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rockstar.esq

Quote fatigue

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I had an experience today which is worth sharing.  Several months ago my company was asked to provide pricing to upgrade some light fixtures.  The first go around we had plans to work from along with specifications for the fixtures they wanted.

The client immediately changed their mind about what was and wasn't going to be replaced.  I dutifully revised my proposal for the job.

Now the client wants me to find a cheaper/better fixture.  I go and find three options, each of which saves significant sums while actually delivering a better light fixture.  Most of the savings comes from the volume discount my company gets for doing so much business with the rep.

Inexplicably, the client decides to visit the rep's office to "get to the bottom" of why the fixtures are so cheap.  

Lighting rep offices are showrooms built to show clients what's possible when money is no object.

This client saw the showroom and assumed the rep was overcharging everyone to pay for it.

So the client decides to go find a rep with a dodgy-looking showroom staffed with incompetents and he picks out a similar fixture to those we've suggested.

The specification is for something that would have been old-fashioned and inefficient in 1995.  I revise the bid anyway.  The "savings" come to less than 1% of their original bid.

They're not happy with that, so they want me to find a new energy efficient light that looks like what you'd expect in a 1995-era cubicle farm.

While they're at it, the client decides to have one of my foreman come out to the site so they can do a site survey of exactly what's needed.  This presumably, is because the plans we've been working with aren't accurate.

So I revise the bid for the new-but ugly fixtures, and reduce the counts to reflect what the client and my foreman came up with.  To this point, I have priced this job nine different ways over the course of approximately 4 months.

Today, I hear the client is outraged that we're "24 fixtures short" of what's needed.  The client's firmly astride their high horse sending me emails showing the dates that various plans were transmitted.  If only I'd taken 60% of this page from this set and 40% of that page from another set, it'd be plainly obvious what was really needed.

I should mention that I listed the quantities of lights included in my proposals along with their specifications on every one of the above revisions.  I strive to be extremely clear about what is (and isn't) included whenever my bid is different from what the plans call for. 

As we go about sorting all of this out and calming the client down, I can see quite clearly where things went wrong.  Estimating is a detail-oriented task that requires a lot of focus.  The work involved in arriving at a number for something can be considerable.  When you go back to check your work, all of the numbers look familiar.  Nobody can afford to spend the time to go through every measurement and calculation because that's literally a repeat of your estimate.

Since some idiot made it industry standard for estimates to be "free", the cost to your company to bid a project must be paid out of the overhead on the project.  Estimate revisions tack on additional overhead that wasn't included in your original bid.  Clients figure it's no work at all for you to change "just one thing" so they balk if your price went up to pay for the estimators time.

As a result, the estimator is expected to make bid revisions as quickly and cheaply as possible, especially since clients like to suggest they're just one revision away from signing on the bottom line.  Its pretty appealing to just "do what you're told" rather than questioning the client's judgment.  I've had projects where I was obliged to pore over the same information so many times over that I became "blind" to errors in my work.

On the client side, they're trying to manipulate the situation to maximize their  budget.  In my above example, the client steered a course away from the best value and the complete scope of work.  They did this because they never looked at the larger picture.  Their  focus on reducing waste created an iterative process where they assumed every prior step was progress in the right direction.

Practically speaking, the contractor must recognize the pitfalls of quote fatigue.  Clients tinkering with endless revisions are more likely to cause problems than solutions.  The best course for all concerned is for the client to define not only their problem, but their threshold for acceptable solutions.  Contractors must in turn deliver a solution within that threshold on their next revision.  Clients may need help with bringing focus to their problem.  "Scope creep" undermines the trust between the client and the contractor. 

Clients won't care that you did what you were told for the price you quoted when the job falls short of their needs.  They may feel stupid for trusting you but they won't recall ignoring your advice.  It's critical to understand that clients will remember the cheapest price they heard but they won't recall the context.

If something is unlikely to make them happy, providing a price only enables their anger later on.  That's doubly true with revisions where their "solutions" are making things worse.

 

 

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I have nothing useful to add to this but I do feel like I should say, 'thank you.' I worked for my father in law doing custom home remodeling for a few years and never got on the bids and paperwork side of the business. I always wondered why he'd get so frustrated with some of the people we worked for but he'd never explain it to me. I think now I understand a very little bit something of the headache he always seemed to have.

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Sometimes you are just better off without a client.  I found over the years the more demands a client has, the more extra work they want from you, the more changes they want the less likely they will buy from you.  It is apparent the "client" has decided you are not being "fair" to him he has lost sight of reality in the job, wish him well with another contractor and let them loose their shirts. 

Better to lose a "client" than your shirt.

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Michael,

I really appreciate your comment and I'm glad to be helping people. 

 

notownkid,

There's a lot of truth in what you wrote.  I've had a few good clients who are pretty tedious with pricing revisions.  Over the years I've done a lot of work for them.  It's tough to land enough work as it is, I can hardly afford to turn people away. 

That being said, there's a turning point in the opening stages of a client-contractor relationship that can really only be seen clearly in retrospect.  That turning point is where the motivation behind the "tinkering" is revealed. I've encountered quite a few reasons for it. 

Here are three the contractor should worry about:

Distrust

Incompetence

Dishonesty

Here are three that the contractor should be patient with:

Curiosity

Testing the contractors

Scope to budget alignment

It's tricky to pick the right moment, but I've found that some well-placed questions can help clarify what's going on.  In one case, I called a client who was on their fourth revision to ask what was going on.  The client responded by asking why I was concerned.  I replied "Whenever my bid requires several revisions, my client must need something I haven't provided.  Rather than further test your patience, I thought I should call you to be certain my next revision solves your problem."

That shifted the process away from "call and response" to collaboration.  Once my client had explained themselves, I could offer suggestions on how to define their problem and what their tolerances were for solutions.

In another situation, I had a client who wanted endless cost breakouts so I tried the same approach.  That client dismissed my concerns by asserting their "right" to see how things stacked up.  When I asked if the breakouts would be used to reduce the scope of work, the client said they'd be used only to assure competitive pricing in contract negotiations.

In other words, it's not enough that you deliver the lowest total bid.  If a competitor is cheaper for a portion of the work, that becomes the client's basis of comparison for negotiations. 

Since these breakouts were demanded AFTER the original bid, it's clear the client fully intended the bidders to believe that the lowest complete bidder would be awarded the job at bid time.    That assures competitive pricing.  Now they want to improve on their lowest bid by subjecting the winner to "negotiations" against breakout costs from the losing bidders.

That's fundamentally dishonest.  The original invitation to bid promised to fairly award the contract in exchange for good-faith bids.  Consider the incompetence of a person who tells the bidder they just broke their word, but expects bidders to believe they have honest intentions!

Imagine watching a 1600 meter race in the Olympics.  The winner is the one with the lowest time.  Should it matter if they were winning at the  400 meter mark?

I should mention that the perennial favorite phrase of the scoundrel is; "It's too close to call".  The only way that is possible is if they had two or more bids for the exact same amount.  In the extremely unlikely instance where that happens, an honest client could send a message to the affected bidders listing the actual dollar value they had in common and asking for a run-off bid.  Anything else is dishonesty.  I've awarded half-million dollar contracts that were won by less than $50 of difference.  If all the bids are complete, the winner is the lowest amount, period.  It's actually beneficial to the client to have bidders be so close because it reduces the risk that the lowest bidder is missing something. 

Whenever a client tells me it's too close to call, I respond by telling them they have no risk in awarding to the lower of the two.  Sometimes institutional inertia leads people to think every problem is solved by perpetual competition.  Reminding them that they're wasting time over peanuts can sometimes lead to a moment of honesty.  I had one client with a budgetary blowout who wanted the two low bidders to compete on value engineering ideas.  That was why he was pretending not to know who had won the original bid.

I told them that I can't afford to spend my bosses money providing check-numbers against a competitor who already won a job.  However, if I won the original bid, I will certainly do whatever I can to get cost down to meet the budget.  They responded by admitting that I'd won the job by less than 2%.  Now that they were free to speak clearly about the figures, they could tell me the exact amount we exceeded the budget.  Happily, we were able to make some changes to the suppliers and delivered a whopping 34% price cut without sacrificing quality, timeliness, or profitability.

In general, I think run-off bids should only happen in three situations.  The first is when the design has been modified following a budgetary blowout.  The second, is when two or more bidders submit the exact same amount.  The third is when a contract was terminated before the project was completed, but after the project was started.  Everything else is feigning legitimate competition to facilitate chicanery.

 

 

 

 

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Its just the price of doing business now, I have started to refer customers to a designer/engineer or tell them I need plans to work off. Its now my job to save them money it to provide them a bid for what they want take it or leave it. 

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I had a customer who was sending me anywhere from a couple to a dozen jobs to quote a couple  days a week.  These were nice jobs and we were not that busy at the time. I was putting anywhere from 15 minutes to a few hours each day on quoting their work.   After a couple of weeks I asked how my pricing was and was assured it was good and that jobs would probably be coming my way.  After about a month and a half and about 50-60 quotes for well over 100 jobs I told them I would no longer be quoting their work.   At the time their estimator asked me to continue quoting as he felt we would likely get something soon.  He then made a comment that I forget how he phrased it but it sounded to me like once he go the job using the lowest price he would then try to get a lower price from the low guy by pitting the lowest pricing against each other. 

I suspect I was just being used to drive down the price of their preferred  supplier.  I stopped wasting my time..

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