I get a bit uneasy when hearing that a highway contractor submitted a break-even bid and still lost to a competitor. It's a common scenario that raises eyebrows and I've grappled with the same bewilderment at times.
Here's what often goes through our minds:
1. "Those sons of guns are crazy."
2. "They don’t know their costs."
3. "They're fine making no money."
4. Finally, my favorite: "They bid no equipment costs since it's all paid off anyway."
We've all heard these conjectures, and while they might hold a sliver of truth, often, they stem from our tendency to make a fundamental attribution error.
Consider this analogy: You witness someone in a coffee shop with coffee all over their white pressed shirt and think, "How clumsy!" Yet, when your coffee lid betrays you the following day, you blame the lid, not your coordination. It's easy to attribute others' missteps to character flaws while excusing our own as circumstantial.
In highway construction bidding, where a handful of items dictate the majority of costs, there are more analytical ways to understand the bid dynamics:
1. Examine takeoffs critically: Did we get outfoxed on takeoffs? Takeoffs are the lifeblood of unit price work. Every item counts. Shrewd and informed competitors know how to capitalize on their deep knowledge of the plans, specs, and owner when selecting their unit prices to get the upper hand.
2. Follow the 80/20 rule: On most highway bids, 20% of the items make up 80% of the cost. We have the bid tabs. Where do we see the biggest spreads in our extended prices on major items and the competition? How might the competition have seen things differently than us? What risks did we take or not take? How can we apply these learnings moving forward?
3. Consider market dynamics: Could external factors such as mergers or industry slowdowns be influencing bids?
4. Evaluate subcontractor quotes: Have we leveraged the most competitive bids from all qualified and eligible subs? It’s usually easy to tell if they used the same subs as us or not.
An experienced paving executive once reminded me that fortunes fluctuate; we can't always be the winner, nor should we aim to be. Sometimes, the bid you lose is a blessing in disguise. The key to consistent success lies not in emotion but in a rigorous, data-centric approach.
So next time we lose a bid we really wanted to a competitor, before jumping to conclusions about their sanity or business acumen, let’s take a step back and analyze the facts. Who knows what we might uncover?
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