Contract Bidding Takes A Team Effort

Here are five simple strategies to implement to build better pricing models.

Get A Winning Team In Place

Throughout the bidding process, it's very important for BSCs to surround themselves with the right people. People from sales, human resources and accounting departments are all helpful to consult during the process. It's also an area where it helps to have input from vendors, distributors and subcontractors. Be sure to call upon the people that will either be physically performing the job or the people that will be managing the job. These are the individuals that should be providing accurate projections regarding labor, methodology, the equipment they plan on using, and what types and how many materials they need to get the job done. Their input is going to help you establish the labor budget. If BSCs are fortunate enough to win the bid, they're going to provide these people with the resources that they recommended so that they can deliver according to plan.

Communication Is Critical

BSCs need to be absolutely certain that they and their customers are talking about the same scope of work and expectations. Before contractors can even get to the numbers, they have to have an understanding of the scope of work. This will serve as the foundation for an estimate and it must be established and agreed to by the parties involved. The customer has a clear expectation for what the job will look like upon completion. The BSC providing the bid needs to be on the same page as the customer. Whether there are bid documents, plans, specifications, legal notices, permits or whether the customer is relying upon the contractor to come up with a statement of work, the two parties need to be speaking the same language. If not, a BSC could very well lose a potential contract simply because of faulty communications.

Know The Production Rates

No two BSCs are the same. Are there employees on the crew that have unique skill sets? Are there service lines or tasks that are performed better than competitors? Are there services or tasks that could be improved? BSCs could reference a manual or use industry-standard rates, but if a company performs better or worse than what's suggested, it's leaving the bid to chance. If BSCs have existing customers, they already have a built-in testing lab. Show up on-site, measure the square footage of a few different areas. Observe employees in action. Watch the clock. Take notes. Not only will BSCs learn how long certain activities take, but they may also notice superstar employees, opportunities for new equipment or technological advances that could increase production — all competitive advantages. Knowing production rates will help to develop accurate workloading.

Labor Pool And The Ripple Effect

When BSCs think about the model employee that they would use to staff the job, how much are they paid? Are contractors in tune with the current labor market? The difference in attracting, hiring and retaining a $13 per hour employee versus a $15 per hour employee could be totally different. Yet, those $2 per hour, if not accounted for, could make or break the bid. For example, Contractor A might simply hire $13 per hour employees and take any warm body off the street that applies for the position. Yet, Contractor B might offer their employees $15 per hour, however, and have rigorous background checks, drug testing, motor vehicle assessments and demand certain skill sets. The impact on a job in terms of quality, efficiencies, overall customer trust and satisfaction could be huge. Better employees coupled with a well-run organization equals lower insurance premiums, higher productivity, better workplace morale, lower equipment costs, etc. Those all lead to points of differentiation amongst contractors, and in an industry with tight margins, it could determine whether BSCs win or lose the bid.

Payroll Taxes, Insurance And Influence

Many contractors simply plug in an industry standard percentage to account for payroll taxes and insurance. This section alone could separate BSCs from the competition. Whether it's having a lower unemployment rate or having a safer workplace, BSCs can create major competitive advantages when it comes to these line items.

Take workers' compensation rates as an example. Rates are set by employee classification, marketplace conditions, risk and carriers. Contractor A has an unsafe workplace, lots of accidents where employees get hurt on the job and are out on workers' compensation and it negatively impacts their experience mod rating for their workers' comp policy. Its workers' comp rate is 12.5 percent of payroll.

However, Contractor B runs a tight ship — sound safety procedures in place, great loss control and prevention systems, a very safe workplace and little to no employee accidents. Its workers' comp rate is 8 percent.

Notice the glaring difference in that there could be a 4.5 percent swing between those two contractors? All due to things within their control. If those contractors bid the same job, the exact same way, but the only difference was their workers' compensation rates, who is more likely to get the job? In some businesses, that 4.5 percent could be their annual profit margin.

The bidding process plays a critical role in the success of a building service contractor. It's what separates a fly-by-night contractor scribbling down a quote on a piece of paper versus a confident BSC that has taken the time to know his or her numbers inside and out and delivers a proposal with complete certainty knowing exactly how much can be made on the job and how it will impact the long-term success of their business.

When BSCs raise their standards and take the time to truly understand the costs associated with running their businesses, they will begin to separate themselves from the competition. Better bidding and estimating techniques can help take BSCs to a place where they develop such a deep level of trust, accountability, transparency and authenticity with customers. That's a sustainable business model and a place everyone would like to operate from. The best part: very rarely do those accounts go out for bid.

Greg Montesano is owner of The Prevailing Group in Stamford, Connecticut. The advisory firm works exclusively with service providers and contractors to uncover strategies that will save money and time, as well as boost the bottom line. He can be reached at greg@prevailinggroup.com. Learn more at www.prevailinggroup.com.