modify their proposed amount to include the pertinent scope items.  This frees the estimator to consider the sub proposals in a consistent format designed to facilitate a clear definition of the agreed upon scope.

Advice for sub estimators working with an insecure GC.

Insecure GC’s can’t be counted upon to know what is, and what isn’t in the subs scope of work.  Efforts to request direction will be either ignored, or the GC estimator will demand the sub bid “per the plans and specs”, with the occasional request to “price it both ways”.

Ineffective GC estimators are the leading reason why people don’t follow instructions on bid day.  Giving an inexperienced or irresponsible GC estimator the means to lose the bid works against the entire market’s interests.  Subs working with these GC’s should strive to keep all communications on company email accounts that provide time-stamped evidence of who said (or did) what, and when.

It’s often necessary for subs to gently teach a new GC estimator how things typically work.  Leading the inexperienced  GC estimator to a fruitful and logical conclusion builds trust and rapport for both parties.

There’s less a sub can do with a seasoned, yet insecure GC estimator.  The lack of communication isn’t a bug, it’s a feature intended to maximize plausible deny ability.   Working for these GC’s is often a greater risk than the project itself because there’s nobody protecting the build team’s interest.  These GC estimators are rarely competitive bidders, without exposing their subs to considerable risk.

GC estimators who complain about the scores of “whiny subs” they’re dealing with probably have reason to reevaluate their estimating program to attract (and retain) market-leading subs.

Doubter

One of the most difficult estimating  personalities is the doubter.  These are the estimators who tenaciously ignore the obvious design intent whenever they find a discrepancy.  Efforts to answer their questions will exercise your patience because these folks are always in doubt and never in a hurry.

The five estimating personalities that make or break your bid.

Rick’s commitment to interrupting your work is impressive.

Doubter estimators typically come from the field where they had extensive experience in a wider variety of work than their current employer typically builds.  They’re often intelligent people who didn’t fit in with field crews that emphasized production over planning.

Advice for GC estimators working with a doubter sub

GC estimators should look beyond the immediate project and the doubters questions to establish a precedent for future interaction.  Pretending that it’s reasonable to indulge every imagined concern will only encourage them on every subsequent bid.  Approach the situation as a teachable moment to lay down default assumptions you’d like them to work within.  Up to and including how you’d like them to ask questions.  Doubters tend to favor whatever is the least efficient means of resolving a problem.  Tell them that their questions are important to you and that you want to quickly resolve them by using your preferred medium.  Be advised that you’ll almost certainly have to enforce your boundaries.

Advice for sub estimators working with a doubter GC

Subs will know they’re dealing with a doubter GC estimator when they receive an invitation to bid (ITB) that’s absolutely riddled with alternate and breakout pricing requests that work against a cohesive scope of work.  The doubter GC estimator doesn’t understand the project in the client’s terms, so they bombard them with options “just in case” the client would like an a la carte menu of confusing prices.

Subs need to be very careful about what they tell the doubter GC because there’s little assurance that what they’ve asked for, will be presented appropriately to the client.  Doubter GC’s tend to misinform the client which typically leads to scope changes and a pricing revision that turns out differently than the client expected.  Subs should ask the doubter GC to walk them through their proposed breakouts with a special focus on how things might be combined disadvantageously to the subs.  Often the list of what the doubter GC thinks they need, will be shortened when they’re faced with explaining how they will protect their own teams interests.  It’s critical to understand that doubter GC’s love to pretend that their long list of alternates was a client request.  They quickly become sanctimonious about honoring their esteemed clients request if you simply object to the amount of information being requested.  Give your client what they ask for, provided you’ve controlled your risk first.

Hot Air Balloonists

Whenever projects cross over into markets where work is bid informally, there will be estimators involved who will cause delays, confusion, and a whole lot of waiting for them to get back to you.  I call them hot air balloonists (HAB for short) because they’re often unavoidable, slow, and colorful characters that you’ll need to tie down before they drift past your deadline.

Often these estimators are either “mom or pop” at their firm which generally means they’re spending most of their time doing something other than estimating.

The five estimating personalities that make or break your bid.

Artistic rendering of whatever Melinda’s doing whenever you call her for a bid…

 These professionals often have a competitive edge on their markets because they maintain a lean operation.  In most cases, these folks view estimating as a necessary evil, rather than a vital phase of the construction project.

Advice for GC estimators working with a HAB sub

HAB subs aren’t going to respond to an ITB that looks like it came from a faceless computer.  These folks get most of their work through personal networking.  They don’t chase every hard-bid opportunity that comes along, and they’re often reserved about bidding to an unfamiliar GC.  It may take several tries to get them on the phone, but making a personal connection with them is vital to getting them to bid on your project.  Since they wear a lot of hats, they don’t have a lot of time to chase jobs that are a poor fit for their company.  GC’s should be prepared to answer a lot of in-depth questions about the project on that initial call.  If the GC doesn’t convince them it’s a standout opportunity, they won’t make it a priority.  It’s a fatal mistake to tell them the answers to their questions are in the files you sent them.  They need to see you’re on top of the information because you’re determined to win.  It’s a good idea to check in with them between your first call and bid day.  Lots of HAB estimators will stall out on a bid when they think they’ve got plenty of time.   Absolutely all communication should reiterate the deadline.

Advice for subs working with a HAB GC

HAB GC’s tend to focus on smaller projects that have little in the way of formal drawings, specifications, or even narratives of what the project is about.  Most of what the subcontractor needs to bid the job will be covered at the job walk.  It’s fairly common for HAB GC’s to walk  a group of subs through a space waving their hands in the air like an orchestra conductor.  Subs need to prepare proposals that carefully itemize the work to be done because HAB GC’s aren’t known for their contractual finesse.  Subs looking for HAB direction, should approach the question by presenting the subs preferred solution.  Chances are excellent the HAB GC won’t answer their phone on bid day, so be sure to put clarifications in bold on your proposal.  Emphasize clarity, by keeping the descriptions in simple terms.  Exclusions are vitally important to protecting your interests.  HAB GC’s love to assume that everything they overlooked was implied at the job walk.

Corrupt

Corruption takes many forms in the construction industry but it’s always found in practices that discourage transparency, accountability, and competition.    Estimators must tread a fine line because they must maintain confidentiality in order to conduct a fair bid.  Providing a bidder with their competitors prices in order to solicit lower prices prior to award is known as bid shopping.  This practice is absolutely unethical, and is in some cases illegal.

The five estimating personalities that make or break your bid.

The reciprocal of bid shopping is bid peddling, which is where a bidder offers to submit a lower price than the winning bid to secure the award.

A less extreme version of this practice is for a GC to continually bid a job they’ve already won in an effort to “beat the bushes” for a lower subcontractor bid.  Their original ITB promised to fairly award the contract to the winning bidder on bid day.  Any GC who feels it’s their right or privilege to renege on their promises whenever it’s convenient to them is a cheater.  Be advised that pretending  to be “not sure who won” their original bid is an old scoundrels trick.

There’s no good reason to do business with corrupt people.  Whatever you stand to gain in contract award, you can expect to fight over in unpaid invoices.  Con artists only solicit dupes that they can control and later contain.    I have an entire article on warning signs that will help estimators steer clear of trouble.

The five estimating personalities that make or break your bid.

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© Anton Takken 2016 all rights reserved

 

 


Warning Signs

Will Rogers once said “Good judgment comes from experience, and a lot of that comes from bad judgment”.   While there’s certainly some truth in that statement, an awful lot of suffering can be avoided by recognizing some common warning signs. It’s been my experience that all the truly awful projects had one thing in common; dishonest people. I realize now, that every one of them put off some warning signs right at the beginning. So in hopes of sharing my hard-earned good judgment, I’m going to start with some background on why people disregard warning signs.

Warning signs

“I’ve got three good reasons why we should turn back…”

Judgment isn’t an insult

Right off, we have a popular perception that exercising judgment on the actions of others is an unkind or hurtful act. In simple terms judgment is the ability to make considered decisions or come to sensible conclusions. We have to exercise judgment to make good decisions. Estimators exist because there is uncertainty. If it were possible to simply add everything up, our job would be done by cashiers or accountants. It naturally follows that estimators must exercise their judgment if they are to do their jobs successfully. Estimators cannot afford to limit their perspective to the documents they’ve been provided. The project will happen in the real world, which means the uncertainty and risk of everything involved in the project should be considered. There are times where the people involved are the greatest risk of the project. Ignoring or underestimating the harm a key player can inflict, is a potentially ruinous mistake. If giving everyone the benefit of the doubt was a universal business practice, contracts wouldn’t lock in the estimated price.

Critical thinking

Getting back to influences that shift perspective, we must move to ethical reasoning. Critical thinking, also known as the Socratic Method is the classical means to grapple with moral dilemmas.   The basis of the approach is a line of inquiry meant to draw out ideas and underlying premises. A series of hypotheses are presented, and each is tested to rule out those that lead to contradiction.

The clean and clinical Socratic Method takes a turn when you’re considering what to do with potentially dishonest people. It’s here that we entertain “devil’s advocate” or “how would you feel” arguments about the merit of your concern. I’ve worked with diplomatic and polite professionals who simply couldn’t bring themselves to see potential malice in others. Naiveté and bad judgment are constant companions. A lot of wrong-headed policy decisions are made by people who want to appear virtuous without doing the work to ensure a moral outcome.

For example: A General Contractor (GC) may become aware that their client isn’t conducting a fair bid. Their competitors are benefiting from additional time or information that’s not shared formally or equitably.   Nevertheless, this GC upholds their “policy” of bidding according to the terms of the Request For Proposal (RFP) simply because they were invited to bid.

 

Virtue-signaling

Virtue-signaling, is more about the appearance of virtue, than acting with moral fortitude.

Warning signs

Sure Al could bike to work and avoid the traffic, but then nobody would see how superior he is.

In my example above, the GC is knowingly consuming their subcontractors (subs) time chasing a bid for an unethical client. Not only are they unlikely to win the job, they’d be contractually bound to a dishonest client if they did. Obviously it’s not the GC’s fault that their client is acting dishonestly. However the GC has options to act with integrity. The GC could contact the client with their concerns and withdraw from bidding if they were well-founded. The GC could also opt to submit a conceptual courtesy bid to give the client, their subs and themselves a face-saving exit from a bad situation.

Hope and second guessing

Entrepreneurs are an optimistic bunch. Seeing an opportunity in every difficulty is a critical component of their success. Estimating is a craft but lots of entrepreneurs start to see bidding strictly in terms of competition. Estimators may take pride in landing a few percentage points apart on bid-day because they’re aware of how hard it is to get to that total. Unfortunately, narrow losses are still losses. Tight markets increase the pressure on estimators to capitalize on every opportunity. Lots of desperate estimators jump at the chance to bid on turkey jobs because they’re hoping more than they’re thinking. Second-guessing your hard-won knowledge is using your best tools to build a trap for yourself.

Warning signs

Legitimacy and reciprocity

Take a moment to consider how construction estimating relates to clients, the market, and to contracts. From the RFP to the contract award there are a chain of events that proceed entirely on good faith. The client expects free bids from the GC’s according to the construction documents (CD’s) by their deadline in exchange for fairly awarding the contract to the winner of the bid.

There’s a lot to unpack in that last statement. The GC’s are committing their resources and the resources of their subs to providing a bid based on the client’s CD’s. Those resources are expensive and they are limited. So what’s in it for estimators facing lots of competition? The client is promising to fairly award the contract to the winning bidder. This obliges the client to prove the bid was fair by providing bid results to everyone. So each estimator is guaranteed to get either win a contract, or information on how to win their next bid. Anything that’s true at the Client-GC level is equally true at the GC-Sub level.

Estimators have an obligation to responsibly invest their company’s time in legitimate pursuits. Therefore the legitimacy of a potential opportunity, is dependent on the client’s reciprocity. Estimators must understand that a foolish investment cannot be recouped. So it is especially important to pay attention to early warning signs.

Warning signs

Warning signs

#1 The CD’s don’t support the clients schedule

For example, a client with a set of 50% complete drawings dated yesterday who claims they’re already in for permit so they can start the day after bid-day.

Unless the job is very small, it’s implausible that the clients design team could finish half their work in the time it would take you to bid the job. Even if that were the case, why pay to submit plans that aren’t likely to pass building department review if the completed drawings were forthcoming? The job is obviously not going to start when the client claims, so what is really going on? Bidding on incomplete drawings means that the estimator will have to creatively “fill in the blanks” of the design. Some clients use this ambiguity to request alternates or Value Engineering ideas for their project. These clients take the best ideas from the “free” bids and direct their design teams to include them in the final plans before putting the whole thing back out to bid. Feigning urgency and in need of assistance is a tactic to attract bidders looking to convert a conceptual estimate into a contract. I’ve seen clients who consumed so much of a GC’s time in estimating that the job was no longer profitable to build. That’s a very expensive way to give your competitor a job!

#2 The plans are ancient

Warning signs

We’re working with a familiar design…”

Most legitimate projects on the hard-bid market will have plans that are dated within a month of the RFP. Design development can be a lengthy process that taxes the clients’ patience to get underway. Most clients are in a tremendous hurry to get their projects out to bid because it’s a major step in getting their project built. CD’s that are several months old could indicate that the project has previously bid. Savvy estimators might figure they must have come in over-budget so they’re re-bidding the job. They might be right, but it’s worth considering that a budget-blowout is cause for design/scope revision.   Revised drawings get new dates, and that didn’t happen. Clients who simply felt they could get a better price by re-bidding are violating the basic reciprocity that makes them a legitimate client. They’re simply beating the bushes looking for someone below market value.

#3 The plans show more scope of work than the RFP requires

They’re called Contract Documents for a reason. The contract requires everything shown on the plans and specifications. Vague and/or informal instructions to “just bid this part” of a larger project creates a situation where the contractor can’t simultaneously follow instructions, and address their contractual risk. Why wouldn’t a legitimate client pay their design team to define the limits of project scope in a contractually enforceable manner? In my experience, these clients are feigning a competitive bid to collect information for later negotiations.

#4 The plans have the wrong address

Believe it or not, this is an incredibly common practice with chain stores and restaurants. Plans for a project in a different state are put out to bid with instructions to bid as though it’s identical to the proposed location. When the client won’t invest enough to revise their drawings for a new location, it’s a warning sign that they’re not sincere about writing a contract with you.

#5 The plans have a different contractors name on them

Its common practice for contractors engaged in design-build projects to have their names and logos put on the plans they develop. So when plans are put out to bid with a different contractors name on them, it’s an indication that a design-build contract fell through. Most contractors make their money on the build portion, so it’s unlikely that they’d happily give up that work. I’ve encountered situations where a competitor was suing the client because they were never paid for their design. It was difficult to imagine a successful project emerging from that debacle.

Warning signs

“Laugh all you want Tim, they’re your client now!”

#6 The client is still looking for money

Charity organizations are often obliged to fund their projects with some combination of pledge drives, donations and loans. There’s nothing wrong with that however an estimator needs to be aware of when a client’s ambition exceeds their finances. I’ve been to job walks for church remodels with a pledge drive “thermometer” showing they’d only raised a fraction of their goal. Those projects never got off the ground despite the client’s optimism.

#7 Unprofessional plans and bad clients

Clients tend to attract design teams with similar priorities. Truly excellent clients are generally willing to pay for the best professionals so their projects are successful. The worst design teams tend to work for clients with risky priorities. Projects that are run by committee like Education, Religious, and smaller Government facilities are bastions of poor decision-making. These groups are often seeking to spend their entire budget so they generally require a multitude of alternates that allow them the means to “upgrade” from their basic project without seeking additional funds. Vague, misleading, and incomplete plans are par for the course because these clients want to spend as little as possible on their design. In many cases, the committee members have no construction experience so decision-making and leadership will be haphazard at best. The design teams focusing on this market are well-versed in the arguments that poor plans create. No matter how incomplete the plans, these design teams will make certain they’ve laid all responsibility on the contractor.

#8 Past as prologue

Chain stores and restaurants have a tendency to use a “universal” design for all their locations. Over time, the company builds new stores and encounters change orders for something that was wrong in the plans. The client directs their design team to change the plans for all future work which generally takes the form of an added note on the plan. Over time this “universal” plan becomes inundated with obscure, trivial, and often pointless notes that solely exist to prevent change orders. The clients desire to avoid change orders creates a situation where the relevant scope is concealed from the bidders. A better plan would require fewer notes and would communicate more effectively, but the client isn’t willing to pay for that.

Similarly, clients with onerous RFP requirements designed to facilitate future arguments speak to the clients history. While it’s understandable that a client would want to avoid past mistakes, it’s worth considering what the client learned from that experience. Dishonest clients are often convinced that everyone is trying to cheat them. These clients tend to believe that cheating is simply a matter of beating the contractor to the punch.

#9 Nobody gets the same story

Clients and/or design teams that only answer questions off the record may pass it off as a means to rapidly respond, or to foster a “friendly” rapport with the GC. The bureaucratic process of writing an RFI, and getting it answered via an addendum is admittedly a lot of impersonal work. The great advantage of the formal process is that it’s the only way a bidder can change the contract documents. Moreover, the formal process also provides a measure of assurance that your competitor is getting the same information. If the client and their design team won’t provide direction formally, there’s a chance it won’t be a fair bid.

#10 The job has bid before         

Reciprocity is tied to legitimacy and that’s especially true when it comes to clients who aren’t willing to award a contract to the low bidder. Lots of clients put their projects out to bid at the Schematic Design, and Design Development, stages to “check” that their design is within budget.

Warning signs

Conceptual bidding: a process of going nowhere until you reach your destination.

Unbridled optimism leads GC’s to think their conceptual estimate will be so good that the client awards the contract before the Construction Document’s are finalized.  This process is known as “client capture” and it’s great when it works out. However unless the client has made promises to that effect, it’s more likely that the client expects this professional courtesy to be free of any reciprocal obligations.

There are some clients who maintain this perspective even on their “final” drawings. They are constantly beating the bushes for better prices by re-bidding the job with different contractors.   Developers are particularly given to this practice. An absolutely staggering amount of market resources are wasted on these pricing exercises.

Clients aren’t the only ones who use this tactic, unethical GC’s who’ve won a bid will solicit new bids in a gambit to find a cheaper subcontractor. The subs who brought the GC their bid-day victory, are rewarded by a craven attempt to gain profitability via their competitors after the fact. Whether the GC is technically engaging in outright bid-shopping or not, it’s absolutely wrong.

You may discover your project was previously bid when vendor quotes are faster than normal and carry the date of the original bid. Distributors will often call subs to ask why something is bidding again. These same people will contact the previous bidders tipping them off that the job is back out to bid. GC’s who suddenly receive an early proposal from an uninvited sub may have good reason to suspect they’re not the first to bid the job.

As warning signs go, learning that a job has bid before should be cause for serious concern. There are very few legitimate reasons why a client would be forced to re-bid a job. Clients with contractors or financiers backing out of the deal would be a legitimate reason, however this is extremely rare. Subcontractors should be especially concerned about any GC who’s trying to get a sub proposal after the GC won a bid. The best case scenario is the GC had a sub back out on them. Any GC who’d accept proposals from hack bidders to win a contract isn’t willing to control the project’s risk. Why sign up to work with a rogues gallery of misfits who will drive the project into failure? It’s far more likely that the GC is trying to undercut the subs who helped them win in the first place. These GC’s won’t become more honest after contract award.

A note for the cynical

Oscar Wilde once said; “A cynic is a man who knows the price of everything and the value of nothing”. Estimators spend a lot of time figuring out what things should cost. It can be easy to lose sight of the bigger picture where estimating translates to controlling risk. Every enterprise will rely on people acting in their interests, in accordance with their nature. My answer to the cynics is to pay attention to people’s nature. Most of the problems we seek to guard against fall into patterns of behavior that are more complex than avarice. From the estimators point of view, there may be more risk in working for the indecisive, or ignorant than the greedy.

Many estimators fail to grasp the significance of picking good opportunities to pursue. Successful estimating starts with culling the lost causes, and the wastes of time. Impressing a client who won’t hire you isn’t worth much when your company needs work. It’s very important to understand that our industries malefactors are perfectly aware of how hopelessly optimistic contractors can be in hard times. Feigning legitimacy is their stock-in-trade so hard-times call for serious consideration of who you’re dealing with. Estimators working in a down market must recognize these warning signs as a basic survival skill. Working for a bad client in hard times has put many companies in dire straits. It doesn’t take much for a single bad job to pull an entire operation down. Estimators have a duty to protect their firms by heeding warning signs and steering a better course.

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© Anton Takken 2016 all rights reserved


Why people won’t follow instructions

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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© Anton Takken 2016 all rights reserved

 

 


Clarity of Purpose

Whenever I think about the truly exceptional people I’ve worked with, there’s only one quality they all shared; clarity of purpose. Now it seems like fulfilling the job description that Human Resources typed onto your offer letter would succinctly define your purpose, sadly that’s not always the case.

Timely and tidy

I’ve worked for people who had well-defined expectations for their estimator, however they didn’t consider the estimators purpose in their organization. Delivering tidy proposals before the deadline is an absolute job requirement but that’s documentation (process), not procuring work (product). I’ve never seen an estimating job offer that stipulated how much work you’ve got to win, but I know plenty of people who “used to work in estimating”. The pervasive mindset of most firms is that executing a proscribed process known as best practices will lead to an acceptable number of awarded contracts. Anyone who isn’t successful must not be working hard enough. Estimating is viewed as a machine, and they’re hiring you to crank out wins. The problem with this perspective is that it only works when winning profitable work is easy.

Clarity of Purpose

Competition is different in a booming market

Too much and too little

Meanwhile, there are lots of estimators struggling with the estimators paradox: You lose because you included something extra, and you win because of something you left out. Knowing what to include in your bid can be a strenuous exercise in judgment. Balancing the gaps in information against the surpluses of available minutia can easily consume all the estimators time. Time is lost right at the start as some estimators struggle to get the invitations to bid (ITB) out to their subcontractors (subs). The struggle is compounded when questions arise and the estimator has to write Requests For Information (RFI’s). All this information management work is in addition to actually estimating anything. The problem is compounded by the standard practice of having several estimates in process.

What do you think you do here?

It’s a simple question, what’s your purpose in this business? The answer is emphatically not “estimate the cost of projects” because that’s the process not the product. Your purpose is to win profitable work. Working from that position, it’s obvious that there are immediate hazards surrounding the winning number. If you’re a little too low, the work won’t be profitable. If you’re a little too high, you won’t win. These hazards get more severe the further your number is from the correct answer. Way too low may irreparably harm your company, and jeopardize the project. Way too high, and you may harm your firms reputation, leading to exclusion from future opportunities.

How to get where you’re going

Effectively dealing with these hazards can be summarily described as controlling risk. Let’s take a moment to visualize uncertainty in the example below.

Guessing——————————————————————————————Actual built price

Greatest uncertainty                                                                                                     Least uncertainty

 

The left side represents the least amount of work, and the greatest amount of risk. There’s a chance that you could guess perfectly, but it’s very small. This approach is better known as gambling. The right side represents the most amount of work and the least amount of risk. Companies obviously can’t afford to build models of every project to negate risk. They can, however compile past project information to help price similar work.

Clarity of Purpose

Above: Design driven risk

Estimators conduct Quantity Take Off’s (QTO’s) of the Construction Documents (CD’s) to quantify and value the project scope. The relative merit of their efforts will place their bid proportionately on the scale above. This is the reason estimators control rather than remove risk. If there was no risk, the bid would be done by a cashier.

Multi-level thinking

So if estimators are supposed to win profitable work by controlling risk, and risk is controlled by QTO’s, how are contractors wrong for overemphasizing timely and tidy bids? The problem here is that not all risks are driven by project scope uncertainty.

If we recognize that not all clients are fully funded, we’re forced to admit that not all opportunities are equal. “Winning” a bid with a client who can’t/won’t award a contract is a risk that has nothing to do with how accurate your QTO’s are. Picking only opportunities that you’re likely to profitably win is a fruitless exercise if there’s no contract award.

Very successful estimators pick opportunities that they’ve got an excellent chance of landing a profitable contract award. Remember the estimators purpose is to win profitable work. No contract means no work. From this perspective, estimating could just as accurately be called “Contract targeting”.

Clarity of Purpose

Sheep’s dog, isn’t the same as sheep dog.

What defines an estimators chances of landing a profitable contract? Competition for one, efficiencies of scale for another. General Contractors (GC’s) by definition, contract portions of the project scope to subcontractors. The VAST majority of the actual work is completed by subs. GC estimators are competing on the basis of their relationships with subs. The GC with the most market leading subs has the best chance of winning. Success here, is all about building market leading subcontractor loyalty.

What defines if the work will be as profitable as it should be? In-house, the leadership and administrative abilities of the Project Manager and the on-site staff. Chasing work that’s aligned with their skills, abilities, and past successes is the best way to ensure profitability. On the other side of the contract sits the client and their representatives. Ethical clients with solid design teams are rare gems that attract fierce GC competition for their projects. Incomplete plans and short deadlines is the signature play of the troublesome client.

Clarity of Purpose

“Well our design isn’t complete but we’ve got cloud based computing to share the misery equally”

There’s never time to do it right the first time, but there will be time to do the work again. Unresolved issues handed from estimating to project management tend to harden in the arteries of a project, choking off progress until you’re lucky to simply escape. The estimators purpose is to win profitable work. If it’s not going to be possible to profitably complete the work, there’s no reason to pursue it. Estimators need to keep track of clients and design teams who’ve run contracts into the ground. Very often the client or their design team is the contractors greatest risk on a project.

Deductive reasoning and streamlining your process

Deductive reasoning is a process where you begin with premises that you must assume to be true. Then you try to determine what else would have to be true if the premises were true. Applying this to our situation, we have two premises; Estimators must win profitable work, and estimators work by controlling risk. Earlier I applied deductive reasoning to explain why we do QTO’s, or why it’s important to pick the best opportunities. My intention was to reveal the wider scope of what it really takes to be a successful estimator. If you’re already struggling with the stress and boredom of grinding out bids, this probably looks like I’ve dropped a whole lot more on you. Take heart, that’s not really the case. First off, MOST estimators are losing more than they’re winning. If you’re winning profitable work all the time, I implore you to start a blog! For the rest of us, this means that the majority of your daily work isn’t achieving your purpose.

A critical concept of successful estimating is that in order to win more, you’ll have to bid less. Winning comes from bidding only good opportunities that strategically align with both the GC AND their subs. It takes a lot more focused effort to bring all of that together on an individual bid. Losing bids diminishes the GC’s reputation with the market leading subs. Not only are you wasting your company’s time, you’re damaging your “pull” with subs. More bids means less focus which means higher risk which inevitably translates to lower profitability. Simple things offer no shortcuts.

Most estimating managers won’t consider reducing your workload until you’ve won more work than the company can handle. This circular pattern is why very few people want to become estimators. It’s a ton of work that’s rarely successful because the focus is on single-minded process rather than multi-faceted product.

Elevating the situation requires multi-level thinking. Being able to accurately identify your odds of success is a basic necessity. For more, read up on estimate tracking here. Once you’re clear on the odds, you should be tailoring your efforts to get things rolling quickly. Keeping momentum is how we keep the stress and boredom at bay but that’s not enough to really solve your problem. It stands to reason that you’re tasked with bidding something that’s an obviously poor fit.

Clarity of Purpose

“I can see this client has made some risky decisions…”

Treating every opportunity like it’s equally valid may sound like a best practice but it’s profoundly counter to your purpose. If you’re certain to lose the job, you’re not helping yourself by compromising better opportunities.

Many managers are amenable to courtesy bidding the turkey job to free up resources to land the great opportunity. Gaining a little leg room, then delivering the victory builds faith in your judgment. Backing your judgment with facts and figures, is how you prove your expertise. Trust is built through honesty, transparency, and accountability.

Overworked estimators often hear: “You can’t win if you don’t bid”. The unsaid counterpoint is:”It’s not the job you lost that puts you under, it’s the job you won”.

Clarity of purpose is a simple concept with powerful implications. Give yourself time to consider what you’re doing and ask how it achieves your purpose. We get a lot of encouragement to maintain disciplined process like a regiment on the march, but very little for picking the right direction. It’s only after you’ve arrived at the destination that people realize you knew what you were doing.

 

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© Anton Takken 2016 all rights reserved


Reliable Estimating Part 2 Building momentum!

The plans are on the street, now what?

Once the Invitation to bid (ITB) is drafted, and sent to every subcontractor on your bid list, you’re free to pursue the other work that piled up. The more your internal systems are built to output an accurate ITB and an optimal bid-list, the more these tasks will depend on a thorough review of the Construction Documents (CD’s). By having an ITB template that requires answers to the most common bidder questions, you’ll be able to focus your review of the Request For Proposal (RFP) and Construction Documents (CDs). Be advised that defining which trades you need to invite isn’t necessarily a quick process.

Reliable Estimating Part 2 Building momentum!

“Sure you’re doing six things at once, but could you go a bit faster?”

A specialty trade or a really small scope of work may be required via a single note in the drawings. It may be a better choice to get the ITB out to the obvious trades, than to hold everything until you’ve scoured the plans for a buried specialty vendor.

An absolutely pivotal concept of reliable estimating is knowing that time is more valuable earlier than later.

You get more out of the early minute than the final hour.

Learning you need to fix a “hole” in your estimate one hour to deadline means you’ve got 60 minutes to get a viable bid together. Until that problem is solved, the idea of winning takes a back seat to the risk of submitting an incomplete bid!   In comparison, an estimator who found just 20 minutes three weeks earlier could have addressed all the issues completely.

I’ve been in the war room in the final hour when we discovered that nobody had invited an entire trade of subcontractors! Until we found a sub with a complete bid, we had only our historical pricing to go on. If we bid and won using our historical pricing, we took a risk that subcontractor proposals would be substantially higher than what we carried. Given the great value of that scope of work, our exposure threatened the success of entire job.   We were in such a hurry with the bid letting software that a single trade was left out.

Reliable Estimating Part 2 Building momentum!

Even with the satellite, Dave couldn’t make the connection…

Nobody found time to verify the invite list in the intervening weeks. Don’t let it happen to you.

Series of sweeps

It’s really simplistic to assume that estimating is a function of counting, pricing, and totaling. The efforts that make the difference between winning and losing are rarely attributed to punctilious spreadsheets. Broadly speaking, a GC estimator needs to conduct a series of sequential sweeps through the CD’s looking for four basic criteria.

Sub sweep

Getting the ITB on the street required the first sweep of the CD’s to determine who needs to be invited, and what information they’ll need to get started.

Scope sweep

This is where the estimator gets a handle on what’s supposed to happen in the project. Estimators must pay particular attention to where scopes of work overlap between design consultants. Architects are famous for not telling their engineering consultants about an alternate request, and engineering consultants are famous for not sharing requirements that should be included in another consultants documents. For example, an electrically operated smoke damper which is shown on the mechanical plans, but not on the electrical. Estimators must review plans looking for where trades will overlap on scope. If the plans aren’t clear on who does what, it’s the estimators job to provide direction to all concerned. Leaving this to chance on bid-day ends up with double-ups or holes. The scope sweep should enable the estimator to roughly define how much work there is for each trade. Any trade with an especially small scope of work should be noted for a mandatory follow-up with a trusted sub. The same goes for sub-tier subs like Fire Alarm, Pavement striping, HVAC Controls, Coring/Drilling, Imaging, etc. I call these “ghost trades” because they’re never clearly visible, but they’ll haunt your bid if you ignore them!

Error Sweep

After two sweeps of the plans, the odds are good that you’ve already come up with some questions for the design team. The goal isn’t to pick the plans apart, so much as it is to resolve issues that are likely to impact the bid. CD’s often fall short of defining vital project information like site logistics, alternates and phasing. Getting these questions into Request For Information (RFI) format early in the process gives the design team more time to answer which may in turn allow you more time to communicate the answer to your bidders.

Strategy Sweep

There are lots of GC estimators out there whose entire strategy is to simply rely on subcontractor bids to deliver their victories. This flawed approach hinges on two fallacies. The first fallacy is that there’s something magical about their company that makes subs want to give them better prices.

Reliable Estimating Part 2 Building momentum!

You can howl, but then you’re singing along!

The second fallacy is that all subs are bidding all jobs at all times. By inviting everyone, they feel sure that the market leaders will send them a bid. This “strategy” is successful only when there’s no real competition.

Estimating is about controlling risk. If it were possible to simply add everything up and arrive at an accurate price the industry would use cashiers instead of estimators. Risk and how it’s controlled is how a plan becomes an opportunity. A lot of estimators get hung up on risk as a one-sided concept. I hear a lot of GC estimators looking to press project risk onto their subcontractors. Poorly defined scope, misleading diagrams, or counter-intuitive specifications are all treated like it’s the subcontractors problem. These GC’s fail to understand that the uncontrolled risk raises subcontractor prices, making the GC noncompetitive. It’s of pivotal importance for a GC estimator to understand that winning bids is a function of reducing risk for everyone.

Taking responsibility for sorting this out is how a GC estimator can set themselves apart from the field and thereby attract the market leaders. It’s pivotally important to understand that this is a proactive measure administered fairly to all involved parties. Bid directives are an effective means to mass-communicate a plan of action but they can be easily shared with your competitors. I recommend using bid directives to provide clear and accountable leadership that your competitors would shirk. Strategies should be treated as confidential information, and communicated accordingly.

Very few jobs will present an opportunity for a single overarching strategy to secure a victory. That being said, if you can’t find any advantage, you won’t likely land a job. Very often the greatest advantage a GC will have is due to an existing relationship with market leading subs. In that case, picking work that’s best suited to the top performers becomes the GC’s strategy for success.

Measuring time!

Finally, we’ve reached the point where most folks believe the real estimating begins; the quantity take off (QTO). I’ve written about software technology for estimating before. There have been notable advancements in how estimators tasks are completed, like computerized QTO. For example, it’s now possible to measure, count, and color the plans without the printed plans, scale, paper, calculators and pencils. While that’s a huge advancement, most of these proprietary programs lack the logical “polish” of standard business programs. These programs offer an exponential increase in the speed of QTO’s provided the estimators learn their idiosyncrasies.

Whether you’re using a digital system or manual takeoffs, there are some aspects of reliable estimating that never change.

“One pass” takeoff

After all the effort to define which Construction Specifications Institute (CSI) Masterformat divisions pertain to your project, it’s tempting to conduct the QTO in “CSI order”. Lots of estimators will begin their takeoffs with Division 2 Sitework and skim through the plans looking for anything that pertains to that division. Unfortunately there are often solitary notes pertaining to a small scope of work that’s unique from everything else shown on the page. This means that the estimator skimming for a specific CSI division will ignore that solitary note figuring that they’ll get it when they sweep for that division. When the note is on a particularly unlikely sheet, it’s often forgotten. Later, when their Project Manager comes down the hall complaining about how they missed something, that note will be very familiar.

I advocate what I call the “one pass” takeoff. I make sure that absolutely everything depicted, noted, or specified on the page be taken off before I go to the next page. If you’re doing manual takeoffs, this means you’ll have to start a CSI division sheet for each division as they present themselves. It’s a lot of shuffling to record your measurements, and the sheets tend to look less tidy from the many edits. This is still worth the effort since it not only catches the one-note traps, I’ve found it’s actually faster than repeated skimming.

Knowing where to stop is as important as knowing when to stop

Unless the job is fairly small, chances are good that your QTO’s will be interrupted or at least spread across several days. Estimators should understand that co-workers have no comprehension of how much focus it takes to complete some takeoffs.

Reliable Estimating Part 2 Building momentum!

I’m…gonna need a moment here…

Something as simple as the height of a concrete stem-wall may require calculations based on information scattered across several sheets. It’s therefore good practice to write (or type) notes on the plans providing the necessary information where it would actually do you some good. General items like area and perimeter measurements for each room can prove incredibly helpful since a myriad of takeoffs are based on these two pieces of information. By leaving a record of basic measurements, you’re able to pick up where you left off with minimal wind-up.

I would also recommend that your day’s work be paused at a meaningful and reliable point. Stopping mid-way through a sheet is sure to keep you up worrying about what you missed. Choose to either stop early or work late in order to leave yourself a clear conscience.

Before you begin an intense take-off, consider your schedule and the day’s obligations. It’s unwise to get a half-baked start on something complicated right before a meeting. One of the advantages of the one-pass takeoff method is that you don’t have to do the sheets in order. If you’ve got a limited amount of time before an appointment, pick a sheet you can complete. Estimators must accurately track and predict how long each element of a QTO will take. The fastest QTO’s are the ones that aren’t interrupted, however estimating is about more than take offs. Getting interrupted at an inopportune time is part of the job.

Three round review

Checking for errors is the best way to catch them but how you go about it can greatly increase your reliability. Huge data sets and tiny differences can stymie even the most dedicated review. The key to catching errors is to structure your workflow around meaningful review points. The simplest problems are most easily caught earlier in the process. Breaking the QTO down, this begins at the page level. Before moving to the next page in the plans, the estimator should review everything they took off on that sheet. The minute detail is fresh in your memory, and transposition errors are more easily spotted. The vast majority of errors are caught at this level.

The next round of review is when tallying a division as a GC, or a major component as a sub. The errors found at this level tend to be more dramatic because you’re moving the contributions of several plan sheets. A flooring subcontractor might take a moment after tallying the carpet and the tile measurements to see if the relative difference they’re seeing aligns with what they’d expect. These order of magnitude comparisons can tell you if you’re missing an individual room or an entire floor.

The third round of review is after the QTO’s have been entered into the estimate. Does the estimated cost outcome align with the division level review? By using the earlier reviews as benchmarks to compare against, the subsequent reviews become more reliable.

Reliable Estimating Part 2 Building momentum!

You could say the process leaves a mark on you…

I would strongly caution an estimator against more frequent reviews of their work because reviews without benchmarks are little more than skimming plans looking for stuff to add. After a person has looked at the same information a few hundred times, their ability to recognize new information diminishes. You have to be able to trust your work by testing it at intervals that allow you to know if you’re right or wrong.

Taking notes

An awful lot of estimating comes down to judgment when dealing with uncertainty. It’s not fair, but an estimators judgment is often criticized after the uncertainty is removed. People don’t care that you had a good reason for your decision, they only care about the outcome of your decision. It’s therefore absolutely critical to develop the habit of clarifying, stipulating, and excluding anything that requires judgment on the proposal. Effective proposals define with minute clarity what is driving the uncertainty. For that, you’ll need to take notes of where you found the problem. Keep in mind that as an estimator, your work is laying the foundation for the Project Manager’s efforts. Everyone needs to know where the tricky bits are located. Plus if you’re expected to present your estimates for review at your company, it’s good to be able to provide references for all the hard decisions you made.

Schedule slip

As mentioned earlier, interruptions at inopportune times are part of the job. I’ve had multi-million dollar estimates interrupted at the last moment over questions on a $50.00 change order! Estimating is about controlling risk even within the estimating process. Plainly speaking, an estimator must not only predict how long a QTO will take on a piecemeal basis, they must also be capable of plotting a path to recovery when they’ve been derailed. It’s at this point that many, many, “old-school” estimators just plan on spending the night. I believe that most estimators could substantially improve their quality of life by committing themselves to solving schedule problems with overtime as a means of last-resort.

Schedule recovery may involve many approaches ranging from additional workers, to less detailed takeoffs. Estimators should consider the value and the risk associated with each scope of work they’re taking off. A perfect paint takeoff can take a considerable amount of time, yet the paint scope is relatively inexpensive when compared to plumbing. Since the paint scope is relatively inexpensive, the relative risk of an imperfect takeoff is quite low unless you can’t attract more than one painting bid. Estimators should always prioritize on high value, and high risk scopes of work. As a GC estimator, knowing which direction to go between similar bids on bid-day is why you’re doing the takeoff. Continuing with the paint example, a pressed-for-time estimator might shift to a square foot cost for the paint scope followed by a list of scope inclusions that painters might miss. Providing sufficient information to scope sub bids is FAR more important than knowing the precise square footage of Paint color 1.

Lots of GC’s have a team of people working on an estimate. If you’re heading up the effort you will need to think on your feet when people call in sick, show up late, or otherwise drop the ball. Project Engineers are frequently “loaned out” to help in estimating, however they are rarely relieved of their normal responsibilities. Many will prioritize their ongoing projects at the cost of your time-sensitive estimate simply because they don’t work for the estimator. Lead estimators must provide and enforce deadlines for every task. Never give a helper sufficient time to squander your recovery. It’s better to check on them too much, than to find they’ve dug you a deeper hole.

Estimators who are working with interns, Project Engineers, etc. should make a special effort to simplify and compartmentalize the tasks they are delegating. Estimators are used to thinking in terms of length, area, and volume measurements, however these terms can quickly overwhelm someone who’s facing their first takeoff. Estimators should understand that “standard” units for takeoffs are arbitrary to a newcomer. For example carpet is measured by the square yard, yet ceramic tile is measure by the square foot. Taking the time to explain that there are nine square feet per square yard can make the difference between a useful takeoff and a mess that nobody understands.

And for goodness sake, if you’re having people do this work without a digitizer, or on-screen takeoff system, then at least give them a courtesy lesson on how to measure areas that aren’t squares or rectangles! While we’re at it, teach them to use decimal feet in lieu of inches! For some reason, this rather obvious point is overlooked in most construction education.

Addenda of mass distraction

Many architects will respond to bidder questions via an addendum before the deadline. Projects and professionalism will vary which means that GC estimators will have anywhere from over a week to only a few hours to incorporate changes made via the addendum. This practice is easily the single most stressful aspect of professional construction estimating because unclear, misleading, and outright contradictory information is often presented without sufficient time to get clarification. Estimators should note that shoddy plans, municipal or “public work” clients, and last-minute addenda are constant companions.

Reliable Estimating Part 2 Building momentum!

The architect finds last minute changes to be the most fashionable…

The absolute #1 priority is to get that information disseminated to the bidders as soon as possible. The second priority is to provide the necessary leadership and communication to ensure your bid-team isn’t derailed by the Addendum.

As a start, every Addendum should be scoured for changes to the deadline, proposal format, etc. Everything that goes to the bid-team should have the most current deadline printed where it’s easily seen. Wherever possible, notify bidders when an Addendum has little or no impact on their scope. If the Addendum ONLY affects the GC’s, don’t bother the subs with needless panic-inducing addenda.

If your Request For Information (RFI) was answered in the Addendum, you might reference whether the Architect response is consistent with your earlier bid-directives. The better your direction, the lower the risk your subs will face. Lower risk leads to lower prices, this is where the truly professional estimator earns their keep. If you do your best to get in front of issues, you may be rewarded with an addendum that confirms all of your bid-directives which means your subs are the only ones who don’t have last-minute changes.

Preparing for the blitz

Bid day is a real test of your skills, knowledge, tools, endurance, and patience. The better part of victory is preparation. Heading into bid-day you’ll need several critical elements in place. First and foremost, you’ll need your estimate “built” which is to say that your QTO has been imported or entered into your template form and prepared to accept subcontractor proposals. You should have a reasonable estimate of every trades worth, and a decent idea of what the final cost will be. Second, you’ll need your bid packet, which is all the completed forms identified in the Request For Proposal (RFP). Generally, this is the proposal itself, a CSI breakdown, a construction schedule, bond, etc. Everything should be as ready as possible for the bid-runner to deliver.

Third, you’ll need the “bid tab” or “scope sheets”. These are the scope of work as broken down in the estimate in anticipation of how the subs will bid. The scope of work is generally listed in rows, and a series of columns are made for subcontractor comparison. As the subcontractor proposal is compared against each row, the item is either checked as included, marked for follow-up, or an allowance is inserted. Once all the columns are filled for a given sub, their tally is calculated at the bottom and the subs are ranked by price lowest to highest for entry into the estimate.

I should mention that every Alternate that affects the given scope of work should be built into the scope sheet. Poorly defined Alternates can wreak havoc on bid-day. It’s important to know what to expect.

Estimators with plenty of time often export their bid-tab as a checklist which they have their subs fill out, endorse and return. This helps to prevent the “gotcha” nonsense that comes with indecipherable inclusions, exclusions, and clarifications on subcontractor forms.

Projects with special requirements for Minority Business Enterprise (MBE) participation should be tracked in real-time in the estimate. Allowing for “what-if” strategy is a crucial tool to making timely decisions. Very rarely will MBE companies be the lowest bidders, so it becomes a balancing act to meet participation goals, without undue cost.

As you head into the final hour, all of your hard work preceding the bid will be paying off. Be sure to “close the loop” with everything you’ve learned on this estimate by tying your estimate tracking to your bid results. An awful lot of an estimators daily struggle comes down to reconciling the big picture against today’s efforts.

Reliable Estimating Part 2 Building momentum!

Winning profitable work is the estimators constant goal.  Very little has more influence on your ability to win than choosing the right opportunities. Everything is an opportunity to people lacking perspective. Estimators must take it upon themselves to provide not only estimates for projects they’ve bid, but perspective on the market in which they compete. It’s vitally important to show your work in much the same way as an estimate validates the proposal amount.

Reliable estimating practices not only improve bidding, they enable decision-making.

 

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© Anton Takken 2015 all rights reserved