The Inside Outside Guys ~ The Case For Charging For Bid Proposals
From The Detroit News | By Ken Calverley and Chuck Breidenstein
DETROIT, August 31, 2023 ~ “No way you can do that in this area.”
That’s what you hear in every part of the country from builders and contractors alike when you suggest charging for bid proposals.
A few weeks ago, we chastened our listeners to obtain a complete written bid specification from anyone they hire for work prior to the contract.
This can be time-consuming and, in some cases, an expensive thing to do.
A tradesperson relies on years of training and experience to assemble a quality written proposal that will not only meet the needs of the sale, but support budgeting, scheduling, material and equipment staging, production and any residual warranty.
August 27, 2023 ~ Chuck “The Inside Guy” Breidenstein and Ken “The Outside Guy” Calverly offer the knowledge and resources you need to make the home of your dreams a reality. Catch them every Saturday and Sunday from 10 a.m. to noon on 760 WJR.
Properly employed, such a document is a learning tool for buyers providing written notice of material types, function, criteria, application process and brand.
Where one concrete contractor bidding a new driveway may be specifying 4,000 PSI concrete with reinforcing steel and a low slump, another may be pricing 3,000 PSI material with no steel and a high slump. The bottom line is different on the two bids even though the finished product, at least initially after placement, looks the same.
One of the issues buyers will experience without even understanding why is a large price disparity due to varying specifications bid by multiple professionals.
All the owner typically sees is the cost difference based on a perceived outcome of the project without fully understanding the reality that each company has bid on a different specification that is likely to affect long-term performance.
The finished concrete drive initially appears as it should, but time dictates that the higher quality, and more expensive, specification will hold up better to use, abuse, and the environment.
But we are in a very strong and busy economy that often makes it difficult to even get a sales consultant to look at our project. This same dynamic certainly affects the professional trade company that is being asked to provide a proposal.
The industry has found an answer that functionally improves their close ratio while limiting the number of “tire-kickers” taking up precious time and never buying.
The strategy is fairly simple. We charge for the written proposal.
The contractor creates a complete written specification and total cost which the owner pays for and owns. Rarely is the proposal item priced even though buyers would love to “see” such pricing.
The thinking in “lump-sum” bids is that you get specification “A” for “X” dollars total. Individual stick pricing or profit percentage are irrelevant when you have the complete and accurate specification priced as installed or completed.
The charge for the written proposal is credited against the cost of the contract if you hire the provider to perform the work, so it becomes a “free” bid for the buyer if they sign with the original bidder.
As a contractor this can be a great practice primarily because you want to be the specification writer against whom all others will be compared.
You are confident that you are anticipating doing the work correctly while using the best available materials and equipment the budget will allow. You invite comparisons with other, equally qualified, competitors.
The buyer that invests the time with you on the front side and recognizes the value of a valid written proposal is statistically more likely to sign with you and have a great experience.
What the industry hates to see is the company that really doesn’t know what it is doing and always comes in at a much lower price, making it appear to be a better value when, in fact, it is not.
We see this on many different types of projects, such as the concrete earlier mentioned and new roofs where the finished product lasts only 10 years and a homeowner has to purchase a second new roof decades sooner than they should have, effectively doubling, or worse, the total cost of the roof.
So while it may seem a heresy to some, in these very busy times with such a premium placed on staff utilization, it may be worth your consideration to look at larger or more complex work and consider charging for the creation of proposals.
Yet another strategic consideration for both homeowners and professional contractors.
Like those you can always find at InsideOutsideGuys.com.
For housing advice and more, listen to “The Inside Outside Guys” every Saturday and Sunday on 760 WJR from 10 a.m. to noon, or contact them at InsideOutsideGuys.com.