It looks like 2010 might just be the jump start we have all been waiting for; per McGraw-Hill Construction’s “Outlook 2010 Executive Conference” industry analysts are forecasting an 11 percent increase in overall U.S. construction starts, mostly in housing and public works projects. This is good news. Let’s just hope their estimates are solid.
Last year was a really bad one for bidding jobs. There weren’t very many to bid, and the competition became viciously desperate and quite stupid—bidding at well below cost just to ensure a win. This frantic bidding attitude was partially a result of the many contractors bidding on each job—sometimes as many as 20 or more.
It is likely 2010 isn’t going to be much different. In fact, even with the projected increase in projects, there won’t be a lot of jobs to bid. This means electrical contractors are going to have to be tougher, dig deeper and get smarter with how they bid jobs.
Should I bid or wait it out?
I have heard many electrical contractors say they are not going to bid anything until things change. I can understand this to a certain extent. Why spend the money and time when your chances are so low, and you have to bid the job below cost just to compete? However, the realistic cost market will return. If you are not staying in the hunt and bidding jobs, how will you know when the below-cost market has corrected? If you don’t have an estimate to compare to your competition, how will you know if your estimating database is competitive? If you don’t bid any jobs, how will you keep relationships with your general contractors and other clients? How will you get electrical bid results? Maybe you aren’t getting them now. If so, why not?
My point is you should never stop bidding work completely. In fact, you really should figure out how to win jobs in a tight market and at the right price. You can do this by analyzing your bid results and comparing them to how they stand up against your current competition. This can help you fine-tune your estimating database and methods.
Of course, you should make efforts to ensure you have a strong possibility of winning every job you bid, if that’s possible. Qualify the projects, and pick the best ones. Just remember, in tough times, beggars can’t be choosers.
Use the downtime wisely
Have you retooled your estimating machine, added more horsepower, so to speak? Did you hire more estimators? Have you given more training to the ones you kept? Have you built a solid relationship with an outsource estimating firm? Did you clean up your estimating database? Have you added any labor-saving material items? Did you build more assemblies?
What about computers and software? Did you buy more licenses, or do you still have three people using one system—two on spreadsheets, one entering?
Speaking of working on spreadsheets (really?), have you purchased (and started using) any of the current on-screen or CAD takeoff software? If so, have you developed databases and/or fully linked them to your existing databases? Do you know how to use them for more than just counting? What about for project management and value-engineering?
One of the worst mistakes an electrical contractor’s estimators can make is not using spare time to fine-tune their estimating systems. If you are not busy estimating a lot of work, you should be busy getting ready to estimate a lot of work.
At the minimum, electrical contractors should analyze their historical data to determine what worked and what didn’t. Many will say the game has changed and that the past doesn’t apply to tomorrow. I couldn’t disagree more. There is always much to learn from the past. It’s how you apply it to the future that matters.
The 2010 market will be different. Along with the crazy-stupid competition, there will be new market opportunities: solar, wind, cogeneration, high-speed rail projects, water treatment and other civil infrastructure projects. How have you performed on these jobs in the past? What do you know about estimating them?
I’ve written about all this before: preparing for the busy year ahead and ensuring you are ready and have a solid strategy in place—one that works with your business plan. This is critical. But in case you’ve forgotten or never read those great words of wisdom, I send you back to the archives at www.ecmag.com. I recommend reading these past columns as you prepare for a (hopefully) very busy and successful year of bidding. Search for “Shook” to find them.
• Protecting Your Sell Price, June 2009
• Estimating the Estimate, March 2009
• Never Stop Bidding Work, March 2008
• Recommendations for 2008, December 2007
• Update Your Mind, November 2007
• Another Year of Estimating Passes, January 2007
• Are You Ready?, January 2006
Happy New Year, everyone. Let the bidding begin!
SHOOK is the president and chief estimator for his estimating company, TakeOff 16 Inc. He has worked in the electrical construction industry for more than 23 years. Reach him at 707.776.0800 and sfs@TakeOff16.com.