the firm).
While one of these factors may not disqualify a project, three or four unfavorable characteristics may portray a less than flattering picture of the future. Best-of-class decision-making tools use a scoring system directly tied to past performance.
Scoring your company allows you to identify critical success factors. The scoring criteria should be based on how the firm has performed over a given period. The criteria could change and should be regularly reviewed because market conditions and the demand for goods continue to change.
Also, scoring by one firm may vary dramatically from another. For instance, in the case of location, one firm may exhibit higher performance on projects further from their office, while their peers demonstrate the opposite. One size does not fit all—this truly requires customization. Once again, your score should be based on your firm’s historical record. After examining two to three years worth of completed projects and grading them post mortem, you can easily create this benchmark.
The Decision
The scoring system should create a tool that stimulates discussion and provides contextual arguments for or against specific projects. Ultimately, this eliminates making decisions in a vacuum and creates a more collaborative environment. Jones and Haff always discuss the power of their partnership, and they constantly communicate before and during the bid process. As they define their bidding criteria, they routinely play devil’s advocate and challenge each other’s perspective—can we really sell that for a profit, and what do we know about the bidders at this lot?
Evaluation Tool
A Scoring System for Estimates
Use this scoring system to choose projects (1 is the lowest score, and 5 is the highest):
Customer History
- Score of 1—No history, negative feedback from contractor community, poor Dun & Bradstreet score (where applicable)
- Score of 3—Completed projects in the past, average ability to pay on time, hard bid purchasing (commodity perspective)
- Score of 5—Preferred relationship, value-based pricing, no issues with accounts receivable
Location
- Score of 1—Greater than 50 miles from the home office/yard/warehouse
- Score of 3—Approximately 25 miles from the office/yard/warehouse
- Score of 5—0 to 10 miles from the yard/warehouse
Number of Bidders
- Score of 1—Eight to 10 potential bidders
- Score of 3—Three to seven bidders
- Score of 5—One to two bidders
