Winning the contract to install flooring in a
health care facility, like the waiting room seen here, can be a major step
forward for a company. But remember to carefully calculate your labor and
material costs before making a bid. Pictured is a hardwood floor from
Armstrong's Premier collection.
In Part I last month we looked at some of the fundamentals involved in bidding on a major commercial job. The example we’re looking at involves flooring for a local hospital. We laid out a scenario where a retailer or contractor was invited to bid based on the successful completion of a previous (though smaller) job at the hospital. It looks like a great opportunity, but how do you determine the amount of your bid? Go too high, and you won’t get the job. Go too low, and you may get it but wish you hadn’t. The challenge is to calculate your actual costs in manpower, materials and, let’s not forget, opportunities you have to pass up to pursue this particular job.
Once you have established the scope of the work needed and the schedule demands, it’s time to consider these factors:
Product and installation pricing. After verifying the quantities needed for each type of flooring specified, it’s time to get pricing for each product. When you call the mill rep, you’ll need to know the approximate quantity of product needed, as well as selected colors and the estimated order and shipment schedule. When you get the price, you’ll want to establish the length of time the price will be guaranteed. Verbal is okay, but require confirmation by email or fax. You may also use the opportunity to learn important information about the job. Ask who else is pricing the job and whether their quantities are on par with yours. This way you know if you’re on the right track or out in left field. If so, you’ll have time to recheck your quantities. Also, it may give you the slight edge you need to fine tune your bid.
One of the most important considerations is scheduling. Before submitting your bid, review the latest schedule performance expectation from the construction manager. Is it possible with your other work? The worst thing that can happen on a large, important contract is damaging your reputation through slow or substandard performance. What time of year is the work going to be performed? Will weather be a factor? What do your instincts (and colleagues) tell you about the construction manager? Is he on the ball? Is the project on time and on budget, or over budget and behind schedule? Does the flooring need special requirements such as heat welding and flash coving? How much flooring will your crew need to install each day to stay on schedule? How will you stage the job and coordinate you activities to ensure other trades do not interfere with your work? How will you receive product and be paid for materials? Will your credit lines accommodate these purchase orders without compromising your other day-to-day business? Have you factored in the payment and performance bond cost?
Putting your bid together to win the project. Once you answer these questions you are ready to put your bid together. Once again, recheck your quantities and factor in your material and installation costs. I suggest you also factor in overhead costs to cover mobilization and other indirect cost items. Now is the time to figure the right markup or gross margin that will be included in your bid. Do some investigating in your area, looking at similar projects. What was the average per sq. ft. or yard sale amount for product and installation? You can sometimes find this out from another dealer or a general contractor. You probably have a local installer that does heat welding and flash coving; call and ask what he charges per sq. ft. or linear foot. When you put this together, you should know within a couple of percentage points where your gross margin needs to be to win the job. You might as well find out before bidding if your cost is going to be in line with what you should be able to charge for the job. If you are comfortable with the gross margin you have calculated, then prepare your bid. But remember: Another major area where money is frequently lost is not establishing the right cost for product and installation.
Some bids, notably those involving government work, involve a complex format. Others merely require an email or fax. Expect a hospital project bid document to be on the complex side. Business qualifications, references, financial statements, and an outline of performance all must be submitted with the bid amounts. Even if not specifically required, you should always detail the specific products, quantities and types of installation to be performed. This helps the construction manager compare your bid with others. And by carefully following the bid format, you are sending a message about your competence and letting them know how you will perform.
Once again, review everything you are going to submit in detail, and then make sure the proper person at your company (usually an officer) signs the document. Sign and include the bid bond. Establish how the bid will be delivered and by whom. Some bid deadlines are absolute. If it says “2 p.m. Nov. 30,” then 2:05 may be too late. Others are more flexible such as “close of business on Nov. 30.” Just make sure you know. It seems everyone (myself included) has a story about losing a chance to bid because we were late. There are few things more aggravating than doing all this prep work only to be told you have no chance for consideration because your bid was deficient or labeled “non-responsive” because of presentation.
Awarding the bid. Okay, you submitted all that paperwork and you’ve been told that bidding is closed. The contract will be awarded within 60 days. If it were me, I would wait for a couple of weeks and then find out the progress of bid evaluation with my contact at the construction manager’s office. Naturally, you don’t want to seem pushy. Instead, ask, “How do I look on this? May I answer any questions or explain anything about my bid?” This will give you a clue as to whether you’re in, you’re out, or if it’s still up in the air. Anything you can find out is better than just sitting by the phone. Continue to follow up on a schedule, just short of being a pest, until you know what will happen. This obvious interest may even help you land the project if the bids are close; say if the apparent low bid is from out of town, or maybe the leading candidate has a spotty reputation.
You got the award! Often, you hear the news verbally (I wish I had a nickel for every time that happened). What you really want is a letter of intent that spells out the decision and clearly states that your company has been selected for the job. This is usually from the construction manager on behalf of the owner (in this case the hospital). The actual contract may not arrive for several months. Once you receive the letter, make sure it matches what you outlined in your bid. While this varies from state to state, there may be legal implications if you have provided a signed bid for a project. Typically, if you have received a letter of intent that says the project has been awarded to you, you are liable for performance even though you may not have signed the formal contract. This is usually true unless there is a demonstrable difference between the contract documents and what you originally specified in your bid. In at least one case with which I am familiar, a job was underbid substantially due to simple error. When the bid amount was accepted, the bidder was forced to perform the work at a loss. Once you have the letter of intent, the planning for job execution begins in earnest on your end. How you plan out your purchasing, receiving, jobsite delivery and installation will determine how successful and profitable your project will be. This will make or break your reputation with this high-profile client.
