The bidding process used by homeowners and/or architects to choose a contractor for a particular project is often inherently unfair. Negotiation is a far better method.
In an article in Fine Homebuilding’s Annual Design Issue by John McLean, an architect in San Francisco, the author makes some excellent points about the bidding process; and points out the mistakes that homeowners and architects make that do not favor contractors. It is well worth reading; and Fine Homebuilding is, in my opinion, a great magazine.
In our recent newsletters we ran a series of articles about “How I Approach the Sale”. In those articles we mentioned that we do not like to bid projects. We try to negotiate all our work. We are not always 100% successful and at times find ourselves “bidding a job”. Believe me, it is the exception and not the rule.
We have found over the years that most residential and even some light commercial projects on which the owners and/or architects want to obtain bids are not being done on a level playing field. You can find established contractors with legitimate organizations and the overhead that all that entails bidding against a “glorified handyman” operating out of the back of his pickup truck. There is no way that the legitimate contractor can compete.
Sometimes, the owner already has his contractor and just wants to “keep him honest” by checking his price against another contractor or two. You have just spent all that time and used some of your resources for something you were never going to get anyway. There are too many scenarios like this that we have encountered over the years, most of them bad, so that we try very hard to not be a bidder.
In our June Newsletter we will provide a lot more detail to this subject. Here now are a couple of small but actual facts.
- Most of our negotiated work often starts out as a job seeking bids;
- A lot of the time we can turn it around to become a negotiated project by our consultative sales approach; and,
- We usually make a higher profit margin with an oftentimes lower contract price.
Think about changing how you get most of your work if you are presently a bidder all the time.
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Bidding vs. negotiating usually starts with asking the “tough” questions like:
Who else is bidding on your project?
Have you worked with any of the other contractors before?
What is your decision process?
Why are you interested in my company?
As owners usually keep these answers fairly “close to the vest” it can take a little prying to get the real story. More information is always better!
Thanks for the post.
Hi Geoff;
Thanks for your comments. You are absolutely right. Our sales process starts asking those questions from the initial phone interview.
Our aim is to open up the customer’s thought process as soon as possible in order to determine if we should spend the time and resources to get this job.
We cover all aspects of this process in detail in our newsletter.
Best Wishes
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