There is a certain macho perverse attitude among some members of the PHC world that causes a significant and dangerous reaction: “I’ll bid low even if I don’t really want the job.” It may be an adult version of the boy’s game, “King of the Mountain,” where the gang fights for a pile of dirt at a construction site even though no one in the fight really wants the dirt pile and everyone goes home dirty for the effort.
I have absolutely no advice for the Monster Mechanicals who I suspect owe much of their survival to the skillful negotiation of change orders and add-ons rather than the profit of the bid that landed the job. Nevertheless, I strongly believe there are a few basic rules for survival for the large- or mid-sized mechanical.
If you don’t really want or need the job, bid high, show some daylight to embarrass the low bidder by the money he left on the table. If you want the job, bid carefully and bid knowing the strengths of the people who will be running the job for you.
After you have been awarded the job, do not celebrate by buying some big new piece of equipment. Rent the big stuff when needed and get it on and off the job as quickly as possible. This may require better planning and scheduling but you can’t afford to have equipment radically underutilized because you don’t want to do better planning.
Devote your entire team to keeping the jobs running tight. Do careful job costing as the work proceeds first to be certain you are in the black every step of the way and be sure everyone knows where the estimate was off and learn from the experience rather than hiding from the reality and blowing it off.
Accurate bidding based on knowing your people and their abilities is an ongoing learning process and will lead to improved profits on future bids. All employees should know if the work is on a profit track and know that this is not bonus performance, it is what is expected.
All changes and additions should be properly documented and approved in writing so that there is no long debate over the additional charges. When the owner or the general says, don’t worry, I’ll see that you are taken care of, remember this is the same promise the farmer gives the cattle as he loads them in the truck.
Progress payments should be up to date in accordance with the contract and you should be certain your rights are protected. Right now, as I write, a large amount of money on a very public job in my area is being held up while the general and the owner debate changes and additions. A spokesman for the owner thinks it may take a year to get it all sorted out and as you know, the money is in his pocket until all of the debates have ended and the subs are, as they say on the farm, “sucking hind tit.” As the owner and the general duke it out.
Accurate documentation and approval files on all changes and additions must be maintained on a current basis. The change orders can be the total difference between profit and loss. They should never be neglected as anything less than the most important paperwork in the pile.
One final thought. When you do land that next big job, do not let the new volume force you into a quick compromise on hiring new people. Continue to upgrade by finding the best and the brightest. With the added profits you are generating from your better negotiation and bidding skills, you can afford to pay your current employees more and to improve fringe benefits for you personally and your current, deserving employees.
In this process you will, sadly, find that you are outgrowing some employees who do not want to produce at the higher levels of quality and efficiency you have established. Give them up without regrets.
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