In business there always comes a time when everyone tries to cut corners, and still wind up with the same or better results. It’s only human nature to try and figure out how to get more by putting in less.
When I was fresh out of college I took a job as a construction estimator, and I learned after 6 months that my new company, was implementing a new way of trying to get ahead. One they would never tell the Bonding Company.
But in the Beginning,
We were submitting bids the way I had learned. Scoping, quantity take –offs and pricing. We organized the estimate by trade and utilized the Construction Specifications Institutes outline. We also were always on the look-out for design errors. The company did mostly Government work and their mandate was any changes, mistakes, or delays – was an extra cost to the contract.
We always seemed to be putting together 25 million dollar estimates. It would take 6 estimators and two assistances 3-4 weeks to prepare. The routine was standard.
On BID DAY there was a lot of action.
Our company rep would head to the bid opening location hours before the 2Pm opening. Take possession of the closest pay phone, and then take inventory of all the bidders and anyone else in the bid room. In the office bid (war) room, we would sieve though all the obtained data and predict who was submitting a bid, who was hungry for work, who may low-ball, etc.
At 1:55 via phone, we gave the Office Manager the bid amount.
At 1:59PM the bid was submitted.
At 2:00PM – Bids were in and no more bids accepted.
At 2:00 and 1 second. The Office Manager’s would object if anyone attempted to submit past the deadline.
Then, Bids were opened and read aloud.
After the bid opening the Office Manager would check to see if the low bidder’s submission was filled out properly, make sure the Bid Bond was proper and verify all the Bid items and alternates were filled-in.
Most of the time we weren’t the low bidder. We would only get 10% of the jobs like everyone else.
After we lost, one of our Senior Estimators would pull out our sore loser cartoon sketch and fill in the low bidder’s name and mail it to them. The cartoon was a caricature that showed the other bidders hovering over the low bidder’s submission and laughing at the result. I guess we were hoping the low bidder would get scared enough to walk away or we were just-a-holes, I don’t know.
And that’s how things were until they weren’t.
Then came the change. Out of desperation. (We were losing money) something had to happen.
That change was to just chunk in bids, and get them out fast.
One day we were tackling a large Sewage Treatment job. We estimated in 2 days what normally would take 20. I clearly remember that bid. It was 1979 and people smoked everywhere. Lit cigarettes burned away in dirty ashtrays. Coffee was only coffee, and lunch was not a salad. At 7PM the night before the bid, the company took everyone out for a fancy dinner. It was almost like a party and for some of the senior guys, it turned out to be a liquid dinner. It was real life “Mad Men”.
On the morning of bid day we had rough figures of about $15MM. To this we would normally add 10% profit to be at $16.5MM. But, on this day the CEO added a whopping $8 Million in profit. Our new bid price was $23MM.
What the heck, his guess was as good as anyone’s. Who knew the right price?
Well, the time came and - Our bid submission turned out to be the Winning bid.
Now, we really had a problem. What was the right price? We scurried, the next few weeks to put the estimate together correctly. It turned out ok, but not enough to save the company from all it's other losing projects.
I left the company 6 months later. But followed their slow demise. In a business where most large GC’s opted for a fee contract, submitting hard bids with the hope of getting change orders was a difficult business plan to pull off.
Chucking in bids is still a practice, and probably always will be.
So, take note and carefully review how your contractors are preparing their bids, because cutting corners is part of our human nature.
Kenneth Hecht
Construction and Surety Consultant
When I was fresh out of college I took a job as a construction estimator, and I learned after 6 months that my new company, was implementing a new way of trying to get ahead. One they would never tell the Bonding Company.
But in the Beginning,
We were submitting bids the way I had learned. Scoping, quantity take –offs and pricing. We organized the estimate by trade and utilized the Construction Specifications Institutes outline. We also were always on the look-out for design errors. The company did mostly Government work and their mandate was any changes, mistakes, or delays – was an extra cost to the contract.
We always seemed to be putting together 25 million dollar estimates. It would take 6 estimators and two assistances 3-4 weeks to prepare. The routine was standard.
On BID DAY there was a lot of action.
Our company rep would head to the bid opening location hours before the 2Pm opening. Take possession of the closest pay phone, and then take inventory of all the bidders and anyone else in the bid room. In the office bid (war) room, we would sieve though all the obtained data and predict who was submitting a bid, who was hungry for work, who may low-ball, etc.
At 1:55 via phone, we gave the Office Manager the bid amount.
At 1:59PM the bid was submitted.
At 2:00PM – Bids were in and no more bids accepted.
At 2:00 and 1 second. The Office Manager’s would object if anyone attempted to submit past the deadline.
Then, Bids were opened and read aloud.
After the bid opening the Office Manager would check to see if the low bidder’s submission was filled out properly, make sure the Bid Bond was proper and verify all the Bid items and alternates were filled-in.
Most of the time we weren’t the low bidder. We would only get 10% of the jobs like everyone else.
After we lost, one of our Senior Estimators would pull out our sore loser cartoon sketch and fill in the low bidder’s name and mail it to them. The cartoon was a caricature that showed the other bidders hovering over the low bidder’s submission and laughing at the result. I guess we were hoping the low bidder would get scared enough to walk away or we were just-a-holes, I don’t know.
And that’s how things were until they weren’t.
Then came the change. Out of desperation. (We were losing money) something had to happen.
That change was to just chunk in bids, and get them out fast.
One day we were tackling a large Sewage Treatment job. We estimated in 2 days what normally would take 20. I clearly remember that bid. It was 1979 and people smoked everywhere. Lit cigarettes burned away in dirty ashtrays. Coffee was only coffee, and lunch was not a salad. At 7PM the night before the bid, the company took everyone out for a fancy dinner. It was almost like a party and for some of the senior guys, it turned out to be a liquid dinner. It was real life “Mad Men”.
On the morning of bid day we had rough figures of about $15MM. To this we would normally add 10% profit to be at $16.5MM. But, on this day the CEO added a whopping $8 Million in profit. Our new bid price was $23MM.
What the heck, his guess was as good as anyone’s. Who knew the right price?
Well, the time came and - Our bid submission turned out to be the Winning bid.
Now, we really had a problem. What was the right price? We scurried, the next few weeks to put the estimate together correctly. It turned out ok, but not enough to save the company from all it's other losing projects.
I left the company 6 months later. But followed their slow demise. In a business where most large GC’s opted for a fee contract, submitting hard bids with the hope of getting change orders was a difficult business plan to pull off.
Chucking in bids is still a practice, and probably always will be.
So, take note and carefully review how your contractors are preparing their bids, because cutting corners is part of our human nature.
Kenneth Hecht
Construction and Surety Consultant
