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?

Document Management

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.

Team Prequalification

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?

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Now that the holidays are over and all of the massive amounts of breads, cookies, candies, and pies have suddenly disappeared (at least they have from my office) it’s time to make those New Year’s resolutions. While the majority of personal resolutions aren’t kept, I came up with three attainable resolutions construction operations professionals should make this year.

1. Evaluate Bidding Strategy

It’s tough out there. There are fewer projects to bid and what projects are available are being bid by more people. Consequently, the bidding climate is very competitive with some work going to people bidding below cost. One way to bid more work, without giving your estimator a quick trip to the funny farm, is to identify additional sources of project bid lists. Check out McGraw Hill’s Dodge Plan Center and their Network Express site. There are also local, regional and even national plan centers that have bidding project information that might help.

2. Project Team Communication & Effectiveness

A big part of the bid process is assembling the team you want, and getting them the information they need to prepare competitive bids. Keeping track of the team (especially one in the bid process) can be a lot like herding cats (very independent cats at that). Develop strategies to keep track of the information your team members need and make sure they’re getting it in a timely fashion.

3. Stay Connected

When you do get a job, running the job efficiently is more important than ever. In many ways, communication with your team members is one of the keys to a successful, efficiently-run project. Communication has gotten better with the introduction of cell phones and the internet, but this increased communication has also created new issues. Everyone’s day is full of information that needs to be processed and tracked – email and voice mail alone have caused serious information overload. Keeping track of it all is difficult, if not impossible. But if you don’t track it, you can lose money or, worse yet, get sued.

I hope these ideas help as the year starts and we get closer to the construction season. In the meantime, keep in mind that spending a little time planning now can pay off in increased efficiency and better job performance later.

www.dexterchaney.com