With a strong economy comes more opportunities to bid work and increased pressure on estimators to win more work. No doubt, this is great news for contractors and the construction industry. But does volume bidding always increase your win rate and improve your bottom line? Not necessarily. Especially if those estimates leave your business exposed to risk when it comes to quality of work and accuracy.
In fact, bidding lots of jobs can cost you in the long run. Consider for a minute some of the pitfalls of volume bidding. If the estimator is rushed and their quantity takeoff is less than accurate, this can have a ripple effect on your bottom line. Winning lots of jobs your construction firm can’t complete in a professional manner isn’t a best-case scenario. Inevitably, you’re putting your reputation, as well as your profits, on the line.
Guesstimates Leave You Exposed
In a perfect world, estimators have plenty of time to fully scope the requirements of a project and prepare the bid in the most professional manner possible. In reality, estimators are often hard-pressed against a deadline with less than adequate specs and change orders galore. This is where guesstimates can wreak havoc on your accuracy.
In fact, some industry experts put the number of construction owners who don’t know their true cost of doing business as high as 80 percent. That’s pretty shocking. For example, many estimators take shortcuts in calculating the cost of construction labor. They just assume it is the base wage plus 26 percent without factoring in what makes up true labor cost—not just the actual labor burden, taxes or insurance.
Perfect Estimating with Patience
While estimating is a profession focused on win percentages, it is perfected through experience, practice and intuition. Estimators must be confident that their takeoff is accurate and thorough. For example, a less experienced estimator may forget to include in a bid:
- all of the equipment required;
- where the dirt goes once it is excavated;
- long lead times for certain items that might impact deadlines;
- special safety rules that apply in the state you are working; and
- whether the construction site is on a hill, in a rural area or in a city with little room to work
This is why many contractors turn to construction software to improve their takeoff and help them manage and execute work more effectively and efficiently. When it comes to takeoff and estimating, they can rest assured if plans are colored, the quantity is counted.
Bidding and Winning Enough Work
Volume bidding is not necessarily better for business. Contractors never want to win the bid they’ve spent the least amount of time preparing. Instead, they should work to make sure every bid awarded is accurate, not overcharged or low-balled.
Ultimately, contractors should strike a happy balance between bidding and winning enough work. In other words, you don’t want to bid every job in your local plan room and wind up unable to properly manage and deliver what you promised. Why not take a step back? Think about focusing on the right work to bid that will help you maintain a profitable business.
Do you really know how well your estimating process is working? Are you focused on the right work for your skillset? If you want to explore this and other estimating pitfalls and how to remedy them, download On Center Software’s white paper, Overcoming the Pitfalls of Estimating. Take a deeper dive and elevate your business outlook now.