I’ve been involved in systems contracting for over 30 years now, and still hear stories of “the job that never ends.” Even with sophisticated estimating and job costing tools and processes our members end up with that one nasty project. It may have nothing to do with your scope of work or bidding methods, it may be circumstance well beyond your control. The most often described bad project stories I hear about seem to center around payments and cash flow as well as scheduling and delays.
So, how do you avoid even bidding on that job? Look for the signs:
- Have you ever done work with that client or CM/GC team?
- Is the project within your “sweet spot” for size and scope?
- Is someone trying to convince you this job can lead to big things down the road?
- Is travel required beyond your typical region or area of work?
- Do the contract terms and conditions push an uncomfortable amount of risk towards your company?
- Are there unusual contract requirements; fees, required meetings, guarantees, special insurance, representations or warranties?
- Does the job require you to extend your credit line, move around other projects, bring in extra resources, use a first-time vendor, buy specialized equipment, etc.?
Another trap that systems integrators seem to fall into is a pricing scheme driven only by the fear of not having enough work. On the surface it is interpreted as cash flow that will pay wages and overhead. The bad jobs often create a false sense of positive cash flow when the payment terms are stretched beyond 90 days. At the risk of sounding like a broken record, we simply have to be disciplined with stored materials and progress billings to avoid this situation.
The one that got away is often described to me as a large prestigious project that was snatched up by an out-of-town integrator who came in and bid at your cost. I contend it’s an ego thing and by setting your “minimum mark” and avoiding the value engineering game you can actually feel like a winner when you drive by and see your competitor’s trucks parked out front.
So how do you keep from losing the job you really want?
- Be as involved as possible from the early stages
- Seek clarity on the use of sub-contractors and substitutions
- Encourage the decision-makers to mandate pre-bids and pre-qualifications
- Be very proactive on RFI’s and encourage them to respond to all bidders
- Have full vendor support lined up well ahead of time
- Prove your “bondability” even when no bond is required
- Position your company as the safe choice and the most responsible provider
Please know that you can’t control your competitor’s price or understand their logic – you will lose some public works projects where accepting low bid is mandatory. And there will be times when your “approved’ materials are simply higher priced than the competitors “approved” products. In that case you simply move on. If you are the owner or manager, speak openly with your sales team about this and why you can compete on certain projects.
So, back to the original question… what’s worse? Too little work, or having too many resources tied up in a non-profitable job? Well, that’s ultimately up to you, but a friend of my uses a simple pricing philosophy. He says that if he’s going to go broke, he doesn’t want it to be from having too much work. He has learned to control his ego on having to win the bid and he won’t let anyone talk him down below his minimum mark.
Over time you won’t even remember who got the big job you lost because it doesn’t matter. Get over it quick and move on. In many cases you might be asked to do some follow up business with that client. If it makes sense, swallow your pride and do it…and full rates of course. CW