Constructonomics Gets Smoked Again
When I lived in Avon, CO, a little town about ten miles west of Vail ski resort, the local news was a little sparse at ti
mes, especially during the summer and fall. I found myself, on a few occasions, reading up on the pre-season performance of the volleyball team at the local middle school. There were some rough months out in the Vail Valley. So with all kinds of juicy gossip flying around the web these days, I’m going to give you some more with the public bid results for the remodel of the BerksCounty Library and Coroners office in Leesport, PA. That’s right, you might as well close the browser ofTMZ.com because this is some of the best news out there. I didn’t run into a tree or a fire hydrant on the way to the bid, but if I had, it would not have mattered because Constructonomics was defeated in this competive bid.
In fact, I was blown out of the water. The winning bid was a good 30% below the number I submitted. This was honestly shocking for me. I thought I could be very competitive with a straight 10% mark-up over sub numbers. And as far as the mark-up goes, I probably was very competitive. However, I believe that the main difference lies in the numbers other contractors were getting from subs in any type of job, right now you can find many in the plumbing service with https://allserviceplumbers.com/locations/ and electric system repairs.
When I approached subcontractors for prices on this job, nobody really knows who I am. For all they know, I’m just another contractor that doesn’t want to pay their subs. Without a history of payment with these guys I imagine that the prices they give me are far from rock bottom. I think they may be a bit overly conservative in this regard because I have a payment and performance bond and we can always write joint checks from the owner if they are really that concerned with it. But as always, uncertainty brings about axienty which ultimitely increases price in a hard bid situation. The good ol’ boys from Leesport who are accostomed to doing business with each other will feel much more comfortable giving numbers with razor thin profit margins to each other.
I was also hurt by that fact that some contractors to whom I solicited bid and bond just flat out ignored me. So in some cases I only recieved one bid for parts of the work. This was the case for paving, which was about 30% of the total project cost. By getting at least three bids for each trade, you ensure a very competitive price on which to add your mark-up. It’s tough being the new guy.
I spent all week putting this bid together and it turned out to put no money in my pocket. However, I think I realized that my chances of being competitive in a hard public bid situation are slim and none. I do not yet have the relationships built up with subcontractors to play this game well. I think I’m going to modify my strategy a bit and go after private clients a bit more. Hopefully, financing will loosen in the coming months and I will be able to get some work in the door, ’cause man, I need it.
Tags: competitive bid, Construction blog, Construction Economics, John Poole, public bid
“However, I think I realized that my chances of being competitive in a hard public bid situation are slim and none. I do not yet have the relationships built up with subcontractors to play this game well. I think I’m going to modify my strategy a bit and go after private clients a bit more.”
Why private jobs are easier to obtain than public jobs? Less competetion?
Another explanation is some of the GCs may be formulating their bids having already found areas ripe for change orders planning to make their profit on higher markups on COs.
Another area many owners, especially in the public sector, are missing is properly qualifying contractors before they bid. The quality of the information in the qualification statements and the associated financials has really been damaged by the recession. Many of the low bidders may not have the working capital to properly fund the project.