Winning Work (Part 2)
An alternative to "hard sell" tactics
If a client say's that you were competitive but they can't make up their mind, it's time to get curious about that. Inquiring about your performance in the market is a modest recompense for the effort to deliver them a bid. Rather than "hard-selling" the client, I recommend professional inquiry to figure out what "doors" of lingering concern are open.
What's driving their decision? Narrow it down with helpful options like duration, budget, experience, competence, etc.
Once you have an area of focus, you can reference your proposed answer to their concern. Very valuable feedback is often provided at these junctures. The purpose isn't to argue or cajole the client, it's to determine how your bid compares to your competitors*.
*Note: Bid scope comparison is not to be confused with bid AMOUNT comparison. Sharing, conspiring, or otherwise conveying the monetary amounts that are not read aloud at a public bid reading constitutes bid shopping which is definitely unethical and potentially illegal.
Sometimes a difference in proposals is easily explained. Offering polite and restrained suggestions about what your competitor did differently might help shed new light on your proposal. If your competitor's approach on some issue was superior to yours, you have an opening to admit it. Often we're forced to decide between options relating to scope or schedule. If the client prefers your competitors choice, you might be given an opportunity to revise your proposal because you were reasonable.
Walking the client through their concerns might open an opportunity to address something they hadn't mentioned previously.
Factor this feedback into the new opportunity so you can capitalize on it. Present a revised proposal that's worded with sensitivity to the client's concerns. This communicates a commitment to resolving the clients concerns. With all their concerns met, you can then follow-up and simply ask for the job.
I hear a lot of folks shy away from sales because they don't want to pressure people into a decision. If sales was strictly about approaching people at random, they'd have a point. In the context of a bid, the client extended a Request For Proposal or an Invitation to bid through their Architect. Their proposition, greatly simplified is; be the best bidder and you'll be awarded the job. It's therefore expected that the client will award the job to the best bidder. Clients may be overwhelmed by the amount of information to compare. They're rarely trained estimators who are used to scoping proposals in terms of potential risk and profit.
The situation demands leadership. Staying on the sidelines because you're too polite to provide follow-up means you'll be awarded fewer jobs than you won. Trust is a powerful thing. A knowledgeable and seasoned professional can assuage anxiety and establish trust with a client. Clients sometimes award their project to a higher cost bidder, this is how and why that happens.
You won't always be the low bidder. In some ways that's as much an asset as a liability. I've heard it put succinctly like this : It doesn't matter whether you win everything you bid or lose everything you bid, you'll be out of business eventually.
Knowing that some folks take longer to learn than others, it stands to reason that eventually you'll be bidding against someone who hasn't figured out why they're on such a winning streak. Your bid should ALWAYS be representative of your best effort to profitably win the job. Let nature take its course with reckless bidders. Let the buyer beware.
Clients that indulge in "comparison shopping" by crowding the line or stepping over into bid-shopping are doing so to gain a better deal for them. Many business owners view this as an opportunity to "trim some profit" to land a contract. In doing so, they invariably look toward gouging on change orders to recoup their "investment".
It really doesn't take much life experience to see how this ends up. The client is reluctant to hire that GC again because they were so aggressive with change orders. The GC's potentially recovering from an unprofitable job and a scarred reputation with the client. Often they're looking to "make it up on the next one".
The legitimate low bidder might well have built the job for less simply because their bid included sufficient funding to keep their operation running smoothly without needing to gouge on change orders.
It's a chain reaction of dishonest actors trying to out-fox one another to the detriment of all. Life becomes parody when such a client calls you to say they need your help because they don't want to hire their low bidder. If they didn't want to contract with that GC, they could have excluded them from the bid. The client started the problem by cheating the last time, now they're doing it again. Dishonesty calls everything into question. The client's premise is based on dishonesty, so it's reasonable to suspect the story is false.
In fact the only thing you know for sure, is that the client is willing to be dishonest wherever it benefits them. Diseases like Yellow Fever, Typhoid, and... Greed, need to be quarantined before they spread to others.
Setting a precedent
The answer is to hold the line on your price. If you did everything properly, your proposal is as close to market-leader as you could make it. Bids are a lot cheaper when you've missed something important, like paying your overhead. That doesn't make them market value. If the client was bluffing and your proposal was already the lowest legitimate bidder, they may award to you anyway. You can't cheat an honest person. Setting this precedent with the client at the outset reduces trouble down the road.
Reinforce the precedent
Entering into a contract with a dishonest client doesn't improve their character. It merely binds you to a client who will cheat you every chance they get. The most common tactic is to demand changes to the scope right now because they're in a hurry, verbally (off the record) promising to sign your change order. Once the extra work is done, they're suddenly interested in disputing the change order price. Again the solution is to hold the line*. Extra work requires contract modification, full-stop. Be friendly, be motivated, be firm. You'll be amazed at how fast they can get a change order processed when they really need to.
*Note: there are RARE times where extra work must happen without a change order first. For example if the building is flooding, you must shut off the water main THEN ask to be paid for your trouble.
Dishonesty is a form of laziness, cheaters quickly tire of losing arguments with honest professionals.
Another thing to consider; additional work takes time. In the eyes of a contract, if you were late because you were busy with not in contract work, it's your fault even if the client benefits from your extra work. Simply put, if freebie extras make you late, they'll punish you all the same. Little things add up quickly, especially when the client's getting them for free.
Negotiations are rarely simple
When negotiating, remember that completed work doesn't get cheaper after the fact. Discounting, bargaining, and horse-trading are all better done BEFORE resources have been consumed.
Value reflects the balance of perceived asset and liability to a given party. If the client already has the asset, all you have is the liability. This means the client has leverage in negotiating the value because you aren't even breaking even (earning back your liability) if they refused to pay altogether.
The whole reason that market value persists is because it's beneficial to both parties. Looking at negotiations requires a willingness to be macro and micro in your perspective. Doing some portion of the scope at a loss is a micro perspective, doing the whole job at a profit is a macro perspective. Micro relates to Macro, because herd of little parts done for free can push the profit out of the whole job . Understanding what the client values provides a basis to work from. As silly as it sounds, a lot of clients get hung up on the value of something small. They may want a "victory" to report back to their superiors. Keep a rolling total in your mind of where things are headed. It might make sense to do something at cost to move on from a minor issue.
Some clients mistakenly believe that breakout pricing is how they'll succeed in lowering prices. This transparent effort to demand the means to bludgeon contractors isn't successful because it's unfair. They can't expect competitive bidders to reveal how they arrived at their price. Contractors proved they were market value by competitively bidding. Now they'll prove their savvy by providing breakouts intended to diminish the appearance of profit. It's simply a story that amounts to their total, that gives the client what they asked for without giving them anything worth taking away.
Clients should be encouraged hold up their end of the deal and work with, rather than against, the winning bidder. In a typical hard-bid, the final budget is the market-price of the project. There's more than just labor and material going into that market price. Project risk from schedule, site logistics, seasonal workloads, worker shortages, design shortfalls, working conditions, labor disputes, insurance and bonding requirements, etc. The client may not realize that their project would be much cheaper at a different time of year, or that their project requires specialty products that are in short supply.
Very often GC's will try to accommodate budget over-runs with Value Engineering which sadly translates to "substitute cheaper materials and cut scope". From the client's perspective, this is an extremely frustrating solution. They've paid to develop the design of their project vision. Along the way they've become attached to the look and feel of the design. Amputation and substitution are hardly welcome solutions to their budget problems. Presenting options to change things like; timing, site logistics, bonding requirements and design shortfalls could potentially solve their budget problem without affecting their vision of the project.
At a minimum, providing a sense of how these issues have calculable monetary impact on their project shows that you're not taking advantage of them.
In my experience most GC's resort to metaphorical hand-waving when it comes to costs outside of material and labor. Get solid on what's going into your total and you'll have a distinct advantage making your case to a client. There is no substitute for knowing what you're talking about. When clients understand the risk their project presents to a GC, they regard bids with greater circumspection.
The best jobs for clients and contractors are those where everybody wins. Winning bids profitably demands that you stay committed to being the best in your field. Get in there and make your victory count. Because losing what you've won is being the best, undone.
Thanks Anton for your valuable insight into construction estimating
© Anton Takken 2015 all rights reserved
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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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