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I Forge Iron

What I learned losing three bids in one day


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I had a day recently where I was told I had lost three projects.  Losing bids is a frustrating part of the job however I try to make the losses constructive.  These three losses in a single day provided lessons I thought were worth sharing.

Job #1

Our very best General Contractor (GC) client landed a design-build job.  That means the GC hires the Architect, and they control the entire process from design through to building it.  As part of their contract, the GC is typically required to perform budget checks at several stages of plan development.  They invited us to bid on these conceptual stages which started nearly 9 months ago.  We bid every stage (three in all) including the final bid stage, about two months ago.  Their estimator had called me a day after the deadline to go over a few details, everything went well, and I had a good feeling that I'd be awarded the job.  In the weeks and months since then, the estimator wasn't answering my requests for bid results.  Finally the GC's head of pre-construction called to talk to me about the bid.  He told me we'd lost, and gave me the list of who'd bid and how much.  I'd lost by quite a bit.  He was very thankful for my bid, and graciously explained that the winning subcontractors (subs) had done a lot of similar work in the past.  This company is one of the largest GC in my state.  This man is responsible for everything they bid.  He took the time to personally call a sub who'd lost a bid by a significant amount, and provided market insight into what their competitors were better at.  He did all of this to help me win work with his firm.

Lesson learned: Truly excellent companies get that way by making their efforts count for everyone they work with.

Job #2

We've worked for a whole lot of GC's over the years which has taught us to see dishonesty as a threat to successful contracting.  Literally, every job that started with dishonesty has ended with unpaid invoices.  A few years ago I bid a project to a local GC and when it came time to award the job, their Project Manager attempted to bid-shop the job.  He told my boss that a competitor's bid was $X amount lower than ours and asked my boss if he'd beat it.  I told my boss that their invitation to bid (ITB) promised a fair award to the lowest complete bidder.  Their PM was clearly wiling to break that promise.  Since we know this person is dishonest, there's no reason to believe the PM was telling the truth about the competitors bid.  We refused to change our number and... the PM wrote us a contract for our original bid amount! While we succeeded in calling his bluff, the animosity was palpable.  We were held to the strictest standards, by the least competent employees that PM could muster.  Nevertheless we successfully built the job.

We received an ITB from this same firm for an attractive job that starts exactly when we need work.  Figuring we could "keep them honest" by being the lowest bidder, we bid on the job.  Like Job #1, it was a design-build but it only required one round of conceptual bidding.  I had spoken to their estimator after the first round and he'd assured me that I had "won" the conceptual bid.  The final round was two months ago and that estimator had been ignoring my requests for bid results.  Finally I caught up with him and he tells me that he's awarding it to a competitor.  I ask if they were the low bid, he responds that it was "really close" before going into a whole spiel about how difficult his decision is.  I asked if there was anything I could have bid differently to have won the job.  He says no, then tells me how my competitor has done a lot of recent work with him and they've really helped him out.  I thanked him and got off the phone to think.

I thought of a fire station project we were just finishing with him that was caught in a flood that destroyed an entire town several years ago.  We went up after the storm and got that station operational as a shelter. There's even a youtube video of the Governor in a National Guard helicopter landing at the site.  You can see our ladders were commandeered to bridge washed-out roadways to rescue people.  We donated our time and our equipment to help people affected by that flood.  The job we were hired to do was horribly mismanaged from the start which meant we were losing money on it before the flood.  None of that stopped us from doing our best to support a client, and a community in need.

Lesson learned: Dishonest clients are bad for business.  You can't work hard enough or bid low enough, it's their nature to cheat.

Job #3

Over the last four years, I've invested a lot of time in getting us involved in high-end projects with better clients.  Three months ago I was invited to a huge project that fit that bill.  Everything about the job seemed to be a perfect example of what we're good at, only it's four times larger than normal!  Bid day was particularly chaotic because the Architect issued several last-minute changes to the plans.  Buried deep in literally hundreds of pages, was the only reference to the project's schedule.  It required everything to be completed within 6 months.  When I consulted my estimated man-hours of production, the only way we could meet that deadline was if we committed every single employee we have to that project for half a year.  Taken as a whole, the job was just too big for us and I advised that we withdraw, especially since our distributors had told us that six of the largest subs in the state were bidding the same job.  One of them buys material by the train load.

My boss decided to bid with a substantial contingency added.  He argued that we knew we wouldn't win, but that submitting a competent losing bid would help our efforts to get invited to high-end jobs.  I sent the bids and never followed up on them figuring it was a lost cause.  In fact, none of the GC's even acknowledged that they'd received a bid from me.  The months go by and on this same auspicious day, my boss receives an email from one of the GC's.  The person's job title is corporate gibberish, and doesn't appear to have any bearing on us, however they clearly reference our bid on this huge project.  The implication is that we have to submit to some exhaustive financial evaluation in order to be considered for the job.  This will be a lengthy process which requires us to provide unfettered access to our financial information.  Absolutely nothing is promised in terms of confidentiality, security, or due process.  Since we'd bid to two GC's I called the losing estimator.  By a stroke of luck, he answered and gave me bid results.  As expected, the six largest subs had soundly beaten our price.  

Big GC's often have extensive pre-qualification processes which they use to determine who gets invited to bid their work.  They don't want to hire a sub who can't perform.  The winning GC has asked us to bid no less than 20 times in the last six years.  I've inquired about their pre-qualification process in the past, and they'd assured me that it wasn't necessary because we'd done comparable work with their competitors.  Now we're being asked to "assume the position" to be considered for a project they've had in the bag for a quarter of a year.  There's absolutely no reason to believe we're even remotely competitive on this job.  None of their estimators have ever communicated with us about this bid and our proposal expired several months ago.

Lessons learned: We knew the job was too big for us, so we tried to save face by losing like a "big dog".  This backfired on us by obliging us to a financial "cavity search" with a GC that won't hire us.

Summing up:

Losing Job 1 left me richer for the experience because my client gave me information to help win my next bid with them.  They put a lot of thought into who they invite, and they pay attention to who's winning so they can continually partner with the best subs on the market.  With that information and support, I'll win the next one.

Losing Job 2 confirmed a long held belief that dishonest people are bad for business.  While they may point to extenuating circumstances in every decision, the outcome is defined by their intent.  I see a lot of dishonesty that's driven by lazy or thoughtless actions.  I've found that doing the right thing is often the hard thing. 

Losing Job 3 is a reminder to balance ambition and ability.  I truly believe we could deliver that job for my proposed amount, but it'd be the biggest risk we've ever taken on.  This whole debacle might eventually lead to better prospects, but it'll take a lot of work in the mean time.

 

 

 

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Jackdawg,

The invitation to bid represents an exchange.  You submit a bid for free in exchange for either contract award or bid results.  If the GC doesn't provide names and numbers, there's no way to know they've fairly awarded the project to the lowest complete bidder.  Accountable transparency is the only effective means to deter corruption.

Honest GC's don't provide ANY bid results until after the project is awarded so as to avoid any semblance of bid-shopping.

As an Electrical contractor, if I bid and get awarded the contract, my company and contract amount becomes public information via the permit process.

If a GC tells a competitor I won the job for $X amount, it's not going to change anything for that job. Telling said competitor that I have a history of winning such work merely identifies what market segment I'm leading.  If they frequently compete in my segment, that won't be news to them. 

Proposals should never include proprietary information that would be damaging in the hands of a competitor.  There's not much we can do to prevent a GC from bid-shopping in the first place.  But if we don't demand bid-results, we are enabling the corruption.

 

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I've had a few similar to job 3. Requested to quote on balustrades or fences that were just too big for me to handle if I was realistic about it.  Spent several hours to days working out the quotes which were high because I don't have the capacity to fabricate what they want and never heard anything back.  I've gradually worked out it's builders/architects/owners shopping around for the lowest price they can get.  I've also learned to say straight up if I can't handle a job and walk away happy that I've just saved myself a lot of hassle.

Andrew

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Farmweld,

I really appreciate where you're coming from.  It takes a while to really know where your niche is in the market.  I've worked for companies who were absolutely convinced they could competitively bid (and build) everything from a doghouse to a skyscraper.  The weird thing about this is that you can't only define the range by a single measurement.  I've had jobs that were worth nearly double my typical value that we had no problems completing  because the required materials were very expensive.  I've also had jobs that were absolutely huge in terms of square footage, that weren't very valuable because we were relocating existing material. 

I'll tell you this much, if a GC doesn't send you an invitation to bid that's clearly intended for all trades and the same deadline, they're probably beating the bushes for a better number than the one they've got.  I generally consider that to be unethical because they won the job on the bids they'd received by the deadline.  If a sub helped them win, that sub deserves a contract.  I will say that ornamental iron is a trade that's going to be particularly difficult to find a slew of contractors.  It's possible the GC had to plug in an allowance for what they think it'll cost if they didn't get a proposal on bid day.  That being said, the only fair way to proceed would be to hold a separate bid for all the missing work.

notownkid,

Thanks for that!  Hopefully we've cleared the decks of bad news for a while.  It's weird how we can spot patterns like that.  My boss is fond of pointing out that we've never won a solitary job.  Every time I pick up a win, a couple more will follow.

I think the deal is that we get more competitive when we see the backlog/ schedule tapering off, and less competitive when we're pretty busy.  Since I'm constantly bidding, the times I'm most competitive tend to create a cluster of wins.  That being said, I wouldn't recommend this job to anyone who gets frustrated with losing.  An excellent hit rate in a down economy would rarely exceed 15%.  That's roughly a 1 in 7 chance of winning.  I know contractors with hit rates that are below 5%, that's an average of one win in twenty bids.

Five working days per week, four weeks per month gets you twenty days.  If they averaged a bid per day, they would win one job a month.  Sadly, the people most likely to have single-digit hit rates, are the ones who resort to frantically bidding everything.

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When my architect brother had a building company, he had to enter closed competitive biddings, yet the contractor client would regularly open the bid and give it to the company they wanted to work with for them to match the price.  Then when the work was allocated to the competitor he would find they were also using his designs. 

He soon worked out that the cost of presenting a bid for a building including plans and design worth a lot of money, was a sure way to get designs stolen and bids lost. Not worth it so he took up smaller buildings, dealing directly with the client.  

 

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First  of all I'd just like to say I really appreciate your posts and insights Rockstar.esq. As someone who is learning how to run business in my 'real' job, as well as my own blacksmithing dealings I find them very enlightening. 

 
Background:
 
I work for a Rafting and education company that provides meals, camping, etc for people on vacation and schools and a daily part of the business is providing input and assessing 'bids' that the office puts together. with a half dozen companies in the valley there is a lot of pressure to keep costs down, but as a culture and as individuals myself and the people I work with pride ourselves on a high quality product. Bidding too low just to put bodies in camp or selling a product we cannot provide is avoided.
 
We do this to the tune of around 1500 proposals generated in a year, resulting in 7,000-9,000 unique users who experience our camp and products (products in this sense again meaning meals, accommodations, and trips).
 
Because of such a high volume we experience all types of people. While I am happy to report that the vast majority are great, honest folks, we do receive a share of people who are less than honest. Generally there is a pattern with these people and we turn them away when we can but sometimes it does not get apparent until they are already on the trip.
 
The pattern I have seen is that these people are
 
1. They lie; in this case its almost always about a competitors bid. 
 
2. They request modifications to the product that are out of the ordinary then refuse to pay for them.
 
3. Steal; in our case usually meals or camping equipment. They usually get very angry when confronted, will huff and puff, employ an argument that it should be included in the price (see conclusions below), and are the most fundamentally dishonest because besides being thieves they inevitably lie to you and usually themselves.
 
Your scenario:
 
In your second scenario you draw the conclusion that "its their nature to cheat", but I see a more complicated problem here that often boils down to a lack of respect and knowledge that deserves a closer look. In your line of work it sounds like you are often dealing with people who have a fairly comprehensive knowledge of the work and product, however, I feel that most smiths or people who are dealing with the general public do not have the benefit of any assurance the client has realistic knowledge or expectations about the product or process. 
 
I have found that these people either inadvertently or sometimes intentionally put you in a position where according to their ethos you are beneith them, and at that point you have to cut ties. I do think that with the public careful managing of expectations and gentle informing can avoid this pitfall. In my business I see this inadvertent souring manifested in two ways.
 
First, They try to entice you with submitting a lower bid (without any other modifiers to the contract), and in doing so you either A. Create in their mind the idea that you are overvaluing your product and are thus dishonest, or in a best case scenario B. Giving them the idea that your product and labor is actually worth less than it is. I feel this is common in the USA with is lack of socially sanctified bartering, where walmart has sticker pries, but craftspeople are often  forced to negotiate to get a fair price.
 
Second, they do not have a solid idea of the value of your work to begin with. This problem goes back to a lack of knowledge about the product, and no being able to discern quality, or have a good idea about what quality is in the particular sphere they are operating in. In this case they usually have unreasonable expectations, or see the price as overly flexible, or both. 
 
The Problem:
 
The 'cheaters are cheaters' idea when applied to the layperson is not a complete picture. Managing peoples knowledge and expectations early on can mean the difference not only between a contract and none, but profit and loss as well.
 
I am not saying 'give these people a second chance' (and if you have gone down the road of distrust cutting ties is the best option) but want to present a more nuanced view applicable to the world of craftsmanship and relatively small scale custom projects.
 
The Conclusion:
 
In your case I don't see anywhere left to go. they had cheated, lied and been disrespectful, and established a better relationship elsewhere. Case closed. However, my experience dealing with a large client base, with lots of relatively low bids dealing with people unfamiliar with the product, I do want to propose and alternative when confronted with the initial interaction and provide a standing that allows the seller to maintain integrity without undercutting themselves and leading down the path of distrust.
 
In case of someone balking, asking stupid questions, or undervaluing the product in both my blacksmithing business and for work I have a 'full invoice' saved that I bring up and modify as needed. included are all of the minutiae that people do not think about: For rafting it includes workers comp, vehicle repair (large loads on dirt roads = lots maintenance to avoid stranding clients), and overhead (gently listing "average office correspondence per client = 1/hr at $20hr" also makes them realize that we are not on vacation and our time is still money)
 
More topically for smithing the invoice includes everything they are paying for: Chisels which wear out, Time to start a project, time to do the actual work, fuel, planning costs, materials, jig creation.... Basically I Start with the biggest list I can think of, then do the project in my head deleting and adding anything as needed. Since my charge for fuel and tools is included in my shop per hour fee, and if the project is large enough I'll waive any planning or design fees (after all, blacksmithing is still fun for me), if I do drop those fees I want to make sure that the client knows I am doing them a favor, and doesn't just assume the work is inexpensive (or god forbid cheap!).
 
Lastly any amendment to the price I make has to come with some give from the client. Want $20 knocked off? Then no brass patina. Want $1,000 knocked off? then I'll be stick welding all the joining instead of doing any riveting. Or if they do not want to compromise on the product have them order in such quantity that the overall price is higher but the unit price goes down (make sure to include jig manufacture in your invoice). 
 
In my personal experience I have found there is no quicker way to loose the respect of a client than to devalue your product without changing it. 
 
 
 
 
Again, thanks for all your insights!
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Gold Country Forger,  I'm glad you appreciate my posts.  I can definitely see where you're coming from in terms of "reading" a new client.  You're absolutely right that clients who don't know what to expect, or what things should cost can come across poorly.  A small business, especially one that's dependent on high volumes of inexperienced clients has to make the best of things as you suggested.  It definitely sounds like you have a well-organized approach.

I don't often have that situation, however I've had a few clients that didn't come across well initially.  I've had some success by addressing any signs of dubious ethics directly before I invest any significant time into them.  A client whose relying on me to teach them everything about the way things are priced for free should understand that I'm not here to help competitors get hired. 

It's been my experience that the dishonest clients give me a "yeah, yeah", reply while telling me how if I'd hurry to do just "one more thing", they'd be able to sign the contract.  Invariably they disappear as soon as I've given them a proposal, only to reappear later with a competitors bid in hand.

The honest folks tend to be more respectful of my time and often voluntarily offer a deposit or a letter of intent.  I try to kindly tell clients that I can only spend so much of the boss's time on free consultations.  That way I can keep the time productive, and brief with gabby clients.

I think you're right about how perceived value changes for a client when cost is their only proxy for quality.  I think you are particularly wise to empower your client with informed choices.  If they want to change the price, they must change their project. 

We can't be experts on all things, but the cost-to-quality fallacy is a terrible shortcut for a lot of reasons.  I guess I'd put it this way; if most marketing executives love it, it's probably not in the consumer or craftsman's best interest.

 

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Thanks everyone for your replies, this particular business sub-forum is one I keep an eye on because it has helped me several times in the past, particularly around quoting and business standards.  Not wanting to hijack the thread but one of the main problems we have in Australia is the cost/quality and respect equation.  The wrought/decorative iron market has been flooded with cheap imports that invariably rust out in short order or get damaged.  I've often been asked to provide quotes for insurance purposes to replicate these things, inevitably multiple times what they paid for them, insurance pays out, and they go buy a cheap import again. No respect for the time I've put into the quote or the quality of the product I could produce.  It's got to the stage I just inform the insurance company straight out that it is an import and worth nothing and let them fight it out with the client.

It's nice to get clients that appreciate the quality in what I produce and that are prepared to pay for it, even when you do have to educate them a bit. We regulary get clients to come out to the workshop to work on the design of what they are after.  If I can do it I will have the forge running and make up one or two elements on the spot and when they see how much work goes into a scroll or a spear they really begin to appreciate why I charge so much for hand made work.

Andrew

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Farmweld,

Over here the insurance adjusters are fierce negotiators who won't sign off on a high quote.  They will, however give clients referrals to honest firms who've done good work at reasonable prices.  In every case I can recall, the insurance adjuster does their own independent inspection and assessment to prevent insurance fraud.  Hopefully the insurance companies give you a referral when they've got a legitimate restoration claim.

 

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Rockstar.esq,  The problem is that the insurance assessors have very little knowledge of or experience with decorative wrought iron.  Most of what they see is imported cheap stuff and they have no idea what it is worth.  I quote on replacing it with "real" and "solid" stuff and the claimant gets the payout but buys the cheap replacement and pockets the difference, usually after promising that they will buy from me once they get the payout. Hence my refusal to quote on replacing imported junk for insurance purposes, unless someone is prepared to pay for my time quoting.

Andrew

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On 12/12/2016 at 4:11 PM, Gold Country Forger said:

In my personal experience I have found there is no quicker way to loose the respect of a client than to devalue your product without changing it. 

It has been my experience with human nature that as soon as you let one person slide, you soon find out that you are running a skating rink. Far better to dig in your heels at the first sign of failure to comply with the rules than to attempt to change them later.

Bad clients are in most cases worse than no clients at all. They eat up all your physical and emotional capital.

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  • 3 weeks later...
On December 9, 2016 at 3:56 PM, rockstar.esq said:

Jackdawg,

The invitation to bid represents an exchange.  You submit a bid for free in exchange for either contract award or bid results.  If the GC doesn't provide names and numbers, there's no way to know they've fairly awarded the project to the lowest complete bidder.  Accountable transparency is the only effective means to deter corruption.

Honest GC's don't provide ANY bid results until after the project is awarded so as to avoid any semblance of bid-shopping.

As an Electrical contractor, if I bid and get awarded the contract, my company and contract amount becomes public information via the permit process.

If a GC tells a competitor I won the job for $X amount, it's not going to change anything for that job. Telling said competitor that I have a history of winning such work merely identifies what market segment I'm leading.  If they frequently compete in my segment, that won't be news to them. 

Proposals should never include proprietary information that would be damaging in the hands of a competitor.  There's not much we can do to prevent a GC from bid-shopping in the first place.  But if we don't demand bid-results, we are enabling the corruption.

 

Rockstar, you and I have had conversations about this in the past. Bid shopping is a time honored tradition out here in the wild west. After 2008 i believe it became the norm. 

I frequently see plans, designs and concept drawings that are obviously another shops property. Sometimes the duilder and farcitecht (correct spellings) don't even have the self respect to cover up the originators info. If the drawings originators are regionally local I let them know. There are quite a few firms in our area I won't work with. 

The people that "have the job" might find out that the week they're about to start that they've been replaced by another group. 

I call BS as much as possible now when I see the funny stuff. Seeing the shifty eyes right from the start lets me know it's time to reprioritize this potential job. 

If there's carp in the air, be fierce and ask hard questions. 

As always, thanks for sharing. 

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Wroughton,

Your timing is interesting because I was invited to attend a conference tonight entitled "Do estimators have ethics?" Its being put on by the local chapter of the American Society of Professional Estimators (ASPE).  The ASPE has a code of ethics that specifically bans bid shopping.  Unfortunately there doesn't seem to be much in the way of enforcement.  I know a few bid-shopping scoundrels who are members in good standing.  Evidently it hasn't occurred to the ASPE that dishonest people have no problem lying in order to maintain the appearance of legitimacy.

I was at an ASPE seminar which had a class discussion where a GC estimator made a comment about how his subs needed to protect him from losing via better pricing.  In his view, subs shouldn't bid to his competitors at all unless he got the best price.  He was very frustrated with subs who send their bids to all the competing GC's on a given job.

As a sub it wouldn't have been very PC of me to point out that the reason they're sending their bids to everyone else is because he's not a market leader.  He's willing to accept bids from anyone, which increases the competition for subs who bid to him exclusively.  It's pretty obvious he doesn't understand basic reciprocity.

I was recently reading about the Dunning Kruger effect which basically states that incompetent people lack the ability to identify their incompetence because they're incompetent.  What's most interesting is that highly capable people also lack the ability to identify their greater competence because they perceive tasks to be easier than they really are.  As Confucius said: "Real knowledge is to know the extent of one's ignorance" .

As I thought about this some more, I encountered something called "Hanlon's razor" which is a variant of; "Never attribute to malice, that which is adequately explained by stupidity".

Relating this all back to your comments, it's not surprising to me that bid-shopping folks leave notes on the plans that tip you off to what's going on.  I suspect that most bid-shoppers are a combination of stupid and lazy.  It never seems to dawn on them that their actions drive away the best subs.  The subs that remain are either better cheats than the GC, or they're fools operating on borrowed time. 

As Mark Twain once said; "Never argue with a fool, they'll only bring you down to their level, then beat you with experience."

 

 

 

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