Picking Margin

I used to hate picking profit margin on bids.

The way it works is you take your total costs to perform the project and add a profit percentage to your cost. That gives you your total bid price.

Why the dread? Well, on most public bids, everybody has to submit their sealed bids and when they are opened simultaneously, you get to see all the bidders prices. The contractor with the cheapest compliant bid gets the job 99% of the time. And you only get one shot at each bid as long as the project is awarded by the DOT, county, or city.

Let’s say I’m bidding $5 million asphalt resurfacing job.

If we win by a lot let’s say 10% lower than the second place bidder and I put very little profit on the bid, then I feel embarrassed because I missed out on $500k in potential additional profit. The winners curse.

If we lose by a little let’s say 2% or $100K compared to the winner and I put a bunch of profit on the bid, well I still feel foolish because I got “greedy” by putting too much profit in and we missed out on the bid to our competitor. You can’t make any money on a bid that you don’t win. Contractors who run out of work go out of business.

So there can be a lot of pressure to make the right decision. And competitor bidding behavior is completely out of your control.

Clean, simple, and insightful data combined with sound reason and intuition can help simplify this tough decision contractors face day in and day out.

So I’m curious, what has helped you successfully pick profit margin on competitive bids? You can reply to this email or leave a comment below. Replies are held in confidence.

PM/Estimator Interview Questions

You can learn a lot by how they handle hard things…

1. Walk me through the worst bid you’ve been involved in. How did it go and what was your role?

2. When were you part of an unpopular decision and what did you do?

3. Tell me about the hardest job you have ever built.

4. What is one thing many people believe that you think is complete BS?

5. Recall a time you came to admit fault in a tough situation. Note: If they can’t think of one, do not hire.

6. Tell me about your reading habits. What were the last couple books you read and what did you think about them?

These are just a few, reply to this email & share your favorites.

Da Future of Roads

Snapshot:

• I recently learned about The Heritage Group, who hosted an event on the Future of Roads.

• Here’s where they think tech and infrastructure are headed in the US. This is solid content about the future of our industry, check it out:

Stoic Wisdom Quotes (Double this week!)

“You are just as likely to solve a problem by being unconventional and determined as by being brilliant” - James Dyson (vacuum man)

“Health, happiness, professional abilities, fortune, position in society - all these were things that could be achieved again or restored. After all, we still had our bones intact. Whatever we had gone through could still be an asset to us in the future” - Victor E. Frankl

Reflect on this as we embark on another week of bidding and building!

Warmly,

Tristan

About the Author

Tristan Wilson is the CEO and Co-Founder of Edgevanta. We make software that helps contractors win more work at the right price. He is a 4th Generation Contractor, construction enthusiast, bidding nerd, ultramarathoner, and paving nut. He worked his way up the ladder at Allan Myers in the Mid-Atlantic and his family’s former business Barriere Construction before starting Edgevanta with his Co-Founder Matt in Nashville, where the company is based. Reach out to him at [email protected]