Bidding Strategies

Best Price, Best Quality, Best Service: pick one or two but you can’t have all three. That’s what we are often told, however I challenge the notion and have some thoughts and ideas to share.

Back in the day nearly 20 years ago, we took pride in the high-caliber of our trade contractors. We were faithful to a select group and took good care of them. Generally they did the same for us, but I now think this is a rather "old school" approach. There were some fallacies to the approach that exposed us to certain surprises.

• Did our vendors give us their best price or did we actually pay more for the loyalty we endowed upon them?
• Did we compel them to consistently look for new ways of improving their businesses or were we paying for inefficiencies within their organizations?
• Did we allow our vendors to make their own decisions about the products and installation techniques used in our homes or did we specify clearly.
• Did we rely on our vendors to provide a high level of quality because we knew what to expect or did we instruct them in the manner we wanted things done?

Loyal relationships are good for every business, but an understanding of human nature likely gives us the answers to all the questions above. If I were to ask these questions to my own organization back in the day, we would all have to admit that we probably weren’t operating as efficiently as we could and were leaving money on the table.

In keeping with the strategy to obtain the best price and service, I have a few beliefs that support the effort:

1. Solicit bids only from vendors I'm prepared to use.
2. Use accurate construction drawings that anticipate needs of the vendors.
3. Provide detailed specifications for the quality and extent of the work.
4. Create scopes of work for each trade to follow per our company policies.
5. Never shop bids. Always use the low competent bidder.

Consistent policies that respect the efforts of all bidders and support the needs of the selected vendors, establish a sustainable process for obtaining the best price, quality and service. By creating an environment for success, vendors will recognize your organization as the preferred company with whom they want to do business. - Keith Groninger

Preferred Builder Status

Preferred Builder status is achieved when trade contractors and suppliers prefer to work for one particular builder over another. Preferred Builders are often rewarded with the best pricing and service from the companies that work for them. Obtaining preferred status can only be achieved by businesses that are sincerely concerned about the well-being of everybody they work with.

The approach to becoming a preferred builder is actually rather simple. Treat others the way you want to be treated yourself.

• Develop a reputation as being fair.
• Set high expectations for yourself as well as for others.
• Provide good information when requesting bids.
• Select the low competent bidder and respect the effort of all bidders.
• Be ready to receive work or deliveries when scheduled.
• Manage an organized project site and allow workers to be productive.
• Accept responsibility for the success of others working on the project.
• Communicate clearly about expectations for services provided.
• Pay promptly when the work is completed correctly.
• Make sure everyone knows they are appreciated.

These techniques work with any type of business relationship but to be effective must be sincere and part of a company culture.

Cost Saving Strategies

There are some strategies for achieving low initial cost that make sense if followed in steps.

1. Design the home to be inexpensive to build.
2. Evaluate needs and reduce emotional desires.
3. Establish “preferred builder” status.
4. Develop detailed specifications and work descriptions.
5. Shop for the best price.

There are also strategies to consider to keep operation and maintenance costs in check.

1. Capitalize on solar orientation and passive solar design techniques.
2. Reduce energy demand and increase energy efficiency.
3. Select low-maintenance products and use durable construction techniques.
4. Follow Florida-friendly landscaping and irrigation recommendations.
5. Perform routine maintenance and periodic performance checks.

Dynamic Project Information

Information on a construction project is constantly changing. The processes for keeping everyone informed can enhance performance, or not. Information requirements range from summary to intricate details. An efficient information system through use of the Work Breakdown Schedule can provide information relevant to the needs of the responsible parties.

• Specifications should not ever change. These are the original requirements agreed upon between the Builder and Owner, and included in the contract price of the home depending on the type of agreement.

• Addendum are changes to the scope of the project during the bidding phase. Upon award of the contract to the Builder or subcontracts to the respective trade contractors, the preferred method would be to incorporate all the changes into the specifications.

• Green certification requirements can result in necessary changes to the specifications and the trade contractors' scopes of work. Likewise, the most effective method would be to incorporate all of the proposed green elements into the specifications.

• Changes will likely occur after the contract has been awarded to the Builder and they can be one of the most difficult aspects of a project to manage. Information processes need to ensure that changes are incorporated into the project scope as efficiently as possible to avoid omissions or mistakes.

• Notes are added to each category as reminders or additional bits of information. During the project it seems like something always comes up that we don't want to forget or overlook.

• Scopes of Work are the specific requirements of each of the trade contractors. These may be your own company standards included in the trade contractor agreement. While specifications may be unique to every project, the scope of work should remain constant.

• Selections are the information received from the Owner. Selections like roofing or garage doors could be kept here, although it may not make sense to list all the appliances or tile selections. The status of the selection and where to find the information would be entered here.

A good routine to develop is to review the project information weekly as the schedule progresses. We hold our staff meetings on Thursdays each week. Support staff always looks a couple weeks forward to make sure that the project supers have all the updated information. Meeting on Thursdays allow the supers to review unmatched invoices and give staff a day to make sure the next week's plan is in place.

Estimating 101

At times, estimating can be as much an art as it is a science. In its simplest form, an estimate is a list of all costs associated with a project. A thorough estimate might also list everything that it doesn’t include. Since the most common estimating error is omission, the ability to communicate valuable information can be challenging. As a tool to provide information, an estimate can have different forms.

Conceptual - Similar to a feasibility study, the projected cost and scope may be needed to support a project’s viability. A conceptual estimate should provide enough information to allow an owner to determine whether a proposed project is feasible. The best sources of this information come from historical cost records of completed projects. This step is often necessary prior to committing to design or professional services fees. A good conceptual estimate should provide enough information for the owner to have a clear understanding of how much home they can purchase for their money.

Preliminary - When a dimensioned floor plan is available, preliminary cost estimates can be started. The accuracy of the estimate is dependant on the level of detail available. It’s not uncommon to produce several preliminary estimates as the design progresses and decisions are made regarding finishes and features of the home. Unit cost pricing, consultation with trade partners and historical records are beneficial for providing information, and can be used to help the owner establish a reasonably accurate budget during the design phase.

Detailed - A detailed cost estimate is usually started when the design is complete and the construction drawings have commenced. Even though some costs may not be available until engineering of the drawings and building permit documents are ready, the detailed estimating process can begin. In order to avoid surprises and potentially expensive changes, detailed specifications and written scopes of work should be completed, and provided to trade contractors and suppliers. This will facilitate accurate pricing from competing trades prior to awarding any of the work.

Dynamic - Once construction begins, the estimate should be converted into a working budget and constantly monitored. The budget should always be reviewed before any work is ordered or scheduled. Procedures should be in place to ensure accurate payments are made and surprises are avoided. A good cost-coding system will support organized management of project funds and eliminate misappropriation. Budget status reports should be provided on a routine basis and the Owner should be kept informed of any changes as they occur.

Debrief - A powerful estimating process that is often overlooked by most builders, should take place after each project is complete. Every project has the potential to provide valuable information for future customers. The completed home should be broken down into individual cost components and analyzed against other projects of similar scope. Cost debriefing provides information to builders that wish to improve their processes and provide valuable services to their customers.