Winning construction projects is difficult. Winning new construction projects at the right price is harder.
Construction companies regularly go from times of too much work to times when work is scarce. Unfortunately, the times when work is scarce are often far longer than the good times. Then, when work is won, it’s sometimes at the wrong price.
Finding construction projects to price, then pricing them correctly is the most important job for construction companies. Yet, many companies don’t place sufficient importance on this task. Often projects are priced in a rush, or it’s left to a junior estimator. Some contractors price everything and anything, with little thought to the best construction methods to undertake the project, or indeed the best methods to win the project.
Winning a new construction project is sometimes pure luck, or because the estimator made a mistake.
"Pricing and winning a project starts long before the estimator begins pricing the project and it often ends after the price is submitted"
Pricing a construction project correctly, and then winning it is a skill and an art, and it’s definitely a team effort and should never be left entirely to the estimator. Indeed pricing and winning a project starts long before the estimator begins pricing the project and it often ends after the price is submitted
How to win new construction projects at the right price.
1. Good construction market intelligence.
It’s vital to understand what new construction projects are coming up in the near future. Where are your competitors working? You don’t want to be winning a risky project at a low-profit-margin when better projects could be just around the corner. But good market intelligence also means that you can be talking to the client before the construction project is offered to other contractors to price.
You can make sure that you will be invited to price the project. You can even start some preliminary work. In one case I managed to persuade the client to negotiate a major construction project only with us, rather than them asking us plus other contractors to price the project - so I managed to exclude other contractors from competing.
2. Build a good reputation.
You’re not going to win projects if you have a poor reputation. Reputation is based on delivering quality work, safely, on time and with minimal fuss.
Some clients will pay a premium to employ a contractor that they have confidence will deliver their construction project successfully.
3. Build relationships.
Build relationships with your clients. Repeat business is often the best business. Some of our clients awarded projects to our company on the condition that we allocated construction teams to the project that they had previously worked with.
Most of our construction projects were for clients we had previously worked with. Having a good relationship with a client may also mean that they recommend your construction company to others.
4. Pick the right construction projects to price.
Don’t drown your estimators with projects that you can’t win, or projects that have high risks and low rewards. Pick the construction projects that will be good, then put every effort into winning those projects. Should contractors price every project?
5. Understand your competitors.
Who are your competitors? Are they desperate for work? Is this the type of construction project they like pricing? Are they working in the area? Do they have a good relationship with the client? Will they be competitive? Do they usually beat you?
Indeed sometimes it may not be worth pricing a construction project if the opposition has a good working relationship with the client, or they have a competitive advantage. Don’t waste your time pricing a project you’re probably can’t win. Spend time pricing construction projects you have a reasonable chance of winning. How much profit?
6. Understand your client.
Do you know what’s important to the client? If they are very safety focused, then make sure that safety is highlighted in your price submission. Show them that safety is important to your company and demonstrate how you will build their project safely.
Of course, part of understanding the client is to know that they have money for the project and they don’t have a reputation of withholding payments from contractors or engaging in legal disputes – you certainly don’t want to win a construction project where you might not be paid for your work! In construction it’s important to know your clients. It could save you.
7. Understand the construction project.
This is obvious, yet some contractors don’t always understand the project scope or risks. What are the risks? Can you complete the project in the allotted time? Visit the project site. Read through all the pricing and project documents. Asking questions in the bidding process
8. Be Strategic.
Is there an alternative construction method? How can you make your price cheaper, but not lose money? What will make the client select your construction company over others? How can you win the project at the right price?
We won some construction projects by submitting alternatives solutions to the client – the client got a cheaper price, we won the project and we made a bundle of money.
"Show that you should be the contractor of choice, even if your price isn’t the cheapest."
9. Get your price right.
Prepare a construction schedule (programme). Adjudicate suppliers’ and subcontractors’ quotes carefully. Ensure you have allowed for all your obligations. The construction project tender or bid schedule
Check arithmetic – you wouldn’t be the first contractor to make a silly calculation error, or forget to price an item. Where do estimators get their prices?
10. Put together a winning price submission.
Your price submission must include everything that the client requested. Missing a requirement or document could lead to you being disqualified.
The price is more than a price, it’s a chance to advertise your construction company and to demonstrate that your company has the resources and capabilities to build the project. Show that you should be the contractor of choice, even if your price isn’t the cheapest.
11. Give a winning bid presentation.
If you’re lucky enough to be one of the lowest bidders and the client likes your price submission they’ll probably call you to a meeting, or ask you to give a presentation. Like a fisherman the fish has taken the bait, now you have to pull the fish in without it escaping. Don’t lose the project now. Construction project bid negotiations – Don’t make a mistake
Ask for an agenda for the meeting so you can be prepared. Ensure that everyone in your team understands the project and your price submission. Unfortunately, some senior managers go to these meetings ill-prepared, some even give away money in the course of the meeting just to secure the construction project, while others display a lack of understanding of the project and what’s important to the client.
Ensure that you have all of the pricing documentation with you and that it’s filed where information can quickly be retrieved to answer questions. This presentation is your opportunity to demonstrate that your company understands the construction project, that you know what’s important to the client, that your company has the resources to deliver the project and that you will construct a great project with minimal fuss to the client. You have to sell your construction company as being the best for the project – but don’t do this by bad-mouthing the other contractors, rather by demonstrating your performance on previous similar construction projects and your understanding of this project.
It’s often useful to take some of your proposed construction team to these meetings so the client can meet the people they could be working with. Start building the relationships now.
12. Don’t be bullied into the wrong price or an impossible construction schedule.
You’ve almost landed the project. You can almost smell success. But, at this late stage the client is often looking for concessions – possibly in the form of a discount, removing a condition in your price, or squeezing you to finish the project earlier. Managers unfamiliar with the project and how the construction schedule and price has been developed may be quick to concede these points – they can say they won the project for the company. But at what cost? No matter how desperate the company is to win the project, care must always be taken to ensure that the project is won at the right price, and that the company is capable of completing the project in the agreed time. I’m not saying you shouldn’t make concessions, but these must be reasonable and attainable. If the client’s requests are unreasonable explain to them why your company can’t accede to them, or offer alternative solutions – maybe you can offer a discount for earlier payment or if smaller retainage is withheld.
It often takes more than price to win a construction project
It often takes more than price alone to win a construction project. But anyway, do you really want to win a project just because your price is the lowest? It’s critical to build a good reputation, to develop relationships, to understand the market and the opposition, price the project correctly, then sell your company to the client. Convince them that you are the best contractor for their project.
Can you improve your company’s chances of winning projects
This article was first published on the ClockShark website.
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