Too often, sub-contractors are left scratching their heads, trying to figure how a project that looked so attractive at the time of tender turned out to be the opposite.
Usually, the common response is:
Was the project under-estimated? What was overlooked? Has the scope changed? Any areas that can be recouped through variations?
Bear with me and I will guide you by taking a look over the most common tendering mistakes made, and how you can prevent them from happening again.
‘I did not see that in the documents.’
So, you receive a tender and open the files. You see four folders, Folder A: Schedules, Folders B: Scope of Work, Folder C: Drawings and Folder D: Specifications.
Which Folder do you choose first? Which Folder do you spend the most time in? Which do you spend the least in?
A lot of the times projects are priced on schedules and drawings where the SOW and specs are cross-referenced depending on the level of detail in the drawings. When this happens, items are missed and areas are not covered, leading to you copping the charges if you are successful in winning the project.
‘Same rates as the last one, it will be fine’
When a subcontractor becomes time poor and needs to get tenders back to the client quickly, rates from previous projects or tenders are entered and these are usually sent without a review, a clear reading of the documents , a fresh quote.
You then try to qualify your price as a budget, but the client wants a firm price. So, you end up telling them to use the price provided.
The issue lies in that you have not respected the process. The market prices could have changed, the materials could have increased in price, the document could have stated a special material requirement. All factors which your submission did not take into consideration.
Unfortunately, you will not realize until the contract is signed, and you have been selected. The bad news, its already too late.
‘Why haven’t you allowed for that’
When previous rates are used on a new project or the project is not understood correctly, items are missed. Why have not you allowed for that, where is the allowance for XXXX in the budget?
These are common questions that are killing contractors and subcontractors, as missing items result in reduced margins or monetary losses.
How can you reduce this happening in the future, have you thought about your tendering procedure, building up your task individually once? Project Managers, Engineers and Supervisors know what is required to undertake the works, but unless you have priced the way they would build it then the above questions will continue.
‘What did the quote say’
It is easy to receive a quote and enter the rate of the material without reading the full quote, inclusions, exclusions, clarifications, terms and conditions. Why wasn’t the quote read correctly, were you time poor or you only read what you needed?
One example can be seen when we speak to contractors and they question the rates that were entered in the estimate, and why they did not match the rates required in the quotes.
Answer is simple: When we review the quotes, we start to notice there are delivery rates required and have not been added, there are rates for sundries/consumables which are required, etc. Very often, the suppliers do not allow for plant or machinery to remove the items from the truck and the subcontractor has not allowed for plant or machinery to undertake the works.
All of a sudden, it hits you, this is why the project was not profitable or you have lost money again, and on something that would take 2 minutes to read may have cost you $2k, $20k, $200k.
‘Can you adjust your price?’
You get your price finalized and submitted to the Main Contractor, you wait patiently for an award, some feedback, negotiations or a ‘no’.
And before you expect it, the main contractor asks you to break your price down.
What is this new trend?
If you priced according to their pricing schedule, why are you now being asked to break it down? So, you go and spend your own valuable time breaking your estimate apart, and re-submit, to have a follow up e-mail from the main contractor a few days later asking you to remove tasks from your scope, which you do and submit Version 3 of your estimate using the same rates provided in Version 2.
Finally, you get awarded, get on site and begin to realize that the tasks they asked to remove now have a large cost associated. Some of these being: redundant time on plant or a wastage factor on material (none of them included in your version 3.)
Some Main Contractors may be generous and give you the associated cost, but unfortunately the majority out there will not and leave you to run the project as negative. And you have lost money again!!!!!
What Can I do to prevent this?
This paragraph should be blank, what has been discussed above has made you realize what you need to do to stop losing money on projects.
However, if it has not solved your issue, keep tuned and subscribe to get the five essential steps to ensure successful tenders become successful projects, on our next blog post.
Want to get in touch with the author? Send him a message Declan Murphy
