Step #24 To Sub or Not to Sub?
- Will you be using subs for any portion of the work?
- How do you know if they understand the work?
- Should you require scope letters from your subs?
- Is there a simple way to accomplish this?
When a Good Faith Effort is Required, You Must…
- Identify Subcontracting Opportunities
- Advertise for Sub Opportunities 14 days prior to Bid Opening
- Network by attending the Pre-Bid/Pre-Proposal
- Notify 14 days prior to Bid Opening
- ~Small businesses (one contact in writing, one verbal or in person)
- ~ Professional/community organizations (in writing)
- **Remember you can use email to send out your written notifications
Use a simple Invitation to Bid or Request for Quote to get prices and scope information from subs and suppliers
Compare Scope Letters by checking;
- – Quantities
- – Inclusions
- – Exclusions
- – Alternates
- – Special pricing requirements
- – Acknowledgement of addenda
- – Plans and specs. being used
Step #25 Send out Requests for Material Quotes Compare Material Quotes
- Ensure that they priced your takeoff
- Answer these questions
- – Do prices reflect specified materials?
- – Can materials be delivered within project schedule constraints?
- – Is tax included?
- – Is delivery included?
- – For how long is this price good?
- – What are price increases likely to be?
- – Are order constraints to secure this pricing reasonable?
- – Can this supplier provide required and adequate submittal materials?
Step #26 Create and Maintain a “Long Lead Items” Log
The Identification of “Long Lead Items” is Another Tool for Mitigating Risk
Even if you can’t do anything about it… You can factor the impact into your bid. You may have to:
- Schedule work around late delivery
- Pay more for expedited delivery
- Accelerate on work items installed just after installation of this late arrival
Apply Costs to the WBS/Quantity Takeoff
Step #28 Calculate Project Overhead
Job costs that cannot be placed “neatly” into a specific item of work. NOTE: In a unit price bid, these costs will be distributed proportionately to all bid items.
- Can a strategic approach to Project Overhead improve your chances of success in getting the job?
- How can a different strategy help your bottom line price?
- – Do you ever “double up” on:
- major equipment?
- field level supervision?
- foreman’s truck and tools?
Apply Project Overhead
Apply Company Overhead (Also known as Home Office Overhead or G&A – General & Administrative Costs) A portion of your company’s cost of doing business that must be applied to this project
A Simple Company Overhead Worksheet can be applied on either a daily basis or as a percentage of the annual company-wide G&A costs that must be applied to this project.
Step #30 Apply the Profit Price (What your customer pays you to build the job), Minus the Cost (What it costs you to build the job), Equals the Profit (What are have left after the job is built) The Difference between Cost and Price = Profit
Option II: Applying Overhead & Profit on a bid item or line item basis Good for Unit Price Estimating
Option: Apply Profit Margin on the Bottom Line
Good for Lump Sum Estimating “Margin” Worksheet
Use this formula to arrive at a “margin” for Overhead & Profit 100%
Less desired “margin” 23.00% Equals 77.00% Now divide the project costs by this factor Job costs including job or project overhead $100,000.00 Div by 77.00% Equals Total Project Price $129,870.13
OK… Go ahead and check it! $129,870.13 less project costs $100,000.00 Dollar amount of applied “Margin” $29,870.13 Div by Project price $129,870.13 Equals 23.00%
What happens to the numbers if you do this wrong?
- Job costs including job or project overhead $100,000.00
- Desired Overhead and profit margin on total project price 23% Amount if you just “Add on” the 23% to the costs $23,000.00
- Total Project price $123,000.00 But 23% of $129,870.13 is $29,870.13
- If we subtract the $23,000.00 we “just added” as OH&P We end up with $6,870.13 short of our required “Margin” A Full 5.29% of the total project price In fact, our “margin” just became 17.71% instead of 23%
Step #31 Bid Analysis
- – Coverage
- Productivity Rates
- Cash Flow
- Equipment Usage
- Difficult or Specialized Work
- Compare with Historical Data
Step #32 The Bid Proposal
- What does the Owner/GC want to see? Don’t forget:
- Project-Specific Inclusions / Exclusions
- Standard terms and conditions
- Specific terms and conditions
- Period of time for which the price will be honored
- Plans and specs. used in arriving at price
- Specific definitions
- Anticipated schedule
- Required alternates
- Appropriate Value Engineering Ideas and Alternates
- Contact Information
Step #33 Final Bid Proposal
Submit a Rough Schedule with the Bid
ABOUT THE PRESENTER
Dean Jones is widely recognized and respected for his work to expand, retain, and attract enterprise to the greater southern California region. He is a notable business and labor engagement advocate currently operating the Southland Partnership Corporation, a nonprofit economic development corporation. In this capacity, he serves as the director for the POWER Collaborative Network (P.O.W.E.R. — Promoting Opportunities with Essential Resources), an independent human resources services organization delivering capacity building for workforce service providers in the non-profit sectors. Under his management, this inter-professional Los Angeles County network sponsors the www.IStartOnMonday.com, Jobobama.com, JobCollaborative.com, and Joblip.com community social services assistance web sites.
Similarly, he works with the African American Engagement Collaboration that supports better integration processes between small and large corporations. This collaborative is comprised of the Black Business Association, California Black Chamber of Commerce and National Black Business Council that targets emerging suppliers to enhance their request for proposal responses through improved estimating techniques. This collaborative manages two web sites; www.TheArtOfBidding.com and BlackSuppliers.com, each offering business tools to encourage, recruit and utilize black-owned and operated enterprises to access and supply products and services to major public and private organizations.
As a Certified Purchasing Manager (C.P.M.), his consulting services have extended best viable practices to a diverse range of major organizations, such as; Blue Cross of California, California Endowment, City of Compton CA, City of Long Beach CA, City of Los Angeles Department of Water and Power, City of Los Angeles Neighborhood Initiative, Comerica Bank, First American Title Corporation, GTE, Kaiser Permanente, Los Angeles Black Business Expo & Trade Show, Los Angeles Music Center, Los Angeles County Office of Education, Southern California Edison, Verizon Communications, West Coast Expo.
A second generation Angelino and Los Angeles Unified School District graduate, he earned a Bachelor of Science Degree in Business Administration – Accounting from San Jose State University. He has received a range of recognition and distinction awards for his work in support of socioeconomic programs, including a special recognition from the California State Legislature for his extensive service and contributions to the regulated utility corporation’s supplier diversity programs.