How Low is Too Low?
Contractor tip of the month
By Damian Lang
The economy is brutal. Bidding is tight, and you are finally the low bidder on a big job. Life is good, until you find you missed something. Do you take the job anyway?
You get the call from the general contractor (GC), who says you are low on a large project. With your backlog down, this is the break your company has been looking for, so you start high-fiving your staff. Then, the estimator turns around from his desk and says, “We have a problem. I left out the storage building with 10,000 blocks in it. We can still do the project, but it looks like we are going to take a hit if we do.”
So the scramble begins. You double-check the numbers on the entire bid, hoping there is extra money in another part of the project to make up the difference. After taking everything you can out of the project, you find you will still show a loss when the job is complete, and that’s if everything goes just right. To make matters worse, the GC is pressuring you to take the job. What do you do now? In most cases, walk away.
Now we all know there are other things to consider. Is this a GC who you always work for? And, did he tell you he was using your number and no one else’s? Or, is this a GC who shops until he finds the absolute lowest number every time? And ask yourself this: How low is too low? What do you stand to lose, and what do you stand to gain?
My company was recently low bidder on a water treatment plant that was a public opening project. We were at $1.2 million, which was $180,000 below the next bidder. We always figure a margin of 10 percent; so, normally, we would still take the project. However, being that low, we went through the project to insure all the numbers were okay before signing the contract. Guess what? We found a mistake in the estimate that, once included, put us above the next bidder. So we went through all aspects of the project to find money that could be put toward the $180,000 shortfall. Most of the numbers in the bid were hard numbers, so it just wasn’t there. I had a decision to make, and quickly: give up the job and suffer the embarrassment of backing out after being low, or take the job and take a hit. Let me tell you, it wasn’t an easy call to make.
So, what did I do? I quickly sought the advice of other contractors with whom I network in the industry. In fact, when I presented this situation to one of my contractor friends in the heat of the moment, he replied, “Don’t take the hit and wound yourself, what good are you wounded?” Then he paused and said, “Wounded animals are dangerous.” (I am not sure why he was comparing me to an animal, but being a hunter, I sure got the point.) So, I made the call to pull the bid.
I think our contractor pride gets in the way sometimes, and we forget that if you blow a bid, you can usually withdraw it. Even if it is a prime bid, you still have a limited time to pull your bid if you find you missed something in good faith. Those rules are there for a reason. Just swallow your pride, pull your bid and go after the next one. Believe me, it’s easier to swallow your pride then spend the next several months trying to recover from the grief of a bad project.
About the Author
Damian Lang is a mason contractor in southeast Ohio and inventor of many labor saving masonry systems and products. Lang has served as the Marketing Committee Chairman for the Mason Contractors Association of America. He is also author of the book Rewarding and Challenging Employees for Profits in Masonry. To network with Damian on contractor tips or tips you have and would like published, contact him at firstname.lastname@example.org or 740-749-3512.