[Dale Wiley]

If you do a lot of bid work, be prepared to have your sales tracking numbers take a nose dive. It only takes a couple of lost bids to make your sales percentages plummet to the bottom.

We bid a recent municipal job for tree planting that we have done for the last 3 years. We bid the job with a profit. Another contractor bid it at cost, to "keep his crews busy" and to "pay the overhead". He told me that to my face. The numbers match perfectly.

That was a $ 23,000 bid that went negative to my sales percentage in this young year. Another muni bid went down and will hit the sales numbers with a 4K hit.

This makes all our other more successful quotes and sales look bad. We track them by segment, but it still hits the overall numbers bad.

No more bid work. We will move out of that market and focus on more PROFITABLE design build and negotiated work.

[Stonehenge]

Dale, I'm not sure I understand -

You're ditching commercial/municipal work because you lost a couple bids? Or has there been a longer history of it?

Doesn't seem like you to throw in the towel after two bids so I'm thinking there has to be more to this.

[Dale Wiley]

No, not that at all.....

Our estimating process allows us to generate these bids farily quickly, but there is still expense involved.

Both these bids were for the same agency. We also lost a maintenance contract worth 26K, last year as well. I am tired of competiting with guys that do not know their numbers.

I can focus on our design build, and make 20+% with my new, improved and focused sales process. In public work, the only thing that matters is price.

We still do certain muni / public work. Custom spraying, athletic field renovations, drainage work, athletic field maintenance. This is not bid work, we own some specialized equipment and pretty much name our own price.

With one of our fields being voted best in the district, we have enough of that work to more than make up for the :

" Hurray. hurray....I am the low bid, looking forward to losing my today" mentality that dominates that market.

[cutntrim]

I don't think it's always someone that doesn't know their numbers who is winning those bids. Sometimes it might be a large company that has much less overhead to allocate to the bid, plus more efficient equipment, manpower and systems - that ends up winning the bid. They can just flat-out do the work cheaper, and still make money on it.

[Dale Wiley]

that ends up winning the bid.

I have been doing this a long time and I am convinced that this term is generated from the agency / public leach body that recieves the low bid. They win, by getting the lowest price.

My question is, if the low bidder is so

efficent and knows his costs so well, why are they not totally dominating their markets ?? They should have every piece of avaliable work with a waiting list. This removes them from the market place for at least a week or 2.

The "winning " bidder in this project was a company almost exactly the same size with higher overheads. He is doing 200 and some hours of work at cost, $ 34 per hour. Complete lost opportunity for any return on that investment. I am not in this business to get zero return on my investment.

We are stringing enough work together at $ 40 to $ 42 per hour to keep us going just fine.

Who wins this one ?? I do...!!

I actually won by losing...

[Paul]

I don't know how much public works jobs you do Dale. My company only did public works jobs. Losing bids is just part of doing business, If I won every bid I gave I know I would be losing money. I strove to get about 10% of the bids I did. So doing $1M in sales I bid around $10 to $15M in jobs a year.

Learning to operate cost efficiently is a big part of any job but public work jobs even more so. I can tell you from personal experience many companies make money doing public works job. I wouldn't be where I am without it.

[Dale Wiley]

I have no doubt you did Paul. I also know that you probably structured your company to fit that niche.

I too know of companies that have done very well on public and bid projects. I don't think there are any contracting business's that could effectively compete and succeed in those different market segments at the same time, with the same level of operations, manpower, skills and management.

In our case, the total bid jobs are well under 10% of the total work we do in a year. That's why I am not sweating it, I just don't like what it did (does) to my sales monitoring process.

Going to a referral preliminary meeting tomorrow morning. Probably a $ 50,000 job. Refereed by a supplier who will sell a pile of materials to us on this job. Got pictures of the same type of job we did last year.

Smaller companies are going to have a difficult time in that market segment just because of the scale of economy. You have to have the structure to support those efforts.

It is just not a good fit for us with this particular agency anymore. The company that "won" low bid is similarly equipped, and staffed and sized. It takes X amount of hours to plant trees to spec. There is not enough difference in the time bid to account for the lower bid. He chose to work for very little or no profit, by his own word.

Advantage : Municipal agency.

We have had agencies / public entities cancel bids in late fall, and then go to rebid when " conditions for a better bid are more advantageous", a month later. And somebody is fool enough to drop their pants by 30%.

[scl]

Totally out of my niche, but why would you quit bidding jobs just to make a % of bids won column look good? To me thats kind of like "low score in golf wins, so why play at all?" ! Not trashing or flaming, just wondering what the benefit to not bidding would be? I'm with you about not working for nothing, seems foolish. And thats your competitors problem. But at least when the bank comes in and shuts him down, they'd have you to fall on, maybe!

Scott

[Dale Wiley]

There is a pattern developing here that I don't want to get involved in.

I bid about $ 60,000 in public jobs last year. I did not get any of them.

I did quotes or proposals for about 600K in work and got about $ 278K. Not good, but not terrible.

We additional work that was negotiated with 4 different public agencies because of our performance on a couple of others. This works went out at around $ 50 per hour. That is good...

I can elect not to bid that 60K in public work, because the numbers of the last 24 months support that. Can I make up that 60K in proposals ??

No problem there, but even if I don't, the hours that were sold, were sold at a set net profit, one that we historically cannot make in the public market.

The volume to net ratio does not apply in most of these cases. Our company is simply not structured to work off net margins under 15%, given our size , structure and overall company goals and personal business plan.

[RHayden]

Dale it appears to me you have identified a positive in your company. Why spend time pursuing a segment of the market that does not meet your goals.

Most municipal's are usually bid at around 10% net profit- at least around here. If you need 15% why bother when it appears you have plenty of other segments to concentrate on that will put you at and above your target net.

[Paul]

Dale don't you have bid bonds with these jobs? If a bid is awarded and you have a bond are they not a responsible party and which means they owe you for the bond and what ever other payment is required?

[Dale Wiley]

Not too many of these jobs require bid bonds. The bonding requirements are such in this area, that you need a credit score of about 2000, no construction claims of any kind, and at least 9 years in business.

If they do, your just SOL on the cost of the bond.

We bid a municipal maintenance contract 3 years ago. $ 250,000 a year contract. Called for a 15% bond. It would have cost me almost $ 3,000 for the bond.

6 bidders, 1 rejected, 3 of the five could not bond the job. We were one of those. We already had been working for the agency, had a relationship and posted a $ 500 cash deposit.

We were awarded about 40% of the contract, they returned our $ 500 and we are still working for them today, and just signed another 2 year contract for about $ 90,000 in work. This was not a low bid. It may appear that way, but there are certain things we can do, that allow the agency to procure several services with one company.

[Paydaze7]

see now were doing the opposite were getting outta the residential and some commercial and going to all public/municipal work.. while were not really working for the municipality directly but for a g.c. doing the work. were not making as much as we were doing residential work but our residential profits are shrinking slowly from all the competition... plus i like doing sub work as well, i get the plans for the job sent and submit a price.. theres no creative thinking or designing needed for the job which i love. im tired of spending hours and hours with homeowners about moving the holly tree to the front, to the side to the back and not really making back the money for it... but im sure its different all over the country though..

[Bill Schwab]

I'm looking harder at US military/San Diego Port Authority, very high end residential contracts myself. Though our bread and butter has been Tommy the tractile dude, I get sick of dealing with illegal aliens who A don't belong here, B whore out the market when they bid at what their wages should be let alone paying insurance, and C, dealing with all the hand holding.

I'm not complaining by any means, I just see a brighter future, and one that will take us to the direction I want to go with the bid type work.

[Paul]

There is a different mind set with public work. Your production should be much higher, along with the wages that you pay. Here with a labor rate at over $40 per hour you want your crews to really have great production times along with high quality work.
You have to forget having a crew show up at the shop but need to have them on site at 7 am ready to go to it. I also feel this breeds a better work force they know they are going to make a real living wage not $18k but something like $50K a year.

Thinking like you did doing a homeowner will cost you big time but with the right tools and equipment you can realize some where in the $85 to $120 per hour range. Here if you planed using 7400 hours you should be in the $750K to $1M range.