long the same line as the last blog on hidden project costs that kill profits, I wanted to share a couple more specific ideas for your consideration. Most of the time, profit or loss comes down to labor being ahead or behind what was originally included in your base bid. If you lose money on the change orders, well, I can’t help you there.
Be sure you always include these two things in your base proposal:
1. Use specific language on the time of day and days of the week the proposal is based upon. Be as specific as you can about that condition and leave no doubt that your price is based upon your regular working hours. If you plan to do cut over before and/or after hours or during normal work hours, be sure to list that, too. The same goes for training, safety meetings, job site meetings, etc. If necessary, give them an alternative bid for items that would add to the price if these conditions occur after the project has begun. Make sure there is absolutely no confusion about this.
2. In your scope of work or terms and conditions, spell out exactly what reference you are using as the basis of your company’s safety procedures. For example, “This proposal is based upon the safety procedures manual (or possibly the OSHA-Approved State plan) of XYZ Communications. If customer-specific procedures differ from this manual, the additional time and training required will be in addition to our base proposal.” This language will help avoid the insanely long delays and expenses associated with security clearances, background checks, daily meetings, new manuals, new procedures, first aid, CPR, fall protection, and specialty PPE, etc.
Here’s a real-world example of the importance of these two parts of your proposal: I recently spoke with a member company that is 40 hours into a revised safety procedures manual and employee training on a 400-hour project they were just awarded. They haven’t even been to the job site yet, but they’ve already used 10% of the labor allowed on something they knew nothing about before the contract was awarded. Another member reported that the contract they received had a mandatory training/certification program required by all contractors that was provided by an “exclusive” third-party organization. And, it’s getting worse, not better.
The conditions that you agreed to with the client for a fixed sum of money don’t always happen in that fashion. If that’s the case, arrange a meeting to discuss the extra charges. I know what you’re thinking, and, yes, I live in a world where everyone gets along and looks out for one another’s best interests. I do understand that, in the real world of everyone covering their own rear ends and trying to bring in jobs under budget, this can come down to a no-win situation. I get that; but, you need to do what you can each and every time to make sure you have these items covered. This will leave your company less exposed to hidden cost overruns.
It’s always something…