Two years ago, I was sitting next to the Rhine River in Germany reading a book. I had traveled to take an MBA class about startups and fundraising. The original concept for Edgevanta (consultative/exclusive price modeling for DOT bids) was failing. I remember staying up late one night in my hotel room on European time to receive the news via Zoom that our last potential prospect on our short list of early adopters was passing on our offering. In this game, “Not now” means “I don’t see the value”. I knew we had to move to a software solution that could scale to build a business to solve the problem of helping contractors win more work at the right price.
Vibin’ in Koblenz
A friend who wrote code suggested a book called “Scrum: The Art of Doing Twice the Work in Half the Time” by Jeff Sutherland. It’s basically a guide to the Scrum process, an “Agile” framework for managing and completing projects, primarily in software development, but also applicable to other fields. The book outlines how to implement Scrum and why it's an effective approach to project management.
Sutherland describes his work on FBI’s Sentinel project. This was an initiative to develop a digital case management system, replacing the archaic paper-based system. Initially, the project was managed using traditional methods called waterfall (where you build things completely from start to finish with no feedback in between) and was a massive failure, costing over $400 million without producing a working system. Yikes. When the project was on the brink of cancellation, Sutherland and his team were brought in to implement Scrum methodologies. By breaking the project into smaller, manageable parts and using iterative sprints to focus on delivering working software, the team managed to complete the project successfully for an additional $20 million.
That was all I needed to hear. We implemented “agile” when we started building software at Edgevanta a few months later. Agile is an iterative approach that focuses on continuous releases and incorporating customer feedback with every iteration. It is similar to “Lean" manufacturing and construction. We’ve adjusted to make it our own and it now works well for us. It’s the proven methodology at nearly all top software companies.
So, this got me thinking. Software has their agile….. What is the “Agile” of highway construction bidding? What’s the gold standard?
I searched and could not find any best practices. Maybe I missed it. CFMA and FMI have some articles that get close. Software providers position their own solutions. I couldn’t find an accepted standard across the highway construction industry on how to estimate (get the cost right) and bid (get the price right). When I asked contractors, they rapid fire list out all of the things they do at their company. And every one is a special snowflake with their own tribal knowledge, habits, and practices. We’ll attempt to tackle this subject here.
Before we do, some trivia. Did you know what Amazon’s original name was supposed to be? If you go to www.relentless.com, you’ll find the answer.
In honor of that badassery (made that one up), we’re calling this approach “Relentless Bidding”. I take little credit for this as it’s just some things I’ve seen done well. It is based on getting the costs right in the bid, rigorous analysis in profit margin selection, and iteration and improvement over time in estimating and bidding.
What follows is what we believe best in class highway contractors are doing to win more work at the right price. And it is what we advocate folks should consider incorporating into their business. This is all about getting the right data in the right people’s hands to make the right decisions. When that happens, it’s magic 🪄.
Relentless Bidding
Pre Bid
Go/No-Go + Prime/Sub/Both?
There is a simple and efficient “go/no-go”process of determining whether we will bid the job or not and whether we will be prime, sub, or both. Jobs over a certain size may go to a “committee” for approval and assessment. The longer it takes the worse the process is.
We determine quickly who will run point on the job internally (e.g. heavy civil group or asphalt group).
Bid List Management
Bids are added to a centralized repository so team members are aware of current bid statuses, key dates, assigned estimators, etc.
Known Opportunity Pipeline Tracking
For states with a 6 or 12-month DOT letting look ahead, projects we expect to bid are added to a pipeline report and assigned estimated bid dates, completion dates, dollar values, quantities, and hit rates. This is updated monthly.
For non-DOT work, we use online resources and/or contact city/county/private owners and engineers to collect data and intelligence for pipeline reporting.
When we don’t have project data, we use historical data to wag forecasts in.
This all helps us plan our year and know what work is coming and when. More on backlog tracking below.
Getting Costs Right
Bid Assignment
Bids are assigned to an Estimator within hours of “go/no-go” decisions. Work distribution is balanced across the estimating team. Estimators work on different types of bids to increase their versatility.
Checklist
A bid preparation checklist is prepared by the Estimator and reviewed by their Manager. This helps ensure consistency. What makes a great bid? Repeatable process.
Bid Bond
Bond is requested from surety immediately so we are never rushing.
Key Partners and Stakeholders Engagement
We contact potential JV partners, subs, and suppliers to start those conversations early.
Takeoffs
Accurate takeoffs are performed on all items (not just self-perform items) using standardized templates. If we don’t know what the final quantities will be on unit price work, we don’t know our true cost. Over and under runs matter.
Eyes on Work
A job ride through is conducted with photos and notes taken. Google Earth doesn’t count.
Create Bid File
Labor, equipment, trucking, materials, subs, supervision, general conditions, etc are calculated line by line in our estimating software.
Rate increases are factored in. Contingencies are addressed.
Learnings from past similar bids are incorporated into estimate.
Bid Reviews
Job overview documents are sent to review team before meeting. A short Loom-style video telling me what I should know about this project is included. Meetings are crisp and concise.
Depending upon project size, initial review within 1 week of bid, intermediate within 3-5 days of bid, and final review (with sub/supplier quotes preferably) within 1-2 days of bid.
Every item is reviewed with care and expedience.
A productive bid review answers this question quickly: What do I need to know about the scope, quantities, dates, and risks of this bid?
Multiple, iterative bid reviews are scheduled weeks in advance.
People that are involved in the construction are involved in the bid reviews.
Historical costs, WIP gain/fade analysis, and quantity over/under runs are presented on similar jobs we have built recently.
The bid does not have to be done in order to start a review.
Cost is cost and margin is margin. We don’t mix the two. Get the cost right on every bid no matter what, add margin later as appropriate.
Getting Price Right
We have a process for answering these questions:
Project Desirability
What is the sentiment towards the Owner? What is their reputation? Do they pay on time? What are they like to work with?
What are the major risks of this job?
Who on our team will manage this project?
How does job fit our strengths?
What percentage of the job is subcontracted and have we accounted for that in our markups?
What are the average tons per day on this job? What does that tell us about the job desirability?
Internal Backlog Analysis
How does this job line up with our crew and plant backlogs and capacities? How much of the work do we control versus work we are doing as a sub?
Do we need resources from another division of the company to help? Are they available?
What does getting or not getting this job do to our annual plan (revenue, profit, tons) and what we already have booked?
If we cannot finish on time, how many days of liquidated damages must we include?
What other jobs are coming up to bid in this area that may impact our strategy on this job? Play the tape through if so.
Competitive Landscape
Who are we competing against? Are they registered plan holders? How much work do they have going on right now? When does it need to be completed? What is their capacity? Do they ever get full and if so are they full now? Do they like or not like these types of jobs?
Where is the job located relative to our plant and the competition? What is the haul differential?
What is the current market sentiment in this area? What is our long term strategy here and how will our pricing today affect that?
What are we hearing from subcontractors and suppliers about the competitive landscape?
What have we bid on the last few jobs like one and what were our margins compared to the bid results and spreads?
What does historical bid tabulation pricing information tell me about where I can expect the competition and myself to be on total bid price? What do I think my competitors price will be? How accurate have I been on past forecasts against these competitors? What does the data say? What does our gut say?
Picking Markups & Margins
We review pricing strategy and risk on items that we believe are going to over or under run.
We discuss how to handle sub and/or FOB pricing as applicable.
Team members provide their opinions and a final decision is made by the “margin picker” after fact presentation.
Bids Go In
Plugged bids are submitted the day before the bid due date for DOT bids in case of unforeseen issues on bid day.
Build, Learn, and Improve Over Time
Bid Results Retro
Actual bid results and tabs are compared to forecasts immediately.
Team conducts a post bid review “retro” to document learnings, trends, and assumptions. What did we learn? Where were we on/off? This must be done while it’s fresh and can be referenced later.
Bid results and tabulations are saved in a centralized repository.
Backlog Updates
Competitor and company backlogs are updated.
Clean Handoffs
There is a process for project handoffs from Estimators to Project Management teams if we do not run a Build, Build, Collect model with Estimator/Project Managers. A Project Manager is assigned immediately upon award.
Construction and Estimating Cost Collaboration
Estimating team conducts a regularly planned review of active projects including WIP reports, job cost reports, over and under run reports, and interacts with project management to document learnings for future bids. This data is all recorded in a central repository.
No one does all of the above perfectly. But adding just one of these tools to your toolbox every week or month or quarter will add up over time. The key is to just take the first small step and get started with any progress, no matter how small. Thank you for reading.
