Every contractor wants to form a no-bid relationship with each client and never have to bid for work again. But, of course, even if that were to happen, most contractors would simply build on that success and grow their businesses further, which would mean bidding for new work with new clients. Therefore, the low-bid process of winning work will exist as long as there are competing companies.
Every experienced contractor has had that sinking feeling that comes with winning a hard-fought low bid: happy to have won while hoping there remains enough money in the bare-bones bid to make a worthwhile profit.
No single discussion or article could fully address this expansive and ethereal topic, yet getting work based on relationship instead of a low bid is, nonetheless, worth considering. It is applicable and regularly considered in nearly every reader’s shop on a weekly or even daily basis.
Remember, however, the final word will come from your estimator who is busy hammering out a bid that will go out this afternoon or from the sales engineer who calls back a client tomorrow morning in hopes of winning that upcoming contract without having to bid for it.
Sell value, not low price
“When I ask my students about how to bid for work, they always respond with, ‘Low bid,’” said Ray Schneider, chair of Clemson’s Department of Construction Science and Management. “But I tell them that low bid won’t keep them in business. They need to sell value, not low price.”
Clemson’s Center for the Improvement of Construction Management and Processes intentionally recruits faculty members with field experience, such as Schneider, who is a heating, ventilating and air conditioning contractor.
“The low-bid buyer is not bright enough to see the short-sightedness of that strategy,” Schneider said. “That buyer needs to understand that higher quality work, which comes with better quality control and safety, is worth paying for. Sometimes the client buys that [reasoning], but sometimes it doesn’t work.”
Schneider said there is no “magic wand” or “silver bullet” to winning work. He said contractors should stick to pricing their work fairly, doing quality work, keeping within budget and staying on schedule. Those are the steps to building a solid and reliable business that will motivate clients to see a contractor as a no-bidding provider instead of a bidding provider.
But even more than that, building a consistent clientele is about relationships.
“People buy from people,” Schneider said. “Always answer your phone. Service your client. Get people to like you so that you can tell them your story. Then you can move toward being value-based, not price-based. Your clients will know that, though you may be more expensive than a lower bidder, you are worth it.
“It is important that the client like you at both the beginning and the end of the job. I did a lot of advertising. But, in the end, I found that it was word of mouth from happy customers that grew my business. I went from one or two customers to dozens of customers.”
Schneider said the trend toward design/build work, where there tends to be less bidding between general and subcontractors, is just a different way of writing a contract. And he recommended performing follow-ups after a job to maintain relationships. By checking back with those customers, you ensure your foot stays in the door. You’ll be the one they call when they have future work.
Taking good care
Similar to Schneider, Tom McLinden has plenty of real-life experience in construction subcontracting. He is the vice president of business development for Aldridge Electric Inc. of Libertyville, Ill.
“We earn a lot of work by taking good care of our relationships,” McLinden said. “For example, we are the only [electrical] contractor that does high-rise vault work for ComEd.” Commonwealth Edison is one of the nation’s largest electric utilities, which services approximately 5.4 million customers in the Chicago area.
“High-rise vaults are unique to Chicago,” McLinden said. “ComEd actually brings its utility service into the core of a building where there is an easement bound by cement running throughout the building. ComEd then services each floor from that core vault.”
Aldridge’s staff is so knowledgeable about the high-rise vaults that its project managers have provided training to select ComEd customers.
“We have earned that relationship with ComEd because of what we bring to the table.”
“Aldridge has often used ingenuity to win favor with a customer,” McLinden said. “One example of this was the creation of our ‘hanging basket’ for the Chicago Transit Authority.” The CTA’s elevated rapid transit railroad, known locally as the “L,” is the nation’s third-busiest rail mass-transit system.
“The Aldridge crew put their heads together and designed a bucket-lift mounted onto a rail car platform so that they could service ‘L’ track that was otherwise difficult to access. A job that would have taken a week or more could now be done in a single shift. These types of ideas provide added value to our customers. They know that they can rely on us to work in everyone’s best interest.”
“The lowest bid number is not the only criteria,” he said. “We have a safety record that is much better than the industry norm, and we do quality work. And when we do work for a general contractor, we make them look good because our work reflects on them. Low bid is important, but it must be part of a whole package. Of course, on traditional government work, everything has to be bid, but poor past performance could cut someone out of the bidding process.”
While Aldridge Electric values and uses its good reputation, it knows that it must always be in the business of earning it with each new client.
“We have been in business for over 50 years and have worked across the U.S., but we still have many doors to open. We hope our reputation precedes us because it gets our foot in the door. That’s a very important step that comes before the first bid opportunity,” McLinden said.
Gathering the bid list
Electrical contractors’ clients often are general contractors, especially in new construction. Because of its sheer size and resulting far reach, Turner Construction Co. has hired many electrical contractors during its decades of operation.
“We have 46 offices nationwide,” said Kevin Dow, operations manager for Turner’s Southern California office. “And about 90 percent of our work is negotiated.”
“In the interests of the project owners with whom we work, we always bid out our subcontracts,” Dow said. “So we will never just make a call to a single [electrical] contractor and ask for a bid without asking for any others. But relationships still come into play, especially in gathering the bid list. Relationships developed through past positive work experiences can put a company in the select group of invited bidders.
“Our purchasing is very centralized. The project manager will be a part of the analysis [of potential subcontractors] but will not be the sole decision-maker on a project. All subcontracting final decisions are made by the purchasing manager in each office. That is so that not just one subcontractor gets all of the work for that office.
“However, the project manager may be in a position to be rooting to the purchasing manager for a certain contractor based on a previous positive work relationship,” he said.
Subcontractors can definitely endear themselves to general contractors and their project managers.
“We look for a shared commitment on a project from a subcontractor to both quality work and the work schedule,” Dow said. “We want the electrical contractor to have a good understanding of the work and to be proactive—not just reactive—in preplanning, both before and throughout the project. And we need to see a commitment to safety and to cleanup.”
Selling value, working for everyone’s best interests and having a shared commitment lead contractors to favorably redefine relationships with clients. In a perfect world, all contracts would be no-bid. But in the real world, we are left with earning those relationships through hard work, quality performances and exceptional customer service.
MUNYAN is a freelance writer in the Kansas City, Kan., area, specializing in business writing and telecommunications. He can be reached at www.russwrites.com.