t was the summer of 2020. I was division manager responsible for a 400k ton per year operation and crews. Our team had found their stride. We were doing good work and making money.
A 50,000 ton DOT project worth came up to bid. It was a clean $5 million, 3.5” mill and overlay 8 miles from the plant. Our strongest estimator worked on the bid and we had it dialed in. 2100 tons/shift on mainline. We knew what items would under run and made the proper adjustments. We had a sound estimate.
In our analysis, we saw it was close to our main competition’s plant and knew they liked these simple jobs. They were our toughest competitor and they knew how to bid and move money around. We did our standard bid tab analysis to try and guess their bid amount before we picked the profit. We also thought they were “busy” at the time. This was mostly gut and anecdotal. We didn’t think they could get to the job. So, I made the decision to add 3% extra profit to our bid. If we got the job at that profit, we’d be set through Q2 of next year. I thought there was no way we’d be beat.
The next day, I was standing outside at 10:00:30 pressing refresh on my phone. Heart pumping. Waiting on BidX info to pop up. Then I saw the bid results…..
Competitor was low bid. We were second. Then I saw the numbers. You won’t believe it. They beat us by $7,000 on $5 million.
Man, it burned. My heart sank. I’d love to tell you that I humbly learned my lesson but I was mad. I felt like a fool walking into the office and saying “oh well” to our team when they knew I was the one who added that money last minute to our bid.
It took me days to stop thinking about it. In retrospect, our competitor had outfoxed us and I didn’t use data to make my decision. Sure, they were “busy” at the time, but they saw that the state allowed 12 months to build a job that could be done in 3 months. So our competitor let the job sit for 8 months while they caught up on all their other work and then came in full force to build it on time. Hindsight is 20/20, I get it. But had I known that, I would have stayed firm on the original margin.
We knew 80% of jobs they had on their backlog since we bid nearly every job against them. We knew how many crews they had. Why didn’t we take the time to factor backlog or capacity into our analysis? Time. It takes time to collect all this data and it’s constantly evolving as jobs get built and new work gets acquired. Valuable data but we didn’t have the tools to gather it quickly.
Note how well I remember losing this specific bid (down to what I was wearing that day) but I can barely remember the details from all the ones we were low on where I left 10%, 15%, or even 25% on the table. This is loss aversion bias at its finest, where the pain of losing is far more powerful than the pleasure of gain. If I am not aware of this, this bid will follow me around forever and cloud my decision making because I will only want to cut margin. Sound familiar?
With the right costs in our bid, we have 1 lever to pull on bid day and that’s margin. Think about what impacts margin for you. Close to the top is likely current backlog and job desirability. Your competition goes through this same process. Understanding what data they’re using to make their decision helps you understand where they’re coming from. Empathy leads to you winning more work and making more money.
Algorithms won’t pick your profit yet. But getting the right data in the right people’s hands at the right time creates a competitive advantage.
