Your “bid-hit ratio” is the scoreboard showing the percentage of jobs you have bid on and won. If your scoreboard shows a 4-to-1 bid-hit ratio, you are averaging one contract award for every four jobs you bid on. A low bid-hit ratio is ideal; it indicates that the company is able to win work by bidding on few jobs. Companies that negotiate most of their work tend to have lower bid-hit ratios but also require additional overhead expenses for marketing, sales, pre-construction services, customer development and public relations. Companies that procure most of their work from bidding public works jobs or from bidding against a long list of competitors have higher bid-hit ratios. To be successful, first you must know and track your win ratio by job and customer type, and then look for ways to improve it.
What’s your strategy to improve your win ratio?
The best strategy to improve your bid-hit ratio is to track the job types, customers, job sizes and project locations you bid on as well as the competition you bid against. You want to find projects and customers where your odds will be the highest possible. Focus your efforts on jobs where bid lists are short and there is less competition. There is a caveat, however: These jobs typically require pre-qualifications, demand more paperwork or certifications, are only open to specialists in the project type and require that the bidding company have a relationship with the job’s decision maker.
Better choice = Better Odds to Win
Over the years, our construction company wasted lots of time bidding jobs we wouldn’t get unless our bid was extremely low. When your estimating department is too busy bidding too many jobs you can’t get, they won’t win the jobs you want.
Once we decided to focus on specific locations and customer types at a reasonable markup rate, we improved our bid-hit ratio dramatically.
Don’t get stuck on a bidding treadmill, chasing the same kinds of jobs and customers over and over. When you dilute your estimating staff, it lowers your chances of winning good projects. Be selective, and eliminate jobs with long bidder lists in order to diligently pursue the jobs you want. Make this your top priority, and work hard to get qualified or selected for these projects by implementing a bidding strategy that capitalizes on your strengths.
Winning Ways to Improve your Odds
Another way to increase your proposal-winning percentage is to make tough decisions.Never invest estimating time without a high chance of winning the work. Eliminate bidding for jobs you won’t get without extremely low bids, jobs with too many bidders and jobs in which the customer has used the same contractor the last 15 times. Decide how many qualified and professional competitors you want to compete against.
Always try to get a commitment and understanding from customers on how the contractor will be selected before you start working on a preliminary budget, estimate or bid. Also, don’t bid jobs in locations where you are not a local contractor or subcontractor, with labor requirements that you do not have the size to fulfill or for tasks in areas in which your company is not the perceived specialist.
Determine the ideal job size to target by calculating your minimum contractor overhead and profit fee and establishing your minimum profit margin. This will make your estimating department more effective and competitive by focusing on specific project sizes.
Whenever possible, offer more than price, service and quality in your proposal. Service and quality construction is expected and won’t give you an advantage over your competition. Give customers a differentiating reason to hire you instead of your competition.
Never bid jobs without meeting the decision maker. This is my biggest piece of advice for private construction work. When you meet, ask if he or she will negotiate, who else is bidding, who was used on their last five projects, how the bids will be opened and reviewed, what the selection criteria is and what the most important factor is in determining who they will hire for the work.
Not all of these tactics will work every time. But, try them and you’ll see that they improve your bid-hit ratio. These bold decisions will transform your company from a “too busy, low profit” contractor selling on price into an “above industry-average profitable” company.