Hey folks, Phil Zito here and welcome back! In this post, we are going to be discussing three killer strategies for bidding new construction work. Now, when we talk about bidding new construction work, this is kind of following a logical progression, right? In our previous two posts, we talked about ideas to get more work, we talked about the review, scope, and estimate process and how that works, and now we're looking at being in the new construction side and bidding new construction work. How can we go about bidding new construction work in a way that makes us more competitive?
When it comes to bidding new construction work, you have a couple of models. You have plan and spec, which is literally the mechanical (MEP) plans and the specifications, and you're going to bid exactly those. Then you have design bid where you're going to help design the project, and then you're going to bid it and then you have design bid build. Then you also have P3, you have IPD, and all sorts of other models.
For you all, we're going to be focusing on plan and spec work today. We're going to talk through some strategies. Some of these strategies are going to be dependent on you getting ahead of the plan and spec work. Others are going to be reacting to plan and spec work. I'm going to start with reacting to plan and spec work, because that's the situation you're going to find yourself most commonly.
Reactive Strategy: Be Low Strategy/Relationship Strategy
So, you're responding to a bid request. What is a strategy that you can implement other than be low or play off relationships? Those are the two primary strategies. Be lower than what the other people are bidding, right. The reason you want to do that is because the GC will have mechanicals bid and then they will pick a mechanical, typically by price. Then the mechanicals underneath them will pick controls contractors, typically by price. That's how plan and spec works.
Now, if we are wanting to win typical strategies, be lower than everyone else. Typically, how you do that is you have a relationship with the mechanicals. I would be lying to you if I told you this doesn't happen. I'm not advocating for it. Follow your labor laws, follow the laws and requirements of the contract, but I'm also telling you, this is the reality of what happens. Depending on the relationships, they're not going to be say, “ABC is $10,000, you're $11,000, so you need to get below 10.” They may say, “You're a little high, you should go sharpen your pencil.” That guidance will tell you, lower the price a little.
Now, that's all well and good. The other strategy is going to be just having favors or getting flat spec, things like that. What I'm going to tell you though, a lot of that is you being proactive to the bid. What I'm going to focus on right here is truly understanding the scopes and alternates.
So, there are two situations you can find yourself in. You can find yourself in a bid scenario where you are not an approved vendor. Oftentimes, newer salespeople will know they’re not an approved vendor, not on the bid list, and they’ll just pass. In some cases that may be good. This is where you have to start learning the engineers, the architects, the mechanicals, the GCs, and the owners, and how they approach this.
Once you understand this stuff, then you'll know, “Engineer says that it's flat spec X,” or, “Owner says that it's flat spec X, but I know they often will accept alternates.” Even if it's not in the spec, you can submit what's called an alternate. In which case, you can say, “I know you’re flat spec’d ABC controls, but would you accept alternate?” This is a simple letter you send and once you get approval for that alternate, then you can bid. I would say there's a good chunk of new construction work out there right now that you are technically not qualified to bid, but you can bid if you approach it from an alternate perspective.
Additionally, sometimes you'll see stuff that's mindless. You'll go into a spec, and it'll require 4 to 20 milliamp sensors for everything, redundancy for everything, etc. You’ll add it all up, and it's expensive, but you can do alternate design. You can suggest an alternate design, like, “I know you're requiring, advanced application controllers for every single system, but maybe using application-specific controllers would be useful, or even using programmatic protocol interfacing thermostats would be useful because of the type of building.” If you get approval for that, you're lowering your overall cost. So, this is where understanding the scope and then suggesting alternates comes into play. This is a simple strategy, but it's a strategy nonetheless, that a lot of people do not approach.
Proactive Strategy: Specification Influence
Now we're going to move to a more proactive, rather than a reactive, strategy. The proactive strategy that we're going to look at here is called Specification Influence. This begins before the project is ever picked up by an engineer. This requires a little investment and effort on your part, but it pays off.
So, how you do this is through things like “lunch and learns,” educational sessions, etc. You can teach the engineers that you encounter most on projects. By doing this, as you start to educate, you will start to form relationships. One, they will start to tell you what projects they have coming down the pipe, so you can get ahead of them. You can reach out to mechanicals, you can reach out to the engineers, the architects, the owners, etc, to do influence. Additionally, as you start to understand their challenges, maybe identify three main challenges they have, you can do a training session on this, and guess what follows that training session? Some boilerplate spec guidance.
For instance, if I were to focus on engineers right now, their three challenges would be: cybersecurity, IT-enabled controls, and naming schemas for data analytics. Obviously, there's also IAQ, which you should be hammering with everyone and there's energy, which is really specific to your region. So, you could take these three challenges have a training session.
This is kind of a death by 1000 cuts scenario where over time, if you give the engineers a boilerplate spec, and you get very specific, it's quite easy to start putting little pieces of your company-specific guide spec into place. Now, what would this look like in practice? Let's say you have a naming schema, and you've developed automation tools to implement metadata and naming schemas as part of your project. Well, it's quite easy now to build a spec snippet that requires your metadata and naming standards. By doing that, you've already automated this, so you've now created a competitive cost scenario where your cost of implementing metadata, your cost of implementing tagging, etc, is going to be lowered. Now, this requires coordination with your Ops team, but at this time, you're implementing that.
The same goes with IP controls. Let's say some of your primary competitors can't implement ring architecture or they have a product that upon power loss, the IP controls network fails, and you have a product where the IP network stays up on power loss. Well, then that becomes a spec snippet that you can put in that will automatically either disqualify or add cost to your competitors. So, that's another scenario. This all requires you getting ahead and going in and positioning things.
Very Proactive Strategy: Capital Planning
Now the third strategy. So, we went from being immediately reactive to kind of proactive, and now we're going to be very proactive. This is going to be something that we're going to talk about in future posts, and it's capital planning. So, this is getting ahead and these kind of tie into one another. The ad-alternates are competitive strategies to make the spec favorable to you. The spec influence with the engineer is going to make the spec even more favorable to you, and it's also what the “Lunch and Learns” are going to give, awareness of projects coming down the pipe.
Now, this brings you into capital planning and capital planning is understanding an owner’s capital plan. This is typically a 5-to-10-year capital plan of how they are going to invest capital budgets into the improvement and expansion of their campuses. As you become aware of these projects and capital plans that are coming down the pipe, what is really cool about public universities, government organizations, etc, is oftentimes they have a very clearly defined capital planning project. So, you know exactly what to do.
Now, the really, really cool thing is, and I'll dig deeper into this in a future post, is called my circle approach. This is where you draw a circle around a Metroplex of maybe about 20 miles, and then outside of that 20-mile corridor, your competitors are going to start to drop off. They'll start to service people outside of that 15–20-mile corridor, less and less. So, those become prime targets when you're first trying to establish a beachhead.
Also, those folks outside that corridor, they're typically going to have less funding, and thus less defined capital planning. They're going to have less defined structures, and if you have a clear process for capital planning that you can bring in, then you're able to assist them with that, and guess what? If you are doing capital planning, that is a strategy to help you avoid the bidding and new construction work from the get-go.
You get into a more, design bid build scenario, where you're actually becoming an advisor, and you become their go to. You see this on LinkedIn. You see a lot of people who are talking about the consultative engagements their companies are doing, how they're becoming more owner-focused, they're advising owners and becoming more of an owner partner.
So, we're going to continue to see that, I firmly believe, as technology becomes more IP based, as IT gets more involved and IT is very much used to MSPs, managed service provider relationships. We're going to see a lot more service provider relationships and advisor consulting relationships from the BAS industry.
Now, the risk is that with some government work, and some public sector work, if you become the advisor on capital plans in the designer, you are not able to execute the work. So be cognizant of that. I saw that when we were working on DFW airport, Dallas Fort Worth Airport, where if you were the main integrator who was tying all of the terminals together, you weren't able to bid the terminal work. So, you had to pick, “Am I going to be the higher layer integration infrastructure, or am I going to be doing the terminal work?”
Now from an integration infrastructure perspective, that has a lot of upfront benefit, but down the road, potentially, could have less service benefit. If you're the one who does the terminal work, you can also typically follow up with doing the service work for that terminal as well. So, these are things you need to consider as you start to do more public work.
Now, with smaller organizations, this is not usually the case. You can do advisement and you can do the implementation as well. Now the really cool thing about this, with advisement and implementation, is that it will often shift from a new construction scenario to an actual owner direct scenario. This means increased margins, less competitors, and you tend to have more creative control of the actual implementation.
So, there you have it, folks, these are three strategies to help you with bidding new construction work. I hope these helped. I hope you're able to implement these across 2022 and see results from them. I'd love for you to leave your comments and let us know what you’re hearing and seeing in the industry. Let us know in the comments what you find to be successful strategies for bidding new construction work and let us know content we can be bringing to you that you would find beneficial.
Thanks a ton for being here and take care.
