Updated: Dec 15, 2022
I was a Project Manager/Estimator for a leading asphalt and heavy civil construction company and subsequently the Area Manager of a 6-silo asphalt plant operation and supporting crews. I am blessed to have been around construction all my life.
One afternoon, I walked out of the office towards my vehicle and my heart sank as I avoided eye contact with our paving crew in the yard. Why? Well, we lacked the backlog for our employees to work the consistent hours they relied on. We missed a large Department of Transportation (DOT) bid earlier that week that we “needed”, or so it seemed at the time. I felt responsible for the bid outcome since I made changes that led to us missing the low bid project. What upset me most was that I had not done better analysis on the bid. Every contractor needs a healthy backlog to survive. Contractors with a low backlog are more likely to make poor decisions, while ones with a strong backlog give themselves the flexibility to act more strategically. Striking the backlog balance is an age-old conundrum in the construction industry.
Missing one job did not sink us, and that defeat motivated our dedicated team to improve our process with the aim of consistently preparing sound bids and performing detailed market analysis before choosing our bid amount. Like prior improvements in safety and equipment maintenance, management bought in with a willingness to learn from mistakes and test hypotheses. What sets the best highway contractors apart from others on bidding work? Are the contractors that acquire more market share and leave less money on the table than others just lucky? My experience on the team taught me that contractors who practice the following 8 fundamentals will consistently achieve their goals more often. We will explore each one individually in this series on acquiring work.
When people are not prepared, the likelihood of cost inaccuracy skyrockets. Multiple iterative bid reviews drive results. Preparation prevails.
2. Understand the contract, specifications, drawings, and owner deeply
Hundreds of pages of documents often require comprehension on each bid. A contractor’s institutional knowledge properly communicated can demystify unwritten owner expectations.
Efficient and accurate takeoffs are time-consuming and crucial components of accurate cost estimation and unit price bidding.
Deploy a system to assess bid versus actual costs, and measure performance on a daily, weekly, and monthly basis. Over a century ago, Peter Kiewit created one of the first cost-monitoring tools to assess weekly performance on jobs. Understanding true cost and accurate Work-In-Process (WIP) are critical in forecasting future costs on similar work, especially given the industry’s labor-constrained and inflationary environment.
5. Creative and candid team debate in bid review process
Great bids are not created in an echo chamber. Ray Dalio, Founder of Bridgewater Associates, talks about radical truth and transparency in his seminal book, Principles. Encouraging team members, especially field management, to participate in the estimating process fosters creativity and ownership. All other things being equal, the bidder with the most creative approach to building the job should win more.
6. Communication with key vendors
Electronic requests for quotation are necessary but insufficient. Calls or meetings with these potential key project partners before the bid date prevents headaches later. Bids have been won or lost by a prime contractor picking up the phone and discussing a job with a potential subcontractor or supplier.
7. Define organizational success
Has what wild success would look like (accountabilities, metrics) in the project acquisition process been defined for the organization? Has the “why” for each item been explained? What is the next simple action step to move each item forward?
8. Know the market through analytics
Bidding is both art and science. Understanding the project type and fit relative to oneself and the competition matters. Markets are cyclical and the list of factors that influence competitor pricing is long. Contractors armed with the right data to make informed decisions who are accountable for the right metrics at the bidding table set themselves apart from their competitors. Artificial intelligence will play a role in the future of estimating and bidding work.
Becoming world-class at estimating and bidding highway jobs is hard work and a journey with no silver bullet. Like compounding interest, incremental progress in just one of these 8 areas can translate to meaningful impact. The next right step is what matters. Anyone involved with preparing a bid knows the intense rush of emotions just before the result release. Wouldn’t it be something to be the best prepared as the bid opening clock strikes?
At Edgevanta, we are developing a technology like the 8 disciplines above that leverages art and science to drive improvement of our customers’ confidence in their project acquisition decisions. We are thrilled to dive deeper into each topic in our series. I welcome your thoughts and comments in the meantime.
Sincerely,
Tristan Wilson
CEO and Founder
Edgevanta, LLC
This is part 1 of a multi-part series on the project acquisition component of the construction cycle for highway contractors.
