Jacob Austin 00:00:00 Hi all Jacob Austin here from QS.Zone. And welcome to episode 79 of the Subcontractors Blueprint. So yes, it's that time of the week again where I'm back with the Subcontractors Blueprint, the show where subcontractors will learn how to ensure profitability, improve cash flow and grow their business. And this week, if you've ever lost out on a job despite your best efforts, or if you ever underpriced the project and then spent months regretting it, then today's episode is especially for you because we're talking about winning work in a competitive market. Let's be honest, chasing tenders probably feels like a roller coaster. Frustrating at times, thrilling when you land a big job, Yup. And probably downright nauseating if you realize you've underbid and you're losing out once the contract is signed. But with the right strategies in place, you can try and improve your hit rate and ensure that the work you do win actually boosts your bottom line rather than draining it. So some headlines that we'll cover today. Writing an effective bid that highlights your value and what you bring to the table.
Jacob Austin 00:01:24 Identifying and pricing risks accurately during your bid. Tracking material prices and labor rates. Using past experiences to inform your bids. And if you work in a particularly small niche, trying to leverage that niche to give you a competitive edge. So I'm going to dip into each of these topics, and hopefully you'll find yourself with a solid framework for securing profitable work in the construction industry, especially for subcontractors. Bidding is a key part of your business. It's the part where you're securing your turnover, which is the lifeblood of your business. And whilst relationships and repeat clients can help. You'll inevitably need to complete single stage tenders at some point in order to fill your order book. Each tender is its own chance to demonstrate your expertise, but it also comes with risk. If you're bidding too low, then whilst you might win the job, it could bleed cash for you. And conversely, if you're bidding too high, you're likely to be overlooked before the second round of tender negotiation. And that's the problem, because in a competitive market, the margin for error can be razor thin, and some subcontractors may be willing to undercut everyone just to fill their pipeline with others willing to wait for the right job to make sure they're securing rates at premium prices.
Jacob Austin 00:02:48 And that's where figuring out your sweet spot is crucial. Clients will usually have three criteria, which are time, cost, and quality. And quality. Here isn't just about the final product, but also the intangible aspects like reliability, that all important communication and ability to handle complex jobs. The key is to show that you can deliver outstanding quality at a reasonable price. You can't just turn around and say, we're good at what we do, and I want this much money. You have to prove it with data, references and a clear plan. Oftentimes, winning a project isn't just about one job. It's about building relationships with main contractors, their project managers, quantity surveyors, or buyers who can bring you more work down the line. So your bid needs to reflect not only your capability to handle the immediate project, but it needs to position you as a long term partner and somebody that can be relied on for future work. That means, ironically, you might not always want to chase the lowest possible price.
Jacob Austin 00:03:53 Instead, consider how each project can build your reputation. Bring you more and varied expertise and help you to strengthen your market position, and that might help you to determine which projects you want to chase and are willing to cut your rates that little bit more for. If it means it adds an extra string to your bow to help you secure more work later. Let's start with assembling a tender package that highlights your strengths. Now, the first step here might sound obvious, but it probably isn't what you're thinking. First things first are to read your document properly. It's shocking when you receive a tender as a main contractor. How many people have just done a cursory glance through the scope, filled in a few rates and send it off? But this is where you need to slow down. Often there are nuances in the scope and specification, perhaps with environmental standards or particular scheduling requirements that can significantly affect your cost. And if you miss them, you'll either under quote and lose money or perhaps your you'll discover mid project that you're expected to deliver extras that you never factored in.
Jacob Austin 00:05:02 So my tip for you here is to develop a standard tender checklist that should cover everything from reviewing the main contract conditions to the subcontract conditions to the spec, the scope and the program. Properly verify what you need to price before you put pen to paper. Then you need to tailor your approach. Just like in any sales pitch, you need to speak the right language for your client. If the project you're tendering for has a lot of sustainability drivers, then you want to highlight your eco friendly procedures and your ability to prevent waste material or rework. If they're worried about budget, then talk about how your processes can minimize interfacing issues, ad hoc work, and perhaps offer value engineering options that will give you a competitive edge and help keep the budget in check. You've got to show that you understand the priorities of the particular project you're are delivering demonstrate your competitive advantages where you have them. So if you have specific technology, machinery, or in-house expertise that can speed up delivery or enhance his quality, then be sure to tell everyone about it.
Jacob Austin 00:06:10 Let's say you're a mechanical contractor that has an offsite yard and a specific capability in producing modular work, reducing onsite installation time. Perhaps include a short case study showing how you've saved another project weeks on the program, saving prelim costs for the main contractor, returning areas early to the main contractor so that they can work more efficiently, as well as reducing onsite labor cost. Concrete proof in the form of a case study, can be more useful and compelling than general statements like where committed to efficiency and not only just make this statement, but hammer it home with facts. A typical good quality tender might include sections like an executive summary giving a brief overview of why you're the best choice. Underpin your understanding of the scope and the unique value that you can add to the project. A methodology and approach demonstrating how you plan to execute the works, including any interface issues or phasing plans. A headline risk assessment. Potential issues that you can foresee and how you can try and mitigate them. Experience and references highlighting relevant projects and client testimonials.
Jacob Austin 00:07:24 And of course, the all important price and the payment terms that you've based that price upon. Keeping it tidy, readable and professional gives the impression that you'll be the same when you land on site and you're doing the work. If the tender documents ask for a proposed schedule, then give it some serious thought. You don't just want to echo back to your client their desired timeline. If you know it's unrealistic. Also, if you think you can save time, maybe you have some extra labour available, Then flag it up as it might be something you can use as a benefit. But be cautious to tell them about any constraints as well. So if you've got long leading items that mean you can't start until a particular date, then spell it out. Honestly, this is how you can manage expectations. Get the right subcontract period into your contract and then protect yourself from liquidated damages or friction over deadlines. An important thing that I mentioned just now is identifying and pricing risk accurately during the bid. Every project has its risks.
Jacob Austin 00:08:29 Some of them are small and some of them are quite significant. And these are on top of the regular project issues of design changes, scope creep, fluctuating material prices, and potential coordination issues. Think instead. Technical risks. How complete is the design and are you being asked to complete the design, or are you being asked to price as if the design were complete, making assumptions that you can't really get to the bottom of. Are there site risks such as access limitations, logistical challenges, an unusual location, perhaps next to a busy high street or a football ground, or particularly close to an adjacent building? Might there be potential issues with neighbours? Are you going to carry out some loud work that might disrupt people working from home? Shift workers who are sleeping during the day? Is there anything you know about the site, like the former use of it, that might point towards some interesting risks in the ground? Then you've got contractual risks thinking, particularly here, of clauses that might shift liability to you as a subcontractor, potentially over and beyond the scope that you might reasonably price for.
Jacob Austin 00:09:42 Or perhaps you're being asked to take on the risk of delays or cost overruns with some subtle changes of words. And then what about commercial risks? So how long are you being asked to fix your price for? Are the payment terms particularly long? Or is there a large retention or large liquidated damages? List these out. Then you can figure out which ones you can try and control and mitigate, which ones you might be able to share with the supplier, such as getting your supply chain to fix their price for a period of time. Or there might be ones which you want to price into your bid. And whilst we're talking of pricing, how would you go about doing that in a way that doesn't compromise your bid? So I've seen before, some subcontractors are adding, say, a blanket percentage on top of their costs, which is like a just in case risk allowance. And that's better than not factoring risks in at all. But it's not very precise. And it might lead you to be inflating your price and mean you missing out on a potentially lucrative contract.
Jacob Austin 00:10:45 So instead of doing that, try and break it down and try and target the particular risks that you're seeing. So you might want to make a contingency for materials. Let's say you're providing a lot of steel within your work, and you anticipate that the steel price might go up. So target a specific increase allowance on that item. And this is where it helps to have your ear to the ground as to what the market's doing. You could do similar other things. So if you've got program over on as a potential risk because you think the program is perhaps a little tight, you might add some contingency to work some weekends with an allowance for some extra supervision and an uplift that you might have to pay your lads for coming in on a Saturday. You might foresee some coordination issues with your work, and think it's easier to do certain aspects of it out of hours, so that you're not getting the disruption of other trades stepping on your toes. And then there's the design. So if you see gaps in the drawings, this might be a time to propose a provision or some for incomplete design.
Jacob Austin 00:11:49 And by doing this, you're also going to bring this to light for the contractor as well. So when you submit your bid with some queries over interfaces and the provisional sum for tidying that mess up, whatever the case may be, you can follow that up with a question and a conversation with the contractor to say, how are the other suppliers dealing with this? I think it's an issue and I can work through it with you, but it might also cause them, if they're reasonably competent, to raise questions with other suppliers and to input it into their comparisons so that not just your bid, but everybody else's is carrying that same adjustment. And in this way, you're trying to level the playing field when the contract is comparing quotes to try and edge your bid ahead. And you're also, if you're transparent about your risk allowances, telling the contractor that you know what you're doing and you're giving them the chance to address potential concerns before they award the job to anyone. Don't forget, of course, those risk items that you wanted to try and mitigate.
Jacob Austin 00:12:50 And you might do that through assumptions. And this is where you're stating how are you priced to do something in particular, or that you've excluded a certain way of doing something to cover yourself in case either a particular risk transpires, or to prevent yourself from being exposed to costs that you wouldn't have allowed for. Not mentioning these things upfront is what could get you stuck holding the baby if risks happen later down the line. Now, in recent years, we've seen some colossal fluctuation in materials prices. We're thinking timber, steel, fuel, even things like plasterboard and labor rates have been up and down as well. Bear in mind that there are local fluctuations as well. If you're working in an area where labor is particularly scarce. So if you're working off patch, you need to understand that and try and get the right allowances made, because underestimating them can quickly impact your profit margin. So where do you start? By doing something about it? Well, I always deal with as current an information as you can.
Jacob Austin 00:13:57 And that means not relying on a six month old quote for your plasterboard. Get a fresh one. Certainly, if it's the largest part of your materials outlay. Get a specific quote for the job so that you're tendering with the absolute latest information that you can consider whether you can enter into a bulk purchase agreement, particularly if there's been something like a specific spec produced for the job. That means the material supplier has likely done a specific quote for the job. And you may well be able to ring fence that material so that you can rely on the cost certainty of locking in the rates for the whole period. If the job is particularly long with large quantities of the same material, you might be able to negotiate with your supplier because they'll be giving you consistent supply for a period of potentially years. This is a particular volume discount or bulk deal for that supply on that job. The other thing that you can do is go back to back with your suppliers. Quote. Insofar as the period for which the materials are fixed is concerned, and then pass that on to the contractor.
Jacob Austin 00:15:06 So if you know that you've got volatile materials and you know your supplier revisits these prices on a regular basis, say quarterly or half yearly, then by going back to back with that period, you're ensuring that when it expires, you're able to hold your hand out to the contractor and pass on the uplift that your supplier is now charging you. Consider benchmarking labour costs, so keep an eye on industry specific wage agreements or typical pay rates for specialised trades. You can find this kind of information on the basis service. That's the building cost information service. This should give you good solid information as to how to adjust just old rates that you've used on a previous job to make sure that they're contemporary to bid on the next job. Do your local market research. So if you're bidding on a job in a new area, check the local labor availability and the kind of rates that are being paid for tradespeople. You can't just assume that these are the same as in your home region, particularly if you're working a long way off patch.
Jacob Austin 00:16:11 There are large regional variations, and unless you're able to take your own labor down there, which then comes at its own cost of potentially lodging your staff away. You might be unlucky enough to cop for higher wage bills in the place that you're now working. There are also some peculiarities about working in particular places, and what I mean by this is if you're a contractor from outside of the local area, don't expect to be able to pick up labor at the drop of a hat. You might have to snout around for people that are willing to work for you. Now, I have had this in the past where I've picked up the phone to ask for a quote from a local supplier, and they've literally said to me, no, we don't work for you. You're not from around here. And I try to explain at the time, because I was working for a local authority on a local project to them. And part of the criteria was to use local labor. So I was trying to explain that one of the drivers was to reinvest the local government money into local suppliers so that their spend was going back into their local economy.
Jacob Austin 00:17:18 I've said the word local a lot. But nevertheless, in that instance, they weren't interested whatsoever. So make sure you can source local labour if you're going to work away from your regular patch. Another thought on managing your labour costs is that sometimes adding an extra gang or an extra crew is cheaper than pushing your existing labour into doing overtime. So when you're pricing a job, think about this when you're doing your cost analysis, you might be able to keep your rates keen by supplementing your labor force at key points and getting everything done during normal working time. I also mentioned using past experience to inform your bids, and what I mean by this is if you're doing your cost analysis properly, and I've done a detailed episode on cost reporting in the past, every time you finish your project, you should collate a wealth of data that should include your estimated versus actual costs, your man hours that you've actually expended, versus the forecast information on unexpected delays. The supervision time that you provided versus what you put in your bid.
Jacob Austin 00:18:28 And you also should have some lessons learned on design challenges that have come up in certain scenarios. And the lessons learned also from key risks that have actually panned out on a job and which ones you've managed to avoid. All of that information is vital for you to learn from. If you're not analyzing that to refine your future bids, you're missing out on a huge learning opportunity, and you might be able to create a simple post-mortem for your projects, identifying key items which are over or underestimated items which have significantly gone up in price, or how many hours you spent doing rework. Those bits of insight can help you calibrate your future bids and inform risk allowances so that your tender is covering your back, but is also sharp enough for you to win the work. You can also start building a bit of a cost library so that you've got unit costs or average labor rates for different scenarios that might be urban site versus rural site, small project versus large project, or you might include sector information. So residential versus commercial versus healthcare and so on.
Jacob Austin 00:19:40 Over time you'll start storing up a robust cost Library, and that makes it easier for you to put together ballpark estimates on new bids so that you can estimate confidently in the future, so that you're not left guessing when you need to put a price to a particular kind of air conditioning unit. You can reference some real data from a similar job you did months ago. The other thing that this information can do is help you to highlight key successes for case studies. So if you've overcome a major challenge or you've managed to deliver a project under budget or ahead of schedule, that tells a great story and it gives potential contractor clients good confidence that you can deliver the job that they're now tendering for. And clients love to see evidence that you've solved problems and you created better efficiencies, and that you can potentially bring that to their job. That kind of information is a lot more powerful than just a statement of, yeah, I've done that kind of work before. Now the construction market is a big place. There's plenty of work out there.
Jacob Austin 00:20:45 But on the flip side, that means there are tons and tons of subcontractors that might be bidding for the same jobs. So if you have worked in a specific niche or you've picked up specialist skills, you can try and use these to stand out from the crowd. Maybe your your region's go to for complex facade systems. Or perhaps you've got the best in-house design team that can handle complex projects, modeling them in BIM and solving issues before they come to light. With last minute design amendments that the site managers figured out. Doing your post-mortem evaluations can help you try and identify those particular skills that you can try and lean into to secure more work. You might also look at which projects brought you the best profit margin, or the most job satisfaction, or the job that you managed to get over the line where few others could. That might be your niche, even if you haven't formally branded it. Of course, there's more to marketing a niche than just saying we specialize in. I don't know, historic building restoration.
Jacob Austin 00:21:53 If that's something that you can do, go further than just a simple statement. By collating references and highlighting specialist techniques that you might have used. For instance, if you can detail how you worked on a grade two listed building last year, what the unforeseen structural challenges were that you've overcome and how you managed to do that and still meet the Heritage Month's strict standards. That kind of information is gold dust, and contractors and clients with similar needs will look to you for the same thing, but only if you're telling them about it. And that's the point. If you can do something special, you've got to get it out there for the world to see it. If you've got specialist skills, sometimes that means you can charge a premium, but oftentimes you've got to be able to justify that that premium is worth it. If you've got an advanced approach that can shorten a program that can cut out certain mistakes and reduce your client's risk, then the value that you can bring for that premium is very much real.
Jacob Austin 00:22:55 And spell that out in your tender in your bid. Show calculations or references that prove that your premium price is more cost effective than working with a cheaper, more generic or general alternative contractor. And finally, some thoughts on bidding for the right work. It might be tempting to chase every tender that you can, but rather than doing that, try and choose ones that fit your strengths. It's all well and good bidding for simple work, but the simpler the project is, the more likely it is that a lot of people could also be bidding for it. So if jobs are too large and complex for your comfort zone, or if they're too small and you struggle to be competitive on them, then weigh up the opportunities carefully overextending yourself can be disastrous, but focusing on the right projects that offer you the best opportunity at securing a good margin, those can really push your growth and increase your profitability. And to achieve that, it's worth developing some bid suitability parameters. So does the project match your typical scope? Are the timelines and budget feasible? Is the size of it or the pace of it within your capabilities? Are you dealing with a reputable main contractor who's going to pay you on time? It's these kind of questions that you want to ask yourself before you put your time and effort into a bid that might not suit you.
Jacob Austin 00:24:22 And my last thought for today bidding isn't about winning at any cost, is about winning profitably and sustainably. If you're methodical about the way that you bid, analyzing the scope of the contract, clarifying your assumptions, showcasing your strengths, and learning from past projects to inform your future work. Then your hit rate with bids will climb and hopefully so will your bottom line. Thanks for tuning in today. My mission with this podcast is to help the million SME subcontractors working out there in our industry. If you've taken some value away from today's show, then I'd love it if you'd share the show and pass that value on to someone else who'd benefit from hearing it. And of course, subscribe yourself if you haven't already. Thanks for tuning in. If you like what you've heard and you want to learn more, then please do find us at www.QS.Zone or you can reach out to us on all your favourite socials. Again at @QS.Zone. Thanks again. I've been Jacob Austin and you've been awesome.
