I worked for a construction company where the owner insisted that the estimating team priced every project that was available. Some of these projects were far (a thousand kilometres or more) from our other projects, while others were in a field we didn’t have experience with. Needless to say our estimators were run off their feet and worked long hours to price all the projects. (Now don’t get me wrong, we all sometimes price projects far from our home base or tackle projects slightly out of our normal field of expertise, but when you aren’t doing the projects close to home well, and you have other more suitable projects to price, should we be taking on additional risks and overloading our estimating team?)
Another company I worked for elevated the office runner to estimator. He had never even visited a construction project!
Yet I have also worked with fantastic well organised estimating teams and we won numerous projects due to our competitive pricing, our knowledge of the market and our competitors, the quality of our bid submission and our relationships with the customer – more importantly these projects were profitable.
I certainly wouldn’t like to be an estimator. Preparing and submitting tenders/prices/quotations day after day with little reward. A large multi-national construction company I worked for had an excellent estimating department and we were frequently complimented on the quality of the bids we submitted. Yet even with this expertise we only won around 10% of the projects we priced. We checked this over the years and our success rate was always around 10%, whether measured by the value of the work, or the number of projects, we won.
But estimators don’t just have to deal with this low success rate they invariably get blamed for losses and mistakes with their price on the projects the company wins. Listening to most construction managers it would seem the price on their projects is always riddled with errors – all costing the job of course! Seldom do construction managers compliment the estimator for their good work or for a well-crafted bid. You never hear of the positive errors in the price – errors that actually mean that the project will make more money than expected. A profitable construction project always seems to be only because of the construction team.
But are estimators solely to blame for the low success rate and are all the errors in the price only due to the estimator?
Who is responsible for the success of tenders, bids and quotations?
Management role in winning projects
Management plays a key role in winning work by:
Many project managers perceive their role to be only about getting a project finished on time while maximising profits. But project managers can play an important role in winning new work (or losing work). But their role is more than this and includes:
What happens after you’ve submitted your price could win, or lose, the project?
Submitting the lowest price doesn’t automatically ensure that you are going to win the work. Customers often look at more than just the price. Savvy customers check that their contractors have the ability, experience and the resources to deliver their project to the required quality, without incident, with the least problems and on time. Contractors need to ensure that their price submission can satisfy all these requirements, convincing the customer that their price is the best (even though not necessarily the cheapest).
After examining the various prices customers often ask bidders questions to clarify and confirm the contractor’s price. Sometimes these questions are designed to get the contractor to reduce their price, but frequently they are just to confirm details and allay fears, ensuring that each contractor has priced the same products. It’s important these questions are dealt with promptly. Management may have to provide additional support to the estimating team and should certainly be consulted when the customer is looking for a discount or when the customer is materially changing the conditions or scope of the project.
Many customers summon bidders to clarification meetings to further discuss the contractor’s price. It pays for contractors to be prepared for these meetings. As managing director of a construction division I always attended these meetings with the estimator. In many cases we took our proposed construction project manager and, in some cases, other key members of the team. If we knew that the customer placed extra emphasis on safety, scheduling or quality we would ensure that we included the relevant experts in our negotiating team. Indeed, I know when leading our team on many occasions we persuaded the customer we were the best contractor for the project. Unfortunately, I’ve no doubt that on some occasions I blew the negotiations and we walked away empty handed. But, being at those meetings gave us an opportunity to sell our company, and we could better understand any doubts and concerns the customer had with using us, enabling us to present a case as to why these doubts and concerns were unfounded.
We depend on our estimators to bring in a constant stream of profitable new projects. They are the engine room of every construction company and the rest of the company depends on them. But the estimating team cannot win projects alone, without help. They need the support of management and the project teams. It is a team effort to find new projects to price, then to submit a winning bid and finally negotiate a successful project award.
In your company who is responsible for securing new projects?
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This article was first published in estimators playbook and written by Paul Netscher
Paul Netscher is the author of the popular books 'Successful Construction Project Management: The Practical Guide' and 'Building a Successful Construction Company: The Practical Guide'.'Construction Claims: A Short Guide for Contractors' has just been published. These books are available on Amazon and other online book stores. Paul publishes articles regularly on LinkedIn and his website.
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Paul writes regular articles for other websites, gives lectures, mentors, and is available for podcasts and interviews.
© 2016 This article is not to be reproduced for commercial purposes without written permission from the author.
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The opinions expressed in the attached articles are those of the writer. It should be noted that projects are varied and different laws and restrictions apply which depend on the location of the contractor and the project. It's important that the reader uses the supplied information taking cognisance of their particular circumstances. The writer assumes no responsibility or liability for any loss of any kind arising from the reader using the information or advice contained herein.
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