The Game Of Bidding: Commercial Bid Work

CHOOSE YOUR GAME. Prequalification is a major component in bid success. Because many buyers are known for taking the lowest bid, regardless of a contractor’s capabilities or reputation for timely work, choosy contractors try to avoid dead-end bids.

"Bidding works for us when we selectively qualify which projects we bid," said Kurt Kluznik, president, Yardmaster, Painesville, Ohio. "Not making a sale to those buyers who don’t meet our client niche is just as rewarding as making a good sale."

Out of every 50 bid prospects that arrive at Smallwood Design Group’s door, Griggs said he might actually bid on only three or four projects. "We stay away from those builders we know aren’t looking for quality work," he said, pointing out the difference between a value-oriented mass merchandiser that doesn’t expect or require quality on the job vs. a high-end hotel that wants to maintain its image and reputation with impressive, bold, long-lasting plant material.

Selective prequalification also matters at for Hillenmeyer Nurseries, even though competitive bid work only makes up about 10 percent of its work. "Our overhead structure is such that we need to charge a certain amount," St. John commented. "So when price dictates who’s going to get the job, we’re pretty selective on what we bid.

"We’re on a few local general contractors’ and several private landscape architects’ selected bid lists," St. John continued. "Typically, we get one out of every five jobs that we bid. But when we’re on these lists, we get one out of every three because we’re competing against a limited group of contractors who are more like us and charge prices like we do. Plus, our reputation is what put us on this list, so that’s automatically taken into consideration. These people already know us."

A project’s potential need for maintenance pushes The Davey Tree Expert Co.’s staff to bid on it, according to Dan Joy, national operations manager for the commercial grounds management division. "We look at whether or not this client would fit into our typical maintenance client niche, such as office parks or high-end retail areas," Joy explained. "If the project doesn’t fit, then we won’t bid on it."

The client-contractor relationship also can make or break the bid decision. Architects or developers that need three or more bids will ask contractors they know to bid on the work even though the job may not suit them. "There are many jobs we bid out of courtesy to certain architects or developers," Griggs said. "We do this as a way of keeping up these relationships. We win 20 percent of the jobs we bid, but our success rate is closer to 40 percent if we take these favor bids out."

Having a competitive advantage is the final, yet critical, factor. To bid a job and win, contractors must have "an angle of opportunity," or a special service or selection that few other bidding contractors possess. For instance, a contractor who can source plant materials that aren’t readily available to others has this upper hand.

Griggs looks for a project niche, such as luxury, high-rise condominiums, in which Smallwood has a quality reputation, or he looks at the project’s complexity, such as the need for certain tasks that take more skill and not all contractors can handle.

Smallwood Design Group’s price is typically 10 to 20 percent higher and can be up to 50 percent higher than the lowest bid, Griggs said, explaining why bargaining leverage is crucial. "With our higher prices, some people won’t choose us no matter what our relationship is like," he said.

As a benefit to the client, Griggs will offer "value engineering options," where he provides similar, but less expensive, plant material or suggests alternate plant spacing to save the client money. "We can offer them significant cost-saving options and this shows them that we’re working with them," he said.

Timing also can work to a contractor’s advantage. "At certain times of the year, a buyer may have difficulty obtaining competitive quotes, may be under the gun to hire a contractor or may be tired of dealing with the troubles that accompany nearly every unrealistic bid," Kluznik said, pointing out that these moments can provide a natural, competitive edge.

PASS GO, COLLECT PROFIT. Winning a job isn’t nearly as difficult as properly bidding it. Developing a proposal that covers all the bases and provides room for profit, while being competitive, can be tricky. Too often, contractors bid low and then realize they didn’t cover their job costs.

Joy first develops a materials list when he receives job specifications. "This list must be as accurate as possible because for every piece of material used on the job there is a labor cost associated with it," Joy advised.

Also, special site conditions, permits, telephones, portable toilets, site access problems and travel are commonly overlooked costs, Griggs pointed out.

A rushed schedule usually accompanies and further aggravates the bidding process. Many times contractors only have one week to 10 days to develop and submit an accurate and profitable proposal, Joy said.

To appropriately bid a job with this hurried agenda, Davey Tree handles the bid process with a team approach. "We break down the shopping list of materials and assign numerous people to tackle different tasks," Joy explained. "Then a few days before the bid is due, we bring all the information together."

The key to effective bidding for Pieter Rossi, president, BP Landscapes, Grass Valley, Calif., is a bid checklist (see above). "This way, we’re not trying to remember all the important aspects of a job at the last minute," Rossi said. "We have them on a list and whether the site uses every item on this list or not, it prevents us from forgetting an important or expensive addition to the job."

In addition to having bid systems that include drafting a materials lists or using checklists, most contractors agree that gaining experience is the only way to learn how to correctly bid jobs. "I’ve been doing 800 to 900 bids per year and, frankly, experience is the only way to get good at it," Rossi shared, pointing out that BP Landscapes’ bids are typically 40 percent higher than the lowest bid and 10 percent higher than the next bid.

"You have to be extremely thorough when bidding," he continued. "Don’t assume anything. When in doubt – for example, if you’re not sure whether there is proper drainage on a site – implement a clause in the contract stating that if additional excavation is needed, an additional cost will be added."

As their bidding tactics improve, contractors must learn to take control of the bid game rather than bet on a roll of the dice. "You’re taking a big risk when bidding a job," St. John said. "I’ve been doing it for 22 years and I’m still learning. It’s all about understanding access to the site and who’s responsible for what. To cover ourselves, we’ll do clarifications in bids to identify what’s in the scope and price of the work and what’s not. All those things need to be identified on the front end so folks can make an accurate evaluation of your pricing."