Author Archives: Anton Takken

About Anton Takken

I chose to focus on estimating for a few reasons. Chief among them was that it's a position that's hard to fill in most companies. Job security and advancement is easier as a result. Unique to this job is a higher vantage point over the company and its place in the market. Bids are generally over in a few weeks which keeps things from getting boring. The reasons few of my colleagues pursue estimating comes down to a few misconceptions. The first is that it's the builders version of accounting - perceived as a lonely and quiet life among the charts and plans. The second is that it's not engaged in the construction process. Lots of the appeal of the construction industry is the sense that individual effort brought a plan into reality. The teamwork and camaraderie present among tradesman seems conspicuously absent at the estimators desk. Finally, I think the last reason is that it's daunting to be responsible for setting the price of something that's never been done. The good news for folks in estimating is that it's much more social than advertised. An estimator's phone is constantly ringing. Taking the opportunity to build relationships with the bidders creates a positive atmosphere and encourages everyone to do their best. It can be too much of a good thing which is why it's common to arrive at their voicemail when you're calling with a question. A strong rapport with the bidders can be invaluable. Subcontractors have much more exposure to what's going on in the market and they're often eager to share their knowledge. Learning from these experts is a priceless opportunity that's often overlooked. More on this in a bit. I decided to start this blog because I noticed that estimating has applications in many arenas. Over the last few years I've helped estimate in fields ranging from software development to blacksmithing! The more I thought about it, the more I realized that it's not about knowing what everything costs, it's about knowing how to figure that out. I believe the very first step to knowledge is to seek it, the second is to retain it, and the third is to pass it on. I hope to share some insights into how estimating is done and hopefully have some fun doing it. My experience is mostly commercial construction, but I'll try to make everything as generally applicable as I can. There are many aspects of business that all markets share yet it's remarkable that one of the most consistent is the failure to recognize that estimating is the very first step to a successful project. So if you're frustrated that work isn't profitable, or exasperated that there's never enough time to get the job done, this blog will be worth your time. Feel free to email me at: estimatorsplaybook@gmail.com

August 13, 2014

Making Bidding Fun!

By Anton Takken

A much overlooked aspect of what it takes to be a successful in business is the fun of actually doing the work. Estimating need not be boring, anti-social, or frustrating. The key is to maintain some perspective on what you’re actually doing.

A different take

In most offices, the estimator’s role is stiffly defined as “pricing stuff to win work”. While there’s certainly some truth to that, there’s a lot missing as well. For example, most entrepreneurs would view every invitation to bid as an opportunity. Every opportunity is a chance to further their goals. Every success opens new avenues to further opportunity.

The entire entrepreneurial plan is based on cultivating excellence from what’s available. Estimators interpret challenges in terms of risk versus reward. Reward often get’s narrowly defined as profitable. By limiting the appraisal of reward to profit exclusively, much of the entrepreneurial mindset is lost in the exchange. Along those same lines, estimators frequently interpret “unknown” to mean: “not worth it“.

Estimating becomes drudgery when you’re grinding through pricing exercises without any focus beyond covering your hind end. Estimators control risk and there will always be risk on an estimate. Certainly there’s more risk in doing something new. Quantify the risk and make it possible to push your boundaries. Don’t squander opportunities with unqualified pessimism. Eagles and Moths share the gift of flight, but Moths use it to bang into windows.

Winning bids is more fun than losing them but finding a perfect client is better still. Finding that rare profitable niche where your firm offers some unique value to the client is a watershed moment for a business. You’ll know when you’ve found it because you’re able to beat market pricing, exceed market value, and make more profit for work in that niche. It’s a great feeling to be at the top of your game.

Like this guy for example…he’s having a great time!

Getting there from here

Before you go off thinking that happy estimating is simply optimistic bidding , there are a few points to be made. First off, let’s start by making everything you bid rewarding. Every bid must have a primary, secondary, and tertiary reward.

The primary reward is to professionally represent your firm, your vocation, and our industry. In a perfect situation, you profitably win the job.

The secondary reward is to gain knowledge about the bidding environment. The bidding environment is a complex intersection of clients, design teams, competitors, market conditions, and local factors. Success is going to hinge on your judgment which is informed by paying attention to what happened on every bid you participated on. Just as estimating is often about taking a huge amount of unknowns and systematically filling in the gaps, so too must the post-bid investigations. Track what you can and interpolate the rest. You absolutely must gain new information from each bid, otherwise you’re going through the motions which is depression with spreadsheets.

The tertiary reward is networking. To many estimators this is largely limited to clients and design teams. New subcontractor talent is a market control that can not only ensure competitive pricing, but market value. Institutional inertia is a potent force in the construction industry. Many new technologies, techniques, products and services get stymied because established firms don’t face serious competition from companies that are doing everything they can to gain market share. Many estimators seek to reduce risk by focusing exclusively on “their team” of subcontractors. Somehow it escapes their notice that low risk bids are often long-shots in the competitive market. Get new talent involved whenever you can. Figure out which subcontractors are doing work for your competitors and not for you.

Over the course of your career, the bid list is a silent marker of the professionals you’ve encountered. Nobody wants to bring more confusion into their world. It often seems like every group has a few difficult characters. Herein lies a quiet advantage. New contacts are fragile things. If a new subcontractor turns out to be a turkey, you’ll have little regret taking them off the invite list. It’s much harder to be rid of difficult people with whom you’ve had a long working relationship. But once again, new competition might solve that problem for you.

Yeah, this guy definitely needs to go…

Turning things on their head

Lots of people hear “estimators must control risk” and think that means putting money into the bid equal to the dollar value of the uncertainty. That’s entirely wrong for a variety of reasons. First of all, it’s an estimate which means there must be risk. If there’s no risk, there’s no reason for an estimator to be pricing it. Second, bidding is not done in a vacuum which means that competition forces the winner to be the best market value so padded bids are often losing bids.

Third, if you actually know the value of the uncertainty, it’s not a risk, it’s the cost of making a decision.

For example: If a low bidder is 5% cheaper than 2nd low, you firm’s risk in hiring them is 5%. If the low bidder fell through (or raised their price) before starting the job, your firm would have to come up with the 5% difference to hire the second low. The greater the price gap, the more likely that is to happen.

That’s all fine but it assumes that all the risk is resolved prior to contract award. If a subcontractor “falls down” on you during the job, it will cost much, much, more to get the job back on track. This is because you can’t simply sever a contract with the first subcontractor, then hire the second contractor for the bid-day difference in their proposals. The first Subcontractor has legitimate pay applications up to the point they fell down. The 2nd subcontractor has to price the amalgamation of new work using whatever they can salvage of the first guy’s work within the now-compressed timeline for project delivery. Basically, you’re asking the 2nd guy to take on a much harder project than the bid day proposal addressed. Their price might be less than their bid day amount, but the sum-total spent on that scope of work will be much more than the low bid amount. Notwithstanding the inevitable court costs.

Successfully controlling risk is about judgment far more often than monetary padding.

If you find it’s not possible to define the value of an uncertainty you’re almost surely out of your depth, don’t bid.

So how does this apply to me?

If everything in the estimators purview is defined in terms of dollars and fears, there’s no light of opportunity making the job something meaningful. Estimators have a wonderfully unique position in the market that gives them information, insight, and leverage that’s profoundly influential. The key to unlocking this worldview is exercising judgment.

Go faster, good tools make everything but excuses.

In order to “buy time” to do all this thinking, investigating, interviewing, and planning you must understand the continual need to accelerate your QTO’s and estimate building. It’s incredible how many estimators are choosing to short-change their success by spending so much time with the phone off and door locked trying to pound out a take-off.

Market leading software solutions are plagued with poor input systems, frustrating file management, and stodgy workflow arrangements that are seemingly “optimized” for befuddled pensioners.

Get used to the idea that you’re going to have to push the envelope by adapting to this adversity. Take the time to learn keyboard shortcuts, menu sequences, and drop down lists. In some cases, it’s possible to learn entire shortcut “phrases” which quickly move through routine tasks. Speed is your friend and flexibility is critical for swift progress. Inexplicably systems continue to be developed with monstrous lists to represent every variable of a construction project rather than allowing the input to be logically derived by the user. Get to a point where the “counts and measures” aren’t consuming the lion’s share of your time.

Rise to the challenge

Estimating is an executive position that bridges sales and production. Embrace the opportunity to thoroughly understand the job and what drives the cost while aligning the job’s needs with the best your market has to offer. Be a market leader, and motivated professionals will flock to you. It’s a lot more fun.

Maybe not as fun as bear walking, but still… pretty good!

In most places, the construction market experiences severe fluctuations in roughly ten-year cycles. Many firms find it’s tough to quickly adapt to a downturn and few professionals feel the pressure so acutely as the estimator. The furious tempest of chasing every bid opportunity is starkly contrasted by how little work goes to contract. It’s a sad and predictable fate for the unprepared. Estimators should take heart, there is always opportunity for the willing.

Knowing the market, and knowing the market pricing means you know what it takes to win. These informed insights are invaluable to the firms decision makers. As an observer, you should be on the constant search for quiet market sectors. The more diverse these sectors are, the better. Market downturns are not always uniform and many firms find themselves uniquely positioned to expand during such times. Be sure to maintain a long list of clients to call upon when that happens.

Judgment is all important

Much of the joy in work is about having a purpose to what you’re doing. Fear, survival, and inertia are the three leading reasons miserable estimators reply to: “why are you bidding this job?” All three options are passive acceptance of a very corrosive notion. The idea that winning a bid is little more than simple chance barring some bidding error. The overwhelming focus on “not missing anything” obscures the much bigger picture. By and large, most competitive bids come in quite close between bidders. That isn’t a function of luck or missing something huge. Most of that difference is professionals doing their best with what they have. After all the adding, calculating, scoping, and measuring, take a moment and look at the job and it’s cost. Find a past bid that’s similar to this one. Is this job’s cost in line with the winning amount on that project? Now think!

If your total on this bid isn’t looking competitive, it’s time to figure out why. Maybe the schedule could contract, maybe you carried the 2nd low sub on something expensive. Resist the urge to simply tinker with the profit percentage until no other options are available.

What you’re doing right now is controlling the risk of losing the bid. You’ve put a lot of yourself into this effort, make sure that you finish strong.

You should know exactly why you made whatever changes you made so you can connect your actions to the outcome.

This is where estimating steps into its purpose. Estimating is not simply harried mathematics, plan reading, or typing proposals. It’s not just guessing, bargaining, or gambling either. It’s about hitting the mark in a complex, dynamic, and demanding environment. Picking an opportunity, positioning yourself properly, and landing a profitable job for your firm is a wonderful rush. There isn’t much room for “fat dumb and happy” on the hard bid market. Stay sharp and you’ll find that even in a crowded market, you can make it happen.

Final thoughts

To recap a little: an estimators purpose is directly tied to the entrepreneurial mindset. In place of optimism, the estimator brings market knowledge, and nimble problem-solving to turn opportunity into success. The estimator is a scout, a guide, and an adviser to help direct the firm’s actions. Personally, the estimator is a well-known professional who can earn a reputation that opens doors at every level of their career.

In many ways, seeing “the job” for what it really is (or should be), fundamentally changes how it feels to work every day. Be the change you want in your life. Make bidding fun!

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1 Comment | tags: market pricing, market value, Risk, Uncertainty, Winning | posted in Uncategorized

August 13, 2014

Plans and Specifications Part 2

By Anton Takken

Addenda, RFI’s and ASI’s

Addenda are Architect initiated changes BEFORE the bid. Architect’s Supplemental Instruction (ASI)’s are Architect initiated changes AFTER the bid. This is significant because in most cases, the contract has been written before an ASI was issued. The ASI should be reviewed for cost and schedule impacts which will require a change order to incorporate into the contract.

Directives from the Architect fall into a gray area, they are typically an informal document intended more to guide interpretations of intent than to augment the design. An example would be : “The south end of the parking lot may be used as a material lay down yard.”

A Request For Information (RFI) is a question initiated by the General Contractor (GC). If there is only one GC bidding a project the RFI’s may be answered directly. If multiple GC’s are bidding the RFI’s are often answered via a final addendum. Newer changes trump older changes regardless of which document is used.

In a typical hard-bid situation the Request For Proposal (RFP) will include a deadline for RFI’s and a date for final addendum. Depending on the duration of the bid, the final addendum may be delivered a day or two before the deadline. The Architect compiles all RFI’s into a single Addendum document which answers all questions. This ensures that all bidders are working on the same information. RFP’s are sent to GC’s from clients, whereas Invitations To Bid (ITB) are sent from GC’s to subcontractors (subs)

In practice, this often presents a situation where multiple significant changes to the bid must be accomplished in a very short amount of time. The GC’s must hurry to get this information to subcontractors.

“I’ll get to that later…”

Many estimators “keep their heads down” trying to complete Quantity Take Offs (QTO), build estimates, and distribute the bid information to the subcontractors.

Yep, gotta make production….

This practice can compound problems when new projects come in while other bids are underway. Prioritizing work based on deadlines tends to reduce the effective bid envelope for your team and your subcontractors.

Failure to launch.

New ITB’s represent an opportunity to streamline the information before it goes out. Well organized and easily searched files benefit your team and your subcontractors. If your firm uses any kind of plan distribution software, the subs will move far smoother if the information is easy to find. It goes against the grain of some folks to admit it, but it’s a simple fact that most subcontractors will not look at all the plans and specifications. The subcontractors are not getting paid to bid, reduce the cost of bidding to your firm by being less difficult to work with.

This is what you actually “do”.

As addenda, RFI’s and directives come in, sort them to folders. If possible, it’s immensely helpful to publish a bid directive listing the changes chronologically and broken down by CSI divisions. This directive can become part of a proposal scoping set for the team on bid day. Keep your eyes up and get the subs unfettered access to the plan information. If too much importance is placed on having perfect QTO’s and estimate templates, the subcontractor bids will be lacking. That means they’re either coming up short and costing you profitability or they’re padding for risk and costing you the win. If you want to win profitable work, you need to run a good bid. That means precise, prompt, and easy to understand information. This is especially important with a weak design team.

Get your head up

An interesting paradox exists within the average bid. The constant interruption that robs you of time to make final touches to your estimate before the deadline is directly proportional to the effort you sink into communicating earlier. Many estimator’s feel they don’t have time to “spoon feed” information to their bidders. These same estimators often end up either “walking a sub through” their bid at mach 6 minutes before the deadline, or they get really high subcontractor quotes from bidders trying to cover the risk. Project Managers posing as Estimators seem predisposed to this mindset, much to their detriment.

Keep it up Sparky, see how that works out for you…

Plan review

Taking a step back to the ITB, it’s very worthwhile to do a quick scan of the plans. Get “the gist” of what’s going on for the project. Take notes on which trades are involved and keep an eye out for trade overlap. If there’s a new Roof Top Unit (RTU), you should see some structural support, plumbing, and electrical in that area (on the respective sheets). Be wary of anything with “match existing”, or “building standard” as these are not specifications or definitions, they are requirements to field verify or guess.

Look for avenues for material movement. Site logistics can often have huge influence over production rates. Protecting pathways, elevators, stairwells, doorways, or exterior finishes are all often requirements for the project.

If you find an RFI question GET IT OUT RIGHT AWAY! If possible, ask your RFI questions at the job walk because sometimes the architect will give an informal answer. Whatever you find you should share with your bidders.

Check the specification manual for missing sections, it’s very common. If there are any non-traditional relationships get them to the forefront. Examples include owner furnished and contractor installed material. Requirements to purchase materials from a national account, or vendor. Requirements to coordinate with owner subcontractors and so on. Put all of these notes and comments on an eminently readable form easily downloaded by your subs. If it can’t be read at 90 miles per hour, you’re including too much detail!

Paint a picture, don’t write a book

Don’t forget that alternates may be defined haphazardly in the plans. Sometimes the very best solution is to draw boundaries and color areas on the plans to convey limits of phasing, breakdowns or alternates. Referring subcontractors to tedious detail drawing buried in the Architectural plan set is less helpful than a single page saved for their quick viewing.

Ideally, you want to include as much of this information into the subcontractor ITB as you can. Telling them when the job walk is, what they’ll need to look for, and how the bid must be broken down at the START tends to have much better impact than later down the line.

Great expectations and future plans

Bid day arrives and subcontractors are sending in proposals with items missing. It’s quickly clear that they didn’t read the specs, the addenda, or whatever. What could possibly be their problem? Take a moment and consider a few things. Are you competing on this bid? If so, is this subcontractor a loyal bidder to your firm? If not, this may be an insight into how your competition handles their bid documents.

Many subcontractors will bid a project to a GC then send a version to competing GC’s. Depending on the project and the GC’s in question, each one may receive a different number.

It can be very frustrating to suspect a competitor won a job by carrying a subcontractor that was missing some scope items. One way to keep this from happening is to notify the sub they’ve made a grave mistake and send them a link to your well-organized construction documents. Even if they don’t have time to revise their number, they may still pull their bid from your competitors. In one kind act you may earn the respect of a subcontractor and prevent a competitor from snagging the job. That subcontractor may well return the favor by giving your firm their best price on the next job. All of this hinges on the presupposition that you have your “ducks in a row”. This is one way that the best estimator can rise to the top.

Posting plans and specs

Wherever possible it is more professional to post the INDIVIDUAL pages of the plan set rather than one file. Large files take longer to download and consume more computer resources for subcontractors than they should.

Save the pages with a MEANINGFUL TITLE. Bear in mind that many file systems will automatically alphabetize a list of files. Beginning the page name with its number in the stack will help keep things in order. Specification manuals can be broken into major divisions as well.

Whatever system you use, be sure to log in as a subcontractor and view the experience firsthand. Some systems are very time-consuming to obtain the plans. Do whatever you can to make it fast and easy to get the plans.

Incoming changes!

Changes to the construction documents during the bid can be an enormous interruption. Time is of the essence which makes you question why some Architects thoughtfully arrange their materials into humongous files that choke email, and cripple servers. Balance speed against utility. If the architect replaced every sheet in the plan set but only changed two pages it behooves everyone for you to pull those changes out.

Addenda should be in separate file folders on your server, or web drive to make it easier to find everything. Again, save the files as individual pages to make it faster for subs to get what they need. If the Design Team’s narrative is weak, consider writing your own addendum narrative. Be very, very, cautious of design teams that won’t bubble, box, or otherwise highlight their changes on the CD’s. It’s either incompetence or dishonesty,

Sometimes it’s both.

Seek to balance speed in getting the information to your bidders against providing easy to understand information to your bidders. Weak design teams with sloppy addenda merit a request for a deadline extension. Don’t hold your breath because weak design teams often work for bad clients who have high expectations and low budgets.

Control the risk by doing your best to ensure that the subcontractors pick up on all the changes. Often it’s possible to immediately post the addenda files, then follow-up with supplementary information and better file management.

Technology

Most estimators use some form of bid letting software or a private server. Some of the bid letting software systems will automatically send an email to every invited subcontractor every time you post an addendum. Private server systems vary but most of them require a separate email to go out announcing that new information is available.

Private servers have plenty of advantages but without automated emailing, there exists the potential for changes to be posted unannounced. Many firms expect an office administrator, intern, or secretary to handle bid communications. Few estimators follow through to ensure that everything is getting transmitted properly and professionally. Subcontractors may not want to speak up when an administrator is sending incomprehensible emails for fear of being excluded on future bids.

Feedback

Since bid communications are so critical, it’s a good idea to generate a secret “fake subcontractor” that has an outside (not part of your firm) email address you can check periodically to ensure you’re getting all the posted changes. Emails with ITB’s should include the pertinent details in the body of the email. The deadline should be included in the subject line of the email. Some GC’s send generic emails with links to the actual invite buried in text or within attached documents. This is needlessly time-consuming, unprofessional, and self-defeating especially when the link is to a site requiring usernames and password. While we’re on that topic, usernames and passwords are just terrible time-wasters. Sites that demand a commitment to bid, or identification verification’s before allowing access to the construction documents are ineffective. Lot’s of estimators hope that these systems will alert them to who’s bidding as some measure of confidence that they’ll receive bids on time. Estimators need to focus on selling the opportunity rather than nagging for commitment. Subs will not feel obliged to bid a job simply because they once clicked a “Will Bid” button to see the plans. Systems that “bury the lead” behind links, buttons, or other nonsense are reducing the odds that your bidders are making your projects a priority. Few of these systems would persist if more estimators ever saw how irritating they are.

Follow through

Speaking of irritating, plenty of estimators feel that nagging the subs via phone calls is a vital and necessary part of the bid. This drudgery is often passed on to the aforementioned administrator, intern, or receptionist. The notion that nagging subs leads to bid is very flawed. Subs remember to bid on work they want to win and show particular enthusiasm for projects they feel likely to win.

Consider the following; Estimators transmit endless demands. Bid this by then, include this, not that, be low and maybe we’ll hire you but no promises. Subcontractors are looking for opportunity and they are turned away by risk, uncertainty, and delay to name a few.

The amount of labor expended in irritating the subs could be much better employed in making it easier to bid for subcontractors. Estimators could address most of this by shifting their attitude. Thoughtful actions that reduce subcontractor risk are huge because they make the job more profitable and easier to win. Work that’s more profitable and easier to win is a better opportunity. Subs are working with much less time than you are. If they have a question, don’t delay, dither, or pass the buck. Asking for alternates is asking for additional work. If your answer hinges on knowing the dollar value of an option, tell the sub that. An educated guess may give you enough insight to pick a path and get the sub rolling. Subcontractors can be incredible sources of knowledge so don’t be afraid to ask a question to help yourself to give a better answer. If it needs to go in front of the Architect then get the RFI drafted right away. Write it yourself, if you don’t understand the question, you’ll surely screw it up at some point along the line. Take the time to learn what’s involved so you can represent the build team knowledgeably and responsibly.

Final thoughts

Be aware of how you appear. Overly cautious and conservative estimators may pose little risk to subcontractors. However they pose little opportunity on a hard bid because they are consistently high. It’s an estimate which means there MUST BE SOME RISK which means you must make difficult decisions. Make sure your bidders know you’re actions align with your words. Many fraidy-cat bidders call subcontractors claiming they are “really going after” a job. Over time their calls end up unanswered. Speaking of unanswered calls, it’s significant to maintain professional distance. Be kind, polite and professional but keep it short since time is money. Subs that like to talk a lot should hear from you just before lunch to provide a handy conversational exit.

Whenever possible you should use email to maintain a record of the who’s, what’s, when’s, and why’s. Make an effort to personally thank at least one different subcontractor every bid. That will get you remembered because it’s shamefully rare.

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1 Comment | tags: Addenda, ASI, Communication, ITB, RFI, RFP | posted in Uncategorized

August 13, 2014

Plans and Specifications Part 1

By Anton Takken

If you spend enough time in the construction industry you’ll eventually notice that a hefty amount of whatever is written, is written in legalese. The Construction industry has largely defaulted to using American Institute of Architects (AIA) created documents for all contractual relationships. As much as “Builders” have become “General Contractors” the Architect’s role has moved from “Designing Buildings” to generating “Contract Documents”.

It’s a good thing these skills are just as related as….golfing and….fire fighting.

Often Contract Documents are taken to refer to the plans and specifications only. However anything the Architect cites, attached, or generates that is at all tied to the contract may be considered a “Contract Document”. Some examples include; Request For Information (RFI) responses, Request For Proposal (RFP), Directives, Invites to Bid, Addenda, Architects Supplementary Information (ASI), Pricing Requests, Meeting minutes, Soils Report, Hazardous Material Assessment, Schedules, Code requirements, Engineering Standards, Contracts, etc.

With all these various documents in play there can be confusion when documents conflict with each other, it’s important to know that there is a standard for determining hierarchy. Starting from the basic plans and specs scenario, the specification’s trump the plans in all cases. If there exists a conflict between two drawings, the drawing with the larger scale (more detail) trumps the smaller scale. Often Architects will include notation that requires written dimensions on Architectural sheets to trump all others. For example, a plumbing plan may show the layout for restroom fixtures, however the dimensions for fixture locations must be taken from the Architectural plan.

Architects adhere to the Construction Specifications Institute (CSI) Master format numerical coding system for individual scopes of work. This allows a universal coding system for trades to find all applicable specifications pertinent to their scope of work. Generally speaking, specification books are large tomes of legalese with requirements for every element of a scope of work. Each subsection will define what is to be covered which typically includes allowable standards for ; material, installation, manufacturer, submittal, quality control, and final deliverable items like warranty and operations manuals.

The plans are generally speaking, the dimensioned pictorial reference for the project. The Architect will often employ a team of consultants in different disciplines as needed. The most common consultants are engineers from Civil, Mechanical, Structural, and Electrical disciplines. Landscape Architects, Interior Designers, Lighting consultants, Audio/Visual Consultants, Acousticians, Fenestration Consultants, Kitchen Equipment providers, Security consultants, and Medical Equipment providers are examples of the various consultants the Architect may hire to form the design team which generates the construction documents.

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The Architect is in charge of the entire construction document development and the consultants work for them. As projects are in development, it’s common for the Architect to make changes constantly. A fairly common issue is that an engineer will develop their plans missing information shown on the Architects plans. For example a lighting plan on the Electrical sheets may have a slightly different layout than the Architectural reflected ceiling plan.

Unfortunately for estimators everywhere, the standard Architect assumption is that if the desired item is shown even once, anywhere in the CD’s , they can claim their intent was clear. Mechanical, Electrical, and Plumbing (MEP) trades notoriously bid on the “Engineered sheets” only. As an estimator, it’s crucial to check that the Architects vision is accurately transcribed into the consultants work. Errors here can be very expensive on items like decorative lighting fixtures. Be very cautious about verifying that each fixture type has the same counts, fixtures can vary tremendously in price so even though it may be the same overall number of fixtures, the price can fluctuate profoundly.

Why won’t they just tell me what I need to know?

There are some scopes of work that are profoundly frustrating to bid because each consultant delivers entirely separate documents with only cursory references to where critical information might be found. A prime example of this is earthwork. Let’s say the project is a ground up building on a new (greenfield) site. The civil plans will generally show what the existing and proposed topography needs to be. The building itself is generally shown as a simple outline with an elevation written in the middle. Structural plans will show the building foundation which helps to a degree in that the volume of the foundation materials must be excavated. Be careful since the Structural plans often contain detail drawings with dimensions defined by relationships to other parts. In other words, the detail showing a foundation wall section is “Typical” however its height at any given point must be derived from all influencing factors.

This still falls short of telling an earthwork contractor the entire scope of the project. If the soil samples indicated native material is unsatisfactory, the site may require over excavation (overex) to cut out the offending material. In some cases moisture treatment and compaction are required in specific layers (lifts).

Neither the civil, nor the structural plans will contain this incredibly important information. No, this information is in the soils report under “recommendations” which are inevitably buried in the middle of the soils report. The natural question now is “where’s the soils report”? Some design teams provide the soils report as a standalone document, others include it in the specifications manual. In other cases, a GC will be obliged to ask for it via RFI.

The reason everything is so fractured is that the engineering disciplines are very concerned about liability. They seek to contain their risk by providing only information they have developed. Soils Engineers are very aware that their work is being relied upon by the structural engineer. The structural engineer is very aware that their work is being relied upon by the architect. Generally speaking, the more liability the engineer faces, the more they will seek to protect themselves. Soils reports can take on a level of legalese that is impressive even by congressional standards.

So what if I have a question?

RFI’s pertaining to engineering consultant’s work will be routed from the Architect to the engineer(‘s) and back. It’s common for an Architect to have little to no understanding of what was asked or answered. Consult with affected subcontractors and put together an RFI that respectfully illustrates what you believe is the intention. Sometimes they’ll show mercy and answer you.

Conventions versus intentions

The term “schedule” on plans means a chart of related specifications. Common examples of schedules found on plans would include a door schedule, or a HVAC Equipment Schedule, or a Light Fixture Schedule. Plan schedules share a few conventions. First off is an arbitrary name for each unique “type” of related specifications. In the case of a Door schedule, there may be several hardware groups defined. A hardware group will include all door hardware required for a specific opening which may be a lengthy list. The schedule will list the door number, the hardware group, the door’s width, length, material, finish, frame type, and rating. It would be cumbersome to include all this information at each door opening of a floor plan so the schedule is a more concise way to convey all that information.

52 pickup

Whenever information pertinent to a plan is compartmentalized into a schedule there is a strong likelihood that errors will occur. Door schedules are a great example of this. From the plan view it’s easy to see which doors are exterior and which are the interior. Looking at a door schedule, the interior versus exterior distinction is buried in the spreadsheet. It’s very easy to transpose an entry especially since the door numbering is an arbitrary thing that may have no clear relationship to where the opening will be found on the plans. Adding further mischief is the convention to put the door hardware schedule in the specifications. The hapless estimator doing a door takeoff must reference the specs, the floor plan(s), and the door schedule simultaneously to do their job. More RFI’s are written about errors in door schedules than any other topic. Perhaps some bright light will consider moving the door and hardware schedules onto a dedicated floor plan so everything is on the same page.

They draw the treasure map, you pick the pirates.

Before leaving the door example it’s worth pointing out that doors may be furnished by several unrelated bidders. Storefront doors are typically furnished by the Glazier, as are solid glass (fancy) doors. Overhead doors may be furnished by a garage door company or a specialty supplier in the case of interior security gates. Wood doors may be furnished by door suppliers, or millwork contractors, or a combination of the two for applied trim wood doors. Automatic doors installed in storefront are typically by an auto-door firm. Electric Americans with Disability Act (ADA) openers for manual storefront doors are typically furnished by a door supplier but there are always exceptions.

None of which is in any way, shape or form, indicated by the construction documents. It’s entirely the GC’s responsibility to know “means and methods” and to always adhere to “design intent” regardless of how confused you are by the CD’s conventions.

Finish schedules are common on projects with recurring patterns like multifamily buildings. The more homogeneous the design, the less problems will occur. Schedules can be very helpful for defining complex specifications like HVAC equipment, Kitchen Equipment, Light fixtures, and so on. A lot of time is saved by centralizing pertinent information. It helps a great deal that MEP disciplines tend to consolidate their information towards the obvious trade divisions. Architects and Interior Designers are “mass communicating” so their schedules tend to work poorly for everyone but them.

Why didn’t you read the specs…

As an estimator it’s important to know that Architects feel that the specifications are perfectly obvious in the same way that a floor plan shows the building perimeter. To subcontractors, the specifications represent approximately 20 pages that matter surrounded by 600 that don’t.

Although they may be loath to admit it, specification manuals are often “cut and paste” efforts where doubt is handled via overkill. It is incredibly common for specification manuals to contain sections on systems or assemblies that have no bearing on the individual project. In trade parlance this is a “canned spec” meaning the design team just re-used a spec book so a particularly onerous requirement may not actually apply to the job at hand.

This is why you’re here

As an estimator, it’s your job to contain risk, maximize profit, and win a bid. The most powerful tool at your disposal is your judgment. It’s a simple fact that mistakes will find a way to your door regardless of who made them. Canned specs might not be enforced leaving you to decide if it’s worth the risk to exclude something that seems unnecessary. If it’s excluded from your estimate,it must be excluded on your proposal. Whenever you’re on the fence about an issue, ask a trusted subcontractor what the exposure is so you have some idea of your risk. Remember that an estimator must show leadership and fairness. If the plans and specs ask for something impossible, don’t demand that your subs “bid it anyway”.

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8 Comments | tags: Canned specs, Consultants, Design intent, Plans, Schedules | posted in Uncategorized

August 13, 2014

Trade overlap and “Ghost Trades”

By Anton Takken

Watching buildings emerge from the ground everything appears to have a synchronized and obvious way for all the elements to fit together. The tradesman on site just flow from one task to another. Sadly, this is not the natural way of things at the bid stage. A review of the subcontractor exclusions across trades will quickly reveal several items that nobody included.

The natural question here is “Why?”. The answer can be simple. The subcontractors are competing so they avoid including anything that might be in someone else’s scope of work. The answer could also be complex, for example they may know that a specialty contractor is required but they don’t want the responsibility of subcontracting them just to give the GC a “complete” bid.

For example, nobody likes to work with Betsy the roof inspector…

Trade overlap occurs wherever assemblies from separate trades will meet. In the case of equipment the specifications should define how the assemblies will be furnished and installed. For example a responsibility matrix for the mechanical equipment might show that the rooftop equipment will arrive with a fusible disconnect for the electrician to connect to. It may also indicate that the fire alarm contractor is to furnish a duct detector which the HVAC contractor is to install.

Whenever the plans fail to properly identify which trade does what, it falls upon the GC to provide direction accordingly. There will however be times that local tradition or simple subcontractor opinion will play a role in what they will include in their bid. For example let’s imagine that a ground up building will consist of structural steel on to which metal studs are attached to frame the exterior walls. Depending on the assembly, it may prove necessary to weld the light gauge studs to the structural steel. This can be common at parapet walls over a window opening. Some drywall contractors will seek to exclude light gauge welding from their scope of work, claiming the structural erector already has welders on site.

If the local tradition is for structural erectors to weld light gauge studs to structural steel, they may well provide pricing to do so. Be cautious with this option since the structural erector will likely need separate mobilizations to return to the site for the light gauge welding.

Remember that every bid you complete adds to your collective legacy. Working with the subcontractors over and over again, you can (and should) develop understandings of how you’d like things to be bid. Traditions can be hard to change so ask for alternates to “do it your way”. Over time, you might change the tradition!

Sub-Tier Subs

There are some specialty installers that come into play when specific materials or methods are required. Often they are sub-tier subs or “Ghost trades” since they don’t appear on any of the GC’s subcontracts. Examples include: Mechanical controls, Fire alarm, Energy Management Systems, Directional boring, Core drilling, Concrete saw cutting, Ground penetrating radar, X-Ray, Concrete honing, Independent testing agencies, Commissioning agents, Racking systems, Emissions controls systems, Emergency Radio systems, Radio amplification systems, De-watering equipment suppliers, traffic control, erosion control, storm water management, Standby systems, Truck mounted HVAC, Generators, Craning, Rigging, Utility locates, etc.

Depending on the situation, the subcontractors may be obligated to use a single sub-tier sub for some scope item. Basic economic laws remain, a restricted supply drives a greater demand. Sometimes these “Ghost trades” are immensely overpriced simply for lack of competition.

These guy’s don’t come cheap, but who else are you gonna call?

Go ghost hunting.

The vast majority of these “ghost trades” will involve scopes of work pertaining to engineering consultants. Often the plans will show a desired system without any particular mention of a restricted specification. In the case of a remodel, it’s often critical to use vendors who are licensed or franchised by the manufacturer of an installed system. In the case of Fire Alarm it’s not uncommon for an installer to program a “lock” on the system precluding any other company from remodeling the system. On ground up projects, the specifications will define acceptable manufacturers. As a GC it’s perfectly reasonable to reach out to these vendors directly. If they won’t bid directly to you, give them a contact list of your subs to ensure that everyone you’ve invited will receive the needed quotes.

As simple as it sounds, taking a picture of the control panels for all systems during a job walk reduces the likelihood of a mistake. Many firms will put their business card or sticker on the case, this can be a valuable lead.

Don’t play favorites.

Sometimes a design team will require sub-tier-subs without properly specifying the system. If they wrote “or approved equal” after the name of a sole-specified vendor, insist that the design team provide a full specification to allow competition. Often this is an indicator that the vendor assisted the design team and they are rewarding them by sole specification, they conceal this preferential treatment by feigning to allow alternate vendors.

That dude’s shady.

Get involved

Good subcontractor communication leads to better feedback. If you establish yourself as a GC who will run down the details, the subs have less risk in working with you hence lower bids. Getting to know the norms and traditions of sub-tier-subs in your market is invaluable to ensuring that you face a minimum of bid-day surprises. Be advised that it can be immensely frustrating to encounter a situation where everyone is excluding some scope of work. Attempting to force a bidder to cover some portion of work they must subcontract out is not fair. It’s your job to find the hidden details and broadcast them to your bid team NOT to collect bids and stop your feet when they’re omitting something.

Sub tier vendors can be so specialized that subcontractors may not know they exist despite decades of experience. Whenever possible, consult with experienced Project Manager’s as there’s a chance they have heard of the situation once before. Staying on top of current means and methods is a critical job skill everyone in construction management should maintain.

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3 Comments | tags: Specialty vendors, Sub-tier subcontractors | posted in Uncategorized

August 13, 2014

How to lower prices

By Anton Takken

A common follow-up question to “How much to build this?” is “Could it be done for less?”. If you are losing to competitors frequently enough , the answer would be yes, yes it can. There’s a tendency to look at a bid as if it’s simply the total of all the subcontractor quotes. This perspective has limitations in that it implies that cheaper subcontractor quotes is the only way to arrive at a lower total bid.

But why are their quotes so high? Risk is the most common reason. Subcontractors must assess factors that go beyond a narrowly defined scope of work listed in their contracts. For example market conditions may have created a labor shortage that limits the amount of projects the subcontractor can safely take on. Bid invites for projects that are planned to start during peak seasons will create a twofold risk for the subcontractor. First, if they win the job and labor is scarce, they will have to pay a premium to adequately staff the job. Second, if they fail to land enough profitable work during peak season they jeopardize their annual earning potential which may leave them saddled with a fastidious low profit job, which is a very serious problem.

GC Estimators can address this risk by carefully evaluating bid opportunities that are leading up to and during peak season. Are the plans ready for permit? Does the client have funding? Can they start when they claim they will? Could they start earlier or later? Lots of ambitious clients choose to break ground in the summer to reduce weather delays. School remodeling typically takes place when the kids are out as well.

From traffic signals to hand grenades – timing is everything!

This is not the time to be optimistic and giving the client the benefit of the doubt. If a client looks wobbly or has a history of late starts tell your subs you anticipate a later start date. If the client is obligated to timelines for contract awards and project closeouts include that on your invitation to bid. Specification manuals are sometimes thousands of pages long and Architects can’t be bothered to list pertinent details like start dates, completion dates, liquidated damages, bonding requirements, Taxes, or Davis Bacon Wage requirements in one place no matter how much it would benefit mankind (but I digress). Honesty counts, I have been involved with bids that were upwards of 20% higher than the best we could do on bid day because we couldn’t count on the client to start when they said they would.

Projects that get pushed back inevitably collide with work for responsible clients. These collisions can be immensely expensive especially when small projects “just won’t end” to free up needed resources.

Order of operations

Projects with limited subcontractor scope may still require several mobilizations to the project to complete. In extreme situations, the mobilizations are more expensive than the scope of work. Imagine a project that requires a new doorway to be cut into an existing wall. The painter might be tasked with painting the wall around the new opening, the door frame, and the door itself. If the painter were allowed to paint the wall after the frame was installed ,they could get the wall and the frame painted in a single trip. Shipping the door to the painters shop allows them to paint it when convenient and bring it with them when they come to paint the wall. Cutting 50% of their mobilizations and allowing them to paint a door in a less chaotic environment reduces their labor and risk on the job without changing the scope of work. Be creative and find alternate solutions. Taking this door example a different way, let’s say the door is wood and must be stained to match the wall trim. A painter is going to have to obtain a stain sample, mix, match, and apply that finish. The millworker will bring pre-finished trim to the job site to install. They have all the equipment to stain and finish the wood door and bring it with them when installing the trim. The stain WILL match because it’s the same material from the same equipment. Again, the staining can occur in a controlled environment at the subcontractors convenience. The painter ends up with a single mobilization, so does the millworker.

If the work is inconvenient or likely to interfere with more profitable pursuits subcontractors will price it higher. Don’t let dogmatic tradition dictate the schedule, look for the efficient approach. Don’t be afraid to make things cheaper for a “little” scope of work.

House cleaning

Part of what defines the work is the GC. Many firms are monoliths of unresponsive yet demanding bureaucracy. Estimators who don’t have a rapport with their subcontractors are rarely well-informed as to what influences each bidders view of the job. Giving prompt, uniform, and firm direction in reply to subcontractor questions builds a positive association with your firm. They will be more inclined to speak honestly with you about their limitations, interests, and concerns. Dithering, weaseling and CYA replies achieve the opposite.

Project Engineers that hastily reject submittals without explanation create administrative log jams that delay critical path deliveries. Project Managers who fail to develop, maintain, and manage project schedules often become “screamers” as the deadline approaches with long punch lists. Taken together, these “dynamic duo’s” are artery clogging masses in the project’s bloodstream.

GC’s who have their project managers bid their own work often receive different subcontractor rates depending on which PM is going to run the job. This is why.

“You could say workplace tension is a factor…“

None of which is to say that everyone at a GC must be everybody’s friend or always “play nice”. GC’s that win work that’s run smoothly and profitably without screwing anyone will have plenty of admirers.

Working around the situation

The modern bidding environment is very formal and compartmentalized. The GC’s are not permitted to informally ask the design team questions. Subcontractors are not permitted to ask questions of anyone but the GC’s. Bureaucratic delays ensue, forcing critical decisions to the end of the bidding period (if then). Then the bids come in and often the client is displeased with the price and all value engineering suggestions. After all, they paid the design team to get everything this far,now they’re forced to choose what to amputate from their vision of the project. The client doesn’t see much value in the ritual of the Request For Information (RFI) exchange. So take the opportunity to push the project back on track by providing leadership BEFORE the job is off the rails.

“An appeaser is one who feeds a crocodile hoping it eats him last” Winston Churchill

Many GC’s seek to avoid exposing an Architect’s mistakes in hopes that “playing ball” will naturally resolve complex issues. Assuming the Architect will fully grasp all the issues and costs of a problem is how we get half answered questions, cost over-runs, and project delays. Often these problems are apparent at the bid stage. Cost additions post bid are change orders that the owner doesn’t appreciate. Ambiguity in the plans can raise moral dilemmas that unscrupulous competitors exploit to snag a job. Closing the gaps BEFORE the bid levels the playing field and protects the client.

Subcontractors may feel the same way only they must rely on often feckless GC’s to get direction from the design team.

Start on the right foot by writing RFI’s in a professional manner. Reference an actual drawing that you’ve cropped to the area(s) affected. Wherever possible ask Yes/No questions to simplify things. Offer reasonable solutions and imply that you think that’s what they intended.

Here’s an example: Detail XYZ has a note requiring process X however detail PDQ has a note requiring process Q. ABC Construction believes the intent is to use process X at only West facing openings and process Q at all other openings. Is this correct? If not, please define the desired process for the openings in question.

If the architect writes “yes” on your RFI and sends it back to you, you’ve generated an easy to follow instruction for subcontractors to bid on. Legalese or weasel wording makes for ambiguity which is risk.

Now most estimators will just send this RFI to the Architect and steadily grow their frustration as the bid date advances without a reply.

Get what you need as soon as you can

It may be possible to call the Architect off the record before sending the RFI. Phrasing and tone are important. Portray your efforts as striving to make an easy to answer RFI. The intention is to establish your desire to honor their design, not list mistakes you found in their plans. If done with diplomacy, it’s possible to get the answers you need before you send the RFI. Some Architect’s will formally answer all RFI’s at one time for their convenience. Typically via addendum just before the deadline.

Broadcast the answer’s

Knowing the answer early means you can create a bid directive for your subcontractors well in advance of that addendum which will confirm and formalize your instructions.

GC’s that aren’t afraid to give accurate and precise direction are rare in the market. If you make it easier to bid to your firm, there’s an excellent chance that you’ll attract bidders to your projects. Be advised that asking for alternates for scope of work that “could go either way” depending on an Architects reply can be a sizable request. It’s typically much harder to precisely “break out” some scope of work after the bid is complete. Get such requests out an in front of your bidders as soon as you can.

“I’m too busy to answer you right now”…

Subcontractors bring a profound level of specialized knowledge and diverse experience to the bidding environment. They typically have far more customers clamoring for their attention than the average GC could imagine. Subcontractors do not have the luxury of analyzing a single project from the invitation to the deadline. They may only be able to invest a small amount of time in bidding the work because their scope work isn’t valuable. GC’s are who are unwilling to “spoon feed” subs looking for answers are missing the bigger picture. “It’s in the plans” is a pithy response that results in a furtive hunt for as long as their charity outweighs their frustration. Trades with limited scope, or with scope of work that’s only shown on an obscure detail drawing are likely to come up short on bid day if you don’t let them know what you’ve found. The interplay of alternates is immensely frustrating for subcontractors. Items that are affected by trade overlap are likely to have conflicts when decisions are left to interpretation. Does the roof top unit come with its own fused disconnect or does the Electrician have to supply it? Is carpet demolition by a demolition subcontractor of a flooring sub?

A well-defined estimate should output scope of work checklists that you can send to your bidders to reduce bid-day confusion. Try to remember that competitive bidders default to EXCLUDING anything that’s questionable in their scope. If you don’t know enough about the item in question you should call trusted subs and get their input. Not everything with pipe connected to it is in the plumber’s scope, not everything with wires is an Electrician’s job. A skylight might be handled by a Glazier, a Specialty skylight subcontractor, a roofing subcontractor or even a carpenter depending on the specifics of the situation. Be advised that there’s more than one way to address a scope of work. Sometimes the cheapest option is overlooked.

Plan wrangling

99.99% of the time bid documents are transmitted as Portable Document File (.pdf) files. This can be a blessing or a curse depending on several factors. First of which is the way the document is formatted. A fair number of Architects will transmit one file with all the plan pages included in order. The advantage is that there’s no chance that any single page will be omitted. The disadvantage is that this makes the file large and cumbersome for the majority of bidders. Alternately, the plans can be transmitted by sets defined by group i.e. “Architectural, Structural, Interior Design, Civil, and MEP,”. Finally the plans can be transmitted as individual sheets.

The naming convention of the file is very important. Individual sheet files need to be renamed to match the sheet name. “Sheet #21” is meaningless whereas “A5-3 West Elevations” defines the page. Don’t assign this task to folks who lack construction knowledge, the results are uniformly awful.

Be advised that re-naming sheet files tends to scramble the page order if the page names aren’t alphabetical or sequential. In those cases, I find it easier to put the page number at the beginning, followed by the sheet name. From the example above you would have “23 A5-3 West Elevations” as your file name. Keeping the plans organized, and accessible is absolutely critical for reducing the amount of time a bidder has to spend trying to get what they need. Imagine you’re making highway signs for the autobahn, decisions need to be made quickly so the information must be clear.

Welcome to the FF&E Rodeo

This becomes much more challenging when you’re bidding work in certain markets. The multi-family, retirement, and assisted living, market often use interior design teams who create “Fixtures, Furnishings, and Equipment” (FF&E) packets. Those that have crossed my desk are a perfect storm of inefficiency. Cut sheets for carpet, chairs, paint, wall covering, light fixtures, plumbing fixtures, appliances, etc. are combined into one continuous file that’s generally riddled with nomenclature not shared by anyone else on the design team. Carpet types on the Architectural plans do not correlate with the FF&E types because these teams don’t coordinate. There is no effort made to place similar materials together so it requires a comprehensive search to find all specified material for a given trade.

Start by breaking down the FF&E files into individual cut sheet files. Use naming conventions to sort them to either Construction Specifications Institute (CSI) number or trade name. Maintain an inventory of what you’ve found on a spreadsheet. The next step is attempting to match the cut sheets to the types listed on the plans (a daunting task). RFI’s need to be promptly filed where applicable.

Be advised that very complex RFI responses are often delayed. If you break your list down to trade specific materials it should help focus the design team’s resources. Presenting your subcontractors with a completed schedule for the material in the FF&E documents reduces their risk immensely. Avoid “narrative” responses wherever possible. Provide highlighted drawings showing the locations you think they’re addressing. It’s been my experience that Interior Designers are loath to use plan notation for RFI replies. This tendency wastes your precious time. If they won’t draw a picture, draw one for them. Be advised that information like room numbers is frequently missing on consultant plan pages which compounds the confusion with narratives.

Drive the bus or get taken for a ride…

Similarly, conceptual or design/ build efforts can be based upon a hodgepodge of plans, pictures, and narratives. It’s incredibly annoying for subcontractors to read through all the pages of a narrative looking for their scope of work.

Subcontractors are bidding to YOU, so YOU need to put your assumptions out in a comprehensive manner. List out the presumed scope of work for every trade you’ve invited being careful to add precise direction for areas of trade overlap. For example, if there’s a kitchen, YOU must declare if the equipment will be gas or electric. If the client intends to furnish material, then list that too. If you’re competitively bidding, define what you expect the budget to be. Leaving everything up to the subcontractors means you’re riding the bus, not driving. Define desired level of finishes using unit costs wherever possible. If there are hard specifications or special inclusions, make sure that the affected bidders are aware of this. List things according to trade to make it easier for them. If it sounds as though conceptual or design-build estimates are more work than a traditional hard bid, you’re right!

To the subcontractor, missing information on conceptual bids generally equals “excluded”. Design-build presents an onerous situation for subcontractors. They’re expected to “protect” the GC from uncertainty but they must also compete. Exclusions are costly – limit their risk by defining what is and isn’t in their scope of work. The MEP trades are facing a significant amount of work to design-build a project. Weak, weasel-worded, or unknown requirements will push them to simply bid high to let someone else take on the troubled job.

Bids are not free

Sometimes the reason a GC fails to attract low bidders is due to the image they’ve cultivated on the market. Constant losses are an indicator to subs that it’s time to change horses. Subcontractors don’t know who was second, third, or fourth low, the awarded GC is all that really matters to them. A lot of GC’s assume that their competitors were working off the same subcontractor numbers. In fact, it’s common for subcontractors to give better pricing to low risk or better clients.

Closed doors and open windows.

There are also a lot of cases where a GC has a low bid subcontractor all to themselves. GC’s that enjoy this situation have a few things in common. First off they are aggressively promoting acceptance of qualified subcontractors. Many firms are enormously insular about widening their list of pre-qualified vendors. Striking the proper balance between competitive pricing and risky subcontractors is a process of continual refinement. If you’re consistently not winning, you need to be widening the list of acceptable subs. Unsolicited bids or late bids from subcontractors who just heard your firm was bidding are prime candidates for review because they are already bidding work in common with you.

Winners pick winners

Another thing these GC’s have in common is that they are conscious of wasting subcontractor time. It’s senseless to invite subcontractors to bid work they’ve consistently lost in the past. Just as it’s unethical to invite a sub you wouldn’t hire, it’s not ethical to invite a sub knowing they are going to lose. Classify subcontractors according to their key markets will help immensely in ensuring that they’re paired with the right work. Too many estimators focus on “at least three” subcontractor bids per trade. If one sub has never won similar work, it’s time to find another contender. Be advised that subcontractors are often in “sales mode” when answering questions about their firm. Base your classifications on their verified performance. Keep in mind that often subs are much larger than they may appear from your desk. A mid-sized GC employs a fraction of the people that a mid-sized subcontractor does. It takes a lot of resources to actually perform the work.

When times are good, it’s imperative to bid Subs on select lists. When times are bad – it’s critical to show subs you’re picking market leaders. Prove it by winning.

Your voice

Many GC’s employ an intern or hapless office worker to manage bid communications and invitations. The least sophisticated firms have someone on the phone nagging subcontractors endlessly for bids. “The personal touch” is considered a benchmark of getting things done in the bid world. Possibly there are subcontractors who feel this is a much-needed aspect of the bid courtship. For most others, this is a mindless intrusion into an already hectic day. If the project, GC, or client strikes the sub as a bad opportunity, forcing them to explain the situation to an intern or receptionist won’t help.

Sometimes the subcontractor will ask a question intended to help quantify the job. Inevitably the caller lacks decision making authority to adequately resolve the issue.

Lots of businesses create customer service positions with authority but no allowance for decision making. The Department of Motor Vehicles is a prime example. From the receiving end one message is quite clear:

“We don’t care, and it shows…”

I’ve heard GC estimators discussing this situation and several claimed that they had their lead estimators making such calls because the interns or secretaries didn’t get results. Its better to ask: “why don’t subs want to bid?”. Not getting nagged enough is the least likely reason. It’s exponentially more likely that the Subcontractors don’t see a viable opportunity. If these GC’s were honest about their chances on an average bid, they’d likely admit that they’re wasting their subcontractors time to an alarming degree.

Targeting specific work should entail having a select list of excellent subs who pursue the same kind of work as you. Those subs will bid because it’s a great opportunity and they’ll have better pricing because it’s what they’re good at.

Honesty: the great amplifier!

Nagging, cajoling, withholding, and threatening are symptoms of a backwards relationship. If you’re looking at work that’s a good opportunity for you AND your bidders, you won’t need to shout to attract attention. I have found that voluntarily providing bid results attracted more bidders than nag calls. It’s less work if you publish them using the same system as your invitations. Also, it reduces the nagging phone calls you receive from subcontractors looking for bid results.

A friend at the gallows

Subs bidding to GC’s over time will notice patterns. If your firm never wins a certain type of work, you can’t reasonably expect help from them. Lots of false hope is pinned on loyalty bidding. Subcontractors may choose to bid to a GC they’re loyal to, knowing that GC won’t win. Time is precious so they need to get on to better opportunities. Padding the number and pushing the bid out the door lets them maintain the relationship without the GC consuming all their time. It’s common to hear such GC’s claiming that “no subs are bidding this job” as they beg bids out of their subcontractors. Meanwhile, the winning GC has plenty of bids.

The situation could be fixed in several ways. First off you must quit chasing losses because it’s senseless to repeat an action that’s failed in the past. Second, maintain market pricing by cultivating new subcontractor bids. Third, provide pertinent feedback to your loyal subs . For example they may not know that you lost by $50 last time. Teamwork relies on communication.

Commitment

Just about everything in the modern bid environment is about stalling; whether it’s commitment to relationships, contracts, using a low bidder, or even admitting bid results. The pervasive mindset is that stalling for time is the best move since any other action might play against you. Jobs are often advertised using terms like teamwork. In fact, teamwork tends to mean whatever’s convenient to the GC.

For example, three bids for one trade arrive. The high bidding sub has breakout and alternate pricing that illustrate a very high level of thoughtful detail. The low bid sub has very little information and the inclusions don’t mention several items the high bidder listed in breakouts. The middle sub may list all the inclusions of the high bid but without the alternates or breakouts.

Taking low bidder’s total plus the high bidders breakouts gives a sum just below the middle bidder. Let’s say you call the low bidder and get the adds which come in within a percentage point of your earlier tallies which tells you that they’re now complete. Using that bid is now very low risk.

…who’s the fairest of them all?

Consider for a moment the subcontractor’s view of that example. The high bidders proposal enabled the GC to ask the right questions of an incomplete bidder to arrive at a sound proposal. Knowing what each answer was worth before asking is huge. The middle bidder was the legitimate low bidder based on original proposals alone.

How would things change if all three bidders had held their proposals till the last-minute? The first option is to disqualify the incomplete proposal and carry the 2nd low. The second option is to take the high bidders adders plus the low bidder’s bid and accept the risk that their formal proposal may not tally as expected. Jobs are won and lost on these terms all the time.

“Teamwork is everybody doing what I say”.

At the estimators desk, the “teamwork” here allowed the GC to hire the most irresponsible and incomplete bidder. Without the 2nd and 3rd high bidders, the low bid proposal would lack comparison data . This creates a significant trap to the unwary or uniformed estimator. If this situation persists over several bids, it would become obvious that there is little incentive for bidder #3 to continue submitting proposals. If bidder #1 is consistently missing scope items, this may be a sign that they are attempting to snag change orders. This is an insightful example of how that GC’s brand of “Teamwork” may be perceived!

“Better call in the D team…”

Lessons learned

It’s reasonable to compare proposals. Sometimes unexpected items will come to light on a proposal which prompt follow-up questions to other bidders. There is a certain duality to be expected where conscientious bidders may include so many details into their bids that they drive themselves out of competition. Likewise, the lax or harried bidder may miss something that makes their bid low. It’s the estimators job to sort all of this out, to include calling and scoping apparently incomplete bids.

This is entirely different from maintaining a subcontractor list intended to facilitate hiring hack bidders. The GC must offer value to the subcontractors if they are to receive bids. If the GC will accept incomplete bids, the playing field is tilted against the professional subcontractors. From the outside looking in, this is little different from bid-rigging since legitimate bidders cannot expect a contract in good faith.

Correcting course

Hack bidders should be directed to submit complete proposals or risk disqualification. The estimator must fortify the GC position by more thorough take off pricing to back-stop these risky subs. Unsophisticated subcontractors may offer attractive pricing that’s worth the risk. Be cautious of staffing projects with such firms. As the saying goes, trust but verify.

GC’s must strike a balance between subcontractor sophistication and market value. Those that do, find themselves winning competitive work profitably. Those that don’t are either losing money or losing bids. Don’t let it happen to you.

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6 Comments | tags: Ethics, FF&E, How much?, Incomplete plans, Losing, RFI, Subcontractors | posted in Uncategorized