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Construction Programs & Results Inc

We Like to See The Good Guys Win!

Competitive Bidding on Construction Projects

by Michael Stone

I waded through an article last week that I want to pass along. I don't know about you, but while this article discusses the expected situation for construction contracts right now, it gives me chills. It is a classic example of what not to do with your business. The companies bidding on these jobs exhibit the type of thinking that takes companies right out of business.

"For most of 2009, contractors that had previously specialized in certain markets are now hoping to land contracts in other sectors. As more firms adopt this strategy, the number of bidders on projects has increased substantially."

That means contractors are bidding for jobs in markets they haven't dealt with before and don't know that well.

"So far, bid estimates are coming in significantly below state DOT estimates, according to state and local officials."

"Jenkins says the feeling is that many firms are bidding so competitively—perhaps even below cost—as a matter of survival and as a means of retaining workers."

I wonder if there will be a follow-up article in a year or two about the status of the construction businesses that "won" these bids?

If your bid is below cost, that means your business will pay to build the job. Not only will you fund your own overhead expenses, you will have to fund a portion of the material and labor necessary to build the job. There aren't too many businesses that can afford to do that for long!

Trying to be competitive with your bids is financial suicide. Bidding work just to keep busy and keep employees working is financial suicide. It doesn't work.

You are in business to provide a service and make a profit doing it. You are not in business to build jobs, keep your employees working or any of the rest of that nonsense.

Run your business like a business. Don't fall into the trap of "bidding" on jobs just to have something to do. Go after jobs you want, but take them only if you can do so without any red flags from the customer and you can make a net profit when you get it.

 

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