What’s Your Bid/No Bid Strategy?

by marika_gabriel | 19 October 2023 10:00 am

[1]Many construction companies do not really have a clear estimating and bidding strategy defining the type of projects they want to win, pursue, or propose on. In fact, the most common sales and marketing strategy contractors use is “hope.” If this is your sales strategy, you are basing your entire business on the hope that customers will call and offer you the chance to bid and then be awarded contracts if you have the lowest price.

To proactively win the amount of work at the right margins you want on a regular basis, you must be in control of your own destiny and manage your future. This includes creating a list of target customers you want to do business with, outlining the project types you want to work on, identifying the market location you will do business in, determining the job sizes you compete and perform well in, and identifying the niches where you have the highest potential to make the most money.

What is your estimating and bidding strategy?

The goal of your estimating and bidding strategy is to win the right kind of work at the highest Bid-Hit-Win rate and margins possible. It is also to develop loyal customers who will continue to hire your company on an ongoing regular basis. By being selective and making strategic decisions about which jobs to bid will increase your top and bottom lines. When I was growing my construction business, our company’s estimating and bidding strategy was to negotiate most of our work with loyal customers versus winning contracts by bidding against any number of bidders the customer asked, and then trying to provide the lowest price to secure the contract. Our strategy was to become the recognized expert in specific project types and diligently build trusted relationships with loyal customers who had ongoing needs to hire contractors. Our focus was to provide extra services and an open-book approach that would convince customers to negotiate exclusively with our company to build their projects based on our service and trust.

Develop a “Bid-Grid-Sieve”

To accomplish your goals, work hard with a concentrated effort to develop specific criteria to implement your sales and marketing strategy. Use a step-by-step approach to target the right customers who will give your company the most work at the highest margins and negotiate contracts with you. To clearly determine which projects and customers to go after, develop a “Bid-Grid-Sieve” to filter all the opportunities into the few you want to pursue and land.

Does your company have a customer contract or marketing strategy? What type of construction business do you want to go after? How do you want to win work, and what is your strategy to win that work?

1. Negotiate contracts with repeat or loyal customers.
2. Be the only company to bid on jobs.
3. Be able to get the last look or opportunity to be awarded the job.
4. Go after projects that have potential to develop ongoing loyal customers.
5. Chase projects that have the potential to develop repeat customers who bid out their work to many bidders.
6. Seek opportunities to propose on jobs when odds of winning are greater than 50 percent, 33 percent, 25 percent, 20 percent, or less.
7. Bid only on jobs with two or more bidders.
8. Bid only on jobs against competitors who you determine are qualified and professional, and who operate in the same market and price range as your company.
9. Bid on any job to whoever calls against any number of competitors.
10. Bid to customers who shop your bids, do not pay quickly, are frustrating to work with, and cut down or refuse your change order requests.

One key is to consider the potential to be awarded a contract with this customer.

• Have we done business with this customer?
• Do we have a high Bid-Hit-Win ratio
  with them?
• Do they have repeat or loyal customer potential?
• Are they willing to negotiate future work?
• Is there a high profit margin potential?
• Are there value-engineering opportunities to enhance our bottom line?
• Are we perceived as the best choice to build and handle this type and size of project?
• Will the customer meet with us to review our proposal?

How to develop a winning estimating and bidding strategy

1. Determine the project types and work you can specialize in to become the recognized expert and leader in your marketplace. This can include special pre-qualifications, technical expertise, or other factors that will reduce the number of competitors. Examples of these specific project types include difficult and tough jobs; high-end projects like medical facilities, power plants, high-end custom residences, laboratories, certain military operations, or highly technical facilities; fast-track projects; or weekend and night work.
2. Determine the potential customers within the project type who will likely negotiate with your company versus seeking numerous bidders and award projects based on low price. Also consider customers who have high qualification requirements, are very particular about whom they do business with, and are hard to penetrate or get meetings with. These include customers who need your value-added services and whom you can build long-term trusted relationships with. These customer types are companies that need full-service design, engineering, and ongoing construction services; major national corporations that are continually upgrading and expanding; customers who demand high qualifications like intense safety programs, drug testing, or technical qualifications; and those with a high barrier to entry.
3. Decide on the exact criteria and specifics required to determine if you will bid or pursue projects and customers, including job size, profit potential, number of bidders, competition, location, contract type, customer characteristics, potential to win the contract, potential to develop a long-time loyal customer relationship, and if the effort is worth the time and energy. Developing a Bid-Grid-Sieve clearly defining the projects and customers you want to go after will allow you to focus your efforts on winning better work at higher margins. When there are no or limited qualifications or requirements to get on bid lists, there tends to be too many bidders. Too many unqualified bidders decrease the odds of winning work and making money.

What are your customer and contract goals?

To be successful, you need to strive for 25 percent new customers every year and 75 percent repeat or loyal customers. A winning strategy is to convert first-time into repeat and then into loyal customers who use only your company to build their projects. And your biggest goal is to negotiate 25 to 50 percent of all your contracts. What are your customer and contract goals? Are they written? Do you track them? Improving your estimating and bidding strategy now takes implementation. Any plan is better than a perfect plan never implemented!

1. Attack your customer target list.
2. Stay in touch with customer targets and spend relationship-building time with them.
3. Convert new and one-time customers into repeat customers.
4. Continue to build customer relationships.
5. Convert repeat customers into loyal customers who use you only to build their projects.
6. Negotiate projects with repeat and loyal customers.
7. Continue to meet with customers. Take them to lunch and get to know them as friends.
8. Watch your bottom line improve while bidding less work.

As you consider seeking to negotiate more construction contracts, there are several factors to consider. The first is to decide what your potential construction customers want. Today, every construction customer wants and expects you to meet a fast schedule, provide quality craftsmanship, and be very competitive. These project requirements are the minimum required to just get on their bid lists. So, to convert a repeat customer into a negotiated loyal customer, you must provide more than what is expected. Customers who are willing to negotiate a contract, want more than the minimum construction services provided by most contractors and subcontractors. So, if you want to negotiate more contracts, here are the real questions to consider:

1. What else do you offer that your customer will value enough to earn trust to negotiate a construction contract?
2. Why should a developer or general contractor negotiate a contract or subcontract with your company?

Negotiating a contract is a privilege

If you do not provide additional details, should customers not request you to submit a bid for the project? With a negotiated contract or subcontract, the customer has awarded the project based on getting full attention from the contractor, extra services they have committed to perform, and a goal to help make the project a success. This trust and contractual format bind the parties together with a common mission. This overcomes the low bid mentality and gets everyone working as a team.

George Hedley, CPBC, is a certified professional construction BIZCOACH and top industry speaker. To get his free e-newsletter, start a personalized coaching program, attend his webinars and workshops, or get a discount at hardhatbizschool.com[2] online university for contractors, visit hardhatbizcoach.com[3], watch videos on YouTube, or email gh@hardhatbizcoach.com.

Source URL: https://www.metalconstructionnews.com/articles/columns/whats-your-bid-no-bid-strategy/

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