Preventing the need for a Project Management Super Hero: Bid wisely and with caution
I believe the goal of managing your project should be avoiding the need to have a Project Management super hero come and save the day. Essentially, if you run the project the right way, you won't need anyone to come and save it from calamities and collapse. And where is a number one place for project failures? At Project Initiation.
I had a recent conversation with a contractor friend, frankly a repeat conversation I have had with quite a few small contractors I know and I have worked with over time. He lamented yet another project of his that was now in the red with various headaches and he was having difficulties figuring out how to get the project completed with all the change orders he has executed (prior to final negotiation and approval) and was not adequately compensated for and other cost overruns. Considering he calls me periodically for bidding advice, and I know the advice I give him versus the bid he subsequently submits, it is no surprise when he calls with a problem. I typically know where his project failed, at initiation. Hence a summary of the advice I gave him was, in a nutshell, dude, learn to BID WISELY. Some might say bid conservatively.
Small contractors are constantly challenged with the desire to keep their doors open. It is a tough situation to be in. However to do this, they many times continually under bid projects to make sure they get work. Then they get the work and cannot complete the work. I like to say, in this case, the sum total of all work done, is then equal to ZERO. Meaning, he might as well not have taken the job in the first place. Consider this, the day you sign a contract on an under / low bid job is the day you initiated the failure of your project. It is as simple as that.
While there are many times legitimate reasons to take a risk and submit a low bid, too many contractors make this a habit and the habit becomes the norm. What is surprising to me is they make the same mistake over and over and over again! As they typically attribute the failure to several factors except the root of their problem. Reminding me of a very famous quote by a very famous and smart person:
Insanity: doing the same thing over and over again and expecting different results. - Albert Einstein
Suddenly that small contractor now needs a Project Management super hero to come an save the day, or in this case the project. Sad.
Small contractors will low bid a project with the belief they can save better than the next guy and deliver with a much smaller financial output. WRONG! On many projects the major costs, labor equipment and materials are typically set in stone, mainly the materials. So the opportunities for some savings becomes labor and to a lesser extent, equipment. This is why seasoned contractors are able to challenge bids when they notice the lowest bid has fallen out of the bidding range from all bid submissions, the numbers usually tell a very nice story.
With today's high availability of cheap construction labor in the United States, one can understand why this becomes an attractive option and solution for many small contractors. They erroneously use this option time and time again to execute projects and by so doing create mounting problems on their projects. What they fail to take into account is how much rework they end up having to do on the projects from the mistakes of the use of the initial substandard labor force.
On a past project, being handled by a small contractor, on my daily visit to the project site, I happened to find an electrician working on a freshly installed unit. Observing the fellow for a short period of time, it became painfully obvious, he was having a rather hard time figuring out some aspects of the task at hand. (I say painfully as in my opinion, that is very valuable project execution time going to waste) Not even knowing who I was on the project or my function, he finally comes up to me as ask a question of course technical in nature as about his installation task. One of my cardinal Project Management rules is NOT to give a subcontractor direct directives or direction unless in very rare situations. I remarked to the fellow that I am in fact the "owner" of the project and noted I was rather concerned that the electrician working on my project does not seem to understand what he should be doing on the job. I gave him my general contractors (GC) information and did direct him to get in touch with him immediately for directions and instruction. I also immediately called the GC's Project Manager and noted my displeasure.
Suffice to say this specific example DID result in a fair amount of rework which translates into money coming out of the GC's pocket, and in many situations even far greater and costly consequences. The result of trying to low bid a job by expecting to have cheap labor et al, save you some major dollars is most times a fallacy due to the simple saying, you get what you pay for.
A small contractor MUST learn to set a TRUE bottom bid price or if a negotiated contract, a best and final offer or a final negotiated price, and then learn the very hard lesson of walking away from the job if that price is not met. As noted earlier a failure to do this means the day you sign that low bid contract you have signed the dotted lines to sabotaging your own company future and you have set yourself up to die a slow and painful death. Your joy on contract signing day can and most times will quickly be replaced with anger, anguish and frustration. The sad reality is I can cite a host of real examples of seeing this happen to small contractors repeatedly. If a small contractor does not bid wisely, that company door will most likely get shut sooner or later and the sad aspect of that is, when that happens, it will be with a number of lawsuits hanging dangerously over you head.
You don't need a save the day Project Management super hero, you simply need to bid wisely! And if you are not sure quite how to do that, watch this space for more as the blog unfolds at a future date!