You know the old adage that you have to spend money to make money. Nowhere is that more true than the construction industry. Without spending money bidding projects, you can’t get jobs to make money building them. A few years ago, the ramp-up to a new construction season was an exciting time of year. Not so these days. With more people bidding on fewer jobs, the market is much more competitive. Perhaps the toughest part, though, is that even if you bid a job and don’t win, you still incur costs to compete. While many of these costs are easy to identify, some are not, so just what are some things that keep bidding costs up?
With the current levels of detail required by industry standards, code compliance and also by the different disciplines, the number of documents required for a project is huge. Obviously to bid a job, you have to access the documents, which can be costly to say the least when you consider the costs of plan room memberships and purchasing and printing documents. Keeping track of what’s current in that huge set of documents and making sure others on your team are using current documents are critical. It can also be very time consuming and expensive.
I was in a conference room full of general contractors a couple of years ago, and the presenter asked, “How many of you prequalify your subcontractors?” I was surprised at how few hands were raised. In today’s market, knowing the companies you work with is essential. Do they have the financial resources to complete a job; is their insurance up-to-date; how does their safety record look; what do their references say about their recent work; what experience do others in my company have with them?
Now more than ever prequalification should play an important role in deciding who gets to play on your team. With so many businesses struggling just to keep the doors open, you never know if a team member is going to make it through a project, or if they need a project just to keep the doors open. While it’s simpler (and cheaper) to bypass prequalifying your team members, not doing so could result in your team falling apart in the middle of a job when the pressure to perform is high.
Administrative & Communication Costs
While documentation management and team member prequalification may seem fairly obvious sources of added costs and risks, administrative costs may not seem so obvious. When I was a general contractor, I sent out invitations to bid, but the communication didn’t end there. Every time the plans or specifications changed, I needed to make sure the subs I invited knew about the changes and were using the current documents to prepare their bid. Back in those days, communicating this information required a phone call or a fax followed-up with another phone call. At other times, I wasn’t sure if I had enough subs bidding in order to get competitive numbers for my own bid. So, as bid day approached, I got on the phone and fax machine again to make sure that I didn’t need to invite more subcontractors to bid. No matter who did the calling or faxing, the time spent used up valuable resources, and was very expensive.
Reduce Bidding Costs
Although there is no silver bullet to reduce bidding costs, or even finding more jobs to bid, you can do a few things to limit your bid preparation costs. First, bid on jobs you have the best chance of winning. While a large job is ideal, if you know you can’t compete, bidding is like throwing money out the window. When do you bid, streamline communications so that it’s easy to notify and check on bidding subcontractors and vendors. Use a system to manage the documents you and your subs use to prepare bids. What are your biggest sources of bidding costs?