Welcome to All Things Estimating
I would like to introduce a new website that focuses on answering two questions –
Can it be built? How much is it going to cost?
My name is Scott Townsend – the founder of All Things Estimating,
I have recently relocated to Launceston for a new adventure for my family and have set up shop working remotely and offering building consultancy focusing on Estimating Services whilst developing this website into a resource bank and training & education to pass on knowledge for the young blood of the industry.
The basic premise is to explore processes within the design & building process capturing D&C trinity that exists with “Design Management, Tendering, and Procurement”. I have been in the industry for over thirty years. Firstly, as a designer then a builder, D&C estimator and most recently author/blogger .
The website gives me a platform to help empower others on a larger scale. I have high hopes for the site and it is also my hope to ring in some colleagues to give their specialist experiences as well. So please share it with your colleagues and I would be thankful for any blog ideas or industry insights.
All Things Estimating is open for Business.
Where do Tenders come from?
When I am getting to know people in an organization – I normally get around to asking this question- “Who do you think is the most important person in an organization?”. The answer varies from who you are talking to and what their job is within and organisation… .
- Management will answer – its a team event and everyone is important, sing some type of praise starts singing Kumbaya some high management motivation? But they probably think of themselves or the boss.
- PMs will think that they are the captain but will choose someone else to be politically correct.
- The supervisor will say – Site staff as if the product is not built properly you cant get return business and a reputation?
- Etc. Etc. I think you get the picture…
“The most import person – is the person who brings the business through the doors, maintains relationships and closes the deals. So the tender team, procurement, and the construction teams all maintain the reputation of the business – the salesperson gives everyone the opportunity to have a job. Now the boss maybe that salesperson role. So everyone else’s job within the team is to make the salesperson’s job easier. But if a business can get every employee to take on some type of sales responsibility as a united front – obviously that is the goal. Sales and network marketing is an ever-changing world – there is no recipe over the last decade that hasn’t had to adapt.
MARKETING & PIPELINE.
On all the TV shows the client is always struggling to find a good builder. Now that may be correct in some areas and mainly in the residential market however, in the commercial market, it is all out war. You are competing just to get on a tender list most the time, unless you are in a niche market – you have to go out and find the work.
Some tenders just drop into your lap, however, the vast majority (especially in a competitive market), just getting a tender to land at your desktop is an achievement within its self.
As mentioned the tender process doesn’t necessarily start with the Request For Tender (RFT). It actually starts with months or even years of project tracking of Development Applications at Council, specialist organizations such as BCI Australia, Cordell, etc. Trade & network functions, talking to architects, engineering and prospective clients. Letters of expressions to key organizations, countless meet, and greets, tendering on other projects which may not be not your key focus, just to establish legitimacy and a relationship with a client.
Lots of time and money and sometimes plain and simple luck take place. Hopefully, you have a good marketing team who has a pipeline of tenders, to keep the estimating departments ticking over.
THE EQUATION
TO KEEP THE DOORS OPEN?
There is a basic math equation that every General Manager / Owner or the like understand too well. The basic concept is – “how much work do we need to win to be able to keep the doors open and then make a profit?” This number is different in every business but that number is then directly related to the tender win/loss hit rate.
I will talk more about this in estimating record keeping but this is a classic example of why estimating record keeping is so important.
If you wish to read more about estimating records – Click Here
If you have a hit rate of 1 in 5 tenders and you need a turn over greater than $20M, the tender team then needs to bid on approximately $100M of work. Now if you traditionally tender on tenders in the ranging from $1m to $30M – that would equate to not 5 tenders, it may be as many as 30 tenders. So the sales and marketing need to be out there pounding the pavement.
Lots of things can frustrate the pipeline. Whilst looking for the work to tender on – a lot of prospective projects just don’t proceed or simply may be postponed. Sometimes a cost plan doesn’t proceed into an actual project, or there may be a redesign. Keeping a strong pipeline is fundamental to any business plan.
If you are working for a smaller company (normally in the tier 3 category) – the salesperson could be a number of key people including the head estimator. But as an estimator – you want to know the direction of your company. Take an interest in the pipeline. On the other side of the coin – There will be those down times normally around January and February.
But don’t get too disturbed about a small lack of work as there is always price lists and relationship with subbies you can develop. Estimating can be a hard gig however your job security is pretty good. If a company hasn’t got an estimator, the appearance is they have pretty much given up the game. So in these slower times get some good health/work routines going, get to the gym as much as you can. Because when the work starts coming down the pipeline is literally doesn’t rain – it pours.
If you wish to read more about
Tender Process – Click Here
Tender Pre-Qualification
Finding a Builder?
Finding a builder for the job is harder than it sounds. Most builders have a certain genre, that their experience, staffing and skill set gravitates toward. You also have residential, commercial, industrial, medical and hospital builders, and fit-out builders. Then you have high rise residential and office buildings, shopping centres. infrastructure building, civil building etc.
Builders also have a business model that also evolves around reducing risk. So basically not every builder will build every type of project.
Unless you have a lot of time on your hands, how do you find the right builder for the project and you don’t know where to start?
The answer is to do a lot of research, ask consultants for referrals, advertise, etc. Now, these clients have not got any relationships with these builders and the clients want some type of assurance that they first talk the talk and then back it up by walking the walk.
(Yes – I grew up watching John Wayne OK)
Now if you send out tenders into the world you want to know a little bit about the builder who is building for you. What is their business culture? To be selective in the many types of builders, one way is a pre-qualification process.
What is Tender Pre-Qualification?
The single biggest issue you have in any business is the expectation that the product you are selling is going to meet the client’s expectations. “Communication of a dream”.
Moving forward, clients are not experts in drawings, building codes, Councils, etc and they hire consultants to place their concept, their dream and expectations onto paper. Huge leap of faith for many clients.
And when the project is finally built after all the stakeholders get involved – will they be happy with the result? Questions for many clients could almost be impossible to answer.
The selection of a design team was hard – now that has to choose a builder and can that builder meet that expectation or dream?
Most clients are not experts in design or the building industry, they have an overall concept but who do they choose for their design and building team. These decisions could be one of the most important financial decisions of the client’s life. At the outset, there is a mountain of potential for risk. So how do you reduce the risk?
One way is is to send out an audition process called a pre-qualification to tender. This is a way to check the builder qualifications and select a select few to tender on the pricing. So the pre-qualification process allows the client time to focus on the builder’s character, staffing, ability to complete the project, insurances, etc. It also gives the client time to address one thing at a time. It would also give the builders interested to have a glance at the drawings and ask queries about the documents that may help the design team improve the tender documents from a build-ability direction.
Now, this only works if the builders selected in the process can actually commit to the tender request at the time when the tender documents are available.
A week in building terms is a long time indeed, so a lot can happen between the first expression of interest (EOI) or pre-qualification.
So the pre-qualification is often a list of questions in the form of schedules so the client can compare builders like for like (apples for Apples). These questions are basically nothing to do with price, more capability. Now if these questions went are with a standard tender request – these schedules would be called “Non-Priced Criteria”.
In a standard RFT, there are two sides of any tender – non-priced criteria & priced criteria.
A pre-qualification question is very similar to non-priced criteria. Questions at this pre-tender stage would include:
- Introduction of the future tender documents
- Site Restrictions & site-specific challenges.
- Quality standard and other accreditation
- Past Performance & Relevant Experience
- References and testimonials
- Key Personnel
- Current commitment & resourcing
- Insurance details
- Local subcontractors and suppliers
- Aboriginal Participation Policy
- Drug & Alcohol policy.
These documents are basically documentary evidence and references that can prove that a builder can actual walk the walk.
Now assuming you have a list of builders that you are happy with and have met all the client’s criteria – the process can continue onto the tender documents strictly based on price. This process is greatly dependent on timing plus there is another issue with this approach.
What if the builder has fantastic pre-qualification documents and they are crap at tendering?
I think in theory the pre-qualification process has benefits for the client and builder however may limit the fishing pool for the best builder for the job if they, unfortunately, were unable to submit an EOI in the time frame or just wasn’t aware of the potential project to tender.
Within the non-priced criteria, the builder would delve into how they would actually manage the project and over and above the list above the builder may also submit additional items such as:
- Construction Management Plan
- Task Appreciation & Methodology
- Staging plan and Site establishment
- Others.
If you wish to read more about
Tender Process – Click Here
Phone calls
Ensure the Subbie IS engaged
1. I can give you a scenario in most tenders where I hear – ” I didn’t submit a tender because ….” or even worst “I didn’t know you guys were tendering” the reasons for email not hitting their targets include:
- Subcontractors and suppliers have varying degrees of computer know how.
- Addenda can be missed if the subbie doesn’t read the income emails.
- Plus a subbie may download another builder documents and assumes that both builders have the same package.
- With document control, they don’t realize that an addendum has been issued.
- A subbie may be going on leave and you need a quote before that person heads off.
- The person on your tender list has left the company.
- Etc, Etc.
2. I suggest you have two to three rounds of phone calls at the following times during a tender:
- Preferably prior to the documents being issued (but at least your key subbies)
- Every Addenda (yes I mean every addendum)
- Before site visit
- a couple of days prior to tender close
- And after tender closes to chase any rouge trades that didn’t submit or running late.
Development and maintaining subcontractor and supplier relations is part of the role – you must be able to communicate and extract information quickly.
Tip 1 – If you somehow to work in the word “Thank you” into the first sentence and last sentence of every phone call. A little honest humility goes a long way.
Tip 2 – Try to combine a number conversation into one phone call (write down your queries and keep to script) – Very Efficient.
Tip 3 – For Addenda – Use a recording of your voice and send a recording to the subbies as a group email. It saves lots of time. But still, ring the key trades.
If you wish to read more about
Tender Process – Click Here
Post Tender & Client Meetings
The final step is a meeting with the client and/or clients superintendent. If the client asks to meet the contract team who will be running the project things start to get really exciting.
Strategy – I often suggest that an estimator in these meetings is better not to be there. The reasoning is if the client asks any financial queries – it gives the team an opportunity to do a little research and sometimes you can make a financial decision to try to win the project by wearing some costs or blaming the estimator and giving a deduction.
But when you are in these meetings – Know who everyone in the room and their role.
is usually the guy who signs the cheques"
After this meeting is concluded you normally have a small window of opportunity where you can re-submit, clarify, provided an alternative price (this is your last time you would see the client before a decision is made one way or another.
This is pretty important – You need to figure a way to change your price but not be seen to lower your price. This can be done by a late quote that has changed your risk on a trade, better buying from negotiation on another project, etc. But – A client will never engage if he or she believes they are getting a substandard price.
You walk into the meeting at a disadvantage as you want something. The sales part of the job is so valuable at this stage. I have witnessed the anchor of the negotiating team wall into a meeting with no chance in hell of winning the tender to somehow walk out of the meeting with a letter of intent in hand.
This is done by basic manipulating the information to a point that the client is in fear of signing with another builder.
If you wish to read more about
Tender Process – Click Here