Estimating low voltage work, part 2: deciding which jobs to bid

The previous post covered the software and tools behind a bid. This one covers where to point them.

Estimating is not a profit center. Reading specifications, walking jobs, performing takeoffs, and writing proposals all take hours that no customer pays for. As covered in part 5 of the business setup series, unbillable time comes straight out of overhead. A shop that bids every project it is invited to will spend a large share of that time on work it was never likely to win, could not afford to perform, or was a poor fit.

Vetting a job before bidding it is how that time gets spent selectively. The process below takes a fraction of the time a full estimate does, and it answers the most important question first: whether this job is worth bidding at all.

What this post covers

The post starts with who is asking and how far along the design is, then walks through a three-step vetting process. Along the way it covers:

• Who is asking, and at what stage. The difference between pricing a finished design and giving away preconstruction help.
• Division 01. Project requirements, insurance, safety, and the documentation that adds hidden time to a job.
• The bid brief. Keeping notes while vetting so the decision rests on a short, line-item summary.
• The system specifications. Defining scope, recognizing the competition, and confirming the specified products can be bought and supported long term.
• Financial terms and capacity. Payment terms, material costs, crew capacity, liquidated damages, and bond exposure.
• Making the call. The questions that decide whether a job gets bid.

Before Step 1: who is asking, and at what stage

Estimating and preconstruction services are two different things. An estimate prices a design that is complete. Preconstruction services, sometimes called design assistance, help shape the design itself: selecting systems, laying out devices, developing budgets, and catching problems before the drawings are finished. Owners and general contractors pay real money for that work.

Pay attention to who is distributing the job and how far along the design is. Some architects issue plan sets for bidding when what they are really looking for is free preconstruction help. The pricing, product recommendations, and scope corrections that come back from bidders get folded into the next round of drawings, and the project goes out again.

Early-stage design bids usually go through several cycles before award. Each cycle is another round of estimating time, and there is no guarantee the company that helped shape the design will be the one awarded the work. Signs that a job may be an early-stage request include:

• Drawings marked schematic design or design development rather than issued for bid
• Missing or incomplete specifications
• A request for recommendations or budget pricing rather than a firm price
• An architect or owner distributing the job with no general contractor selected yet

None of this means early-stage work is work to avoid. A relationship with an architect or owner can be valuable, and helping shape a design can position the company well for the final bid. It is a deliberate decision, though. If the request is really for design assistance, consider offering it as a paid service, or limit the effort to a budget-level number until the design is complete. The company's knowledge is worth money. Do not give it away for free.

Step 1: Read Division 01 first

The first stop in any project manual is Division 01 (General Requirements). It outlines the project requirements, the schedule, insurance requirements, and the general rules and expectations every contractor on the site has to follow. Before reading a single system specification, confirm the company meets, or can meet, everything listed there.

Requirements that can rule a job out

Some requirements are simple to satisfy. Others decide the bid on their own.

Written safety programs. Some projects require written safety plans to be submitted for review before work begins. If those plans are not already drafted, that job is probably not worth chasing. Writing a compliant safety program under a bid deadline rarely produces a good program or a good bid.

Insurance requirements. Higher limits, additional coverages, or specific endorsements can require significant changes to the company's insurance policy, and those changes cost money. Get a quote from the broker before bidding, and decide whether the added insurance cost is worth the job. On a small project, it often is not.

If the company meets the requirements and is willing to comply with the rules, move on to the next step.

Documentation that adds time

Division 01 also lists the documentation and site procedures the project requires. These rarely disqualify a job, but each one is time that has to be accounted for in the estimate later. Common examples include:

• Pre-task planning before each work activity
• Daily reports
• Morning stretch-and-flex sessions
• Safety meetings and site orientations
• Submittal, closeout, and as-built requirements

A 15-minute requirement performed every day by every technician adds up quickly over a long project. Note each one now so it does not disappear from the labor later.

Keep a running bid brief

Take notes while vetting the job. By the end of the process, those notes form a short, line-item brief that summarizes the project in a few minutes of reading. The brief supports the decision to bid, and if the job is bid, it becomes the checklist for the estimate. An example (illustrative entries):

Step 2: Review the specifications for the scopes you want

With Division 01 cleared, turn to the system specifications for the scopes the company intends to bid. Low voltage scope usually sits in Division 27 (Communications) and Division 28 (Electronic Safety and Security).

Define the scope, and know who else is bidding

There is no requirement to bid every system listed in a division. A shop that does structured cabling and access control can bid those and leave video or intercom to others. What matters is drawing a clear line in the proposal around what is included and what is not.

Keep in mind that general contractors like to consolidate trades. Fewer subcontractors means fewer contracts, fewer schedules, and fewer people to manage. If the large integrator in town is bidding every system in Division 27 and Division 28, and the company is bidding two of them, the broader bid can win even when it is not the lowest on the shared scope. Consider who is likely bidding against the company, and what they are likely to include, before investing the time.

Confirm the products can be bought and supported

Read the specified products closely. The company needs to be able to buy them, install them, and support them long term. If a specification calls for a system the company cannot offer, there are two common ways around it, and both carry risk.

Subcontracting the system. A system the company cannot provide can be subcontracted to a dealer who can. Be aware that this can make the company responsible for the warranty, service requirements, and future commitments attached to that system, all of which depend on a subcontractor the company does not control. There is also a competitive risk. If the company is the smaller or less qualified of the two contractors, the dealer it approaches may go around it and bid the job directly to the general contractor. Who will perform a subcontracted system, and whether that dealer will commit to the arrangement, needs to be settled as part of the initial vetting. It cannot be left to be worked out after award.

Joining a partner program. It can be tempting to sign up for a manufacturer's partner program to secure a chance at the job. In theory, that can work. In practice, remember the dealer tiers covered in the business setup series. If another integrator bidding the job holds a higher tier with better pricing, a new partner buying at base tier pricing may not be able to compete without sacrificing margin.

Pricing is only part of the cost. Most partner programs require an upfront investment and manufacturer training, and many carry annual sales minimums. Depending on the project timeline, the company may not be able to complete the training before the specification requires proof of certification. There is also the cost of learning a new system. Technicians installing and programming a platform for the first time will work slower and make mistakes they would not make on a familiar system, and that learning curve has to be carried in the labor. Joining a program to win one job is an investment of money, time, and field productivity, and it gets weighed that way.

How the products are specified

Product requirements are usually written in one of three ways, and many specifications use a mix of all three.

Approved manufacturers. The specification lists the manufacturers the company must buy from. The list is usually accompanied by performance requirements or example part numbers that set the expected level of product.

Performance only. The specification names no required manufacturer and defines the system entirely by what it must do: resolution, frame rate, retention, reader technology, encryption, integration, and similar requirements.

Named system or equivalent. The specification calls out a specific system, such as "LenelS2 OnGuard or equivalent."

The first two types are typically the best bids for newer companies, because they allow the company to offer systems it already sells and supports, provided its product line is on the approved list. The tradeoff is the performance requirements. Confirm that the system being offered meets every hard requirement. A deficiency may not be noticed during submittal review, and the submittal may be approved. That approval does not transfer the responsibility. If the deficiency is discovered later, the contractor who offered the system is responsible for correcting it.

A named system works differently. When a specification lists a specific system or equivalent, the owner usually already knows what they want and will only deviate if the budget requires it. In that situation, stay as close to the specification as possible. Components that do not affect how the system performs, such as back boxes or PoE surge protectors, can usually be substituted, as long as the main body of the system is provided as specified.

Step 3: Check the financial terms and the company's capacity

The last step is whether the company can afford to do the work and has the people to do it. Payment terms, retainage, closeout requirements, and liquidated damages are usually found in Division 01 or in the contract conditions at the front of the project manual.

Material costs and payment terms

As covered in the business setup series, a contractor pays for labor and material long before the customer pays the contractor. Before bidding, confirm the company can meet the financial requirements of the project and fund what it needs out of pocket until payments arrive. On a material-heavy job, the equipment alone can exceed the working capital of a small shop.

Payment terms can sometimes be negotiated on smaller jobs. As a rule, the larger the project and the general contractor, the more firm the terms become. Read the closeout requirements as well, since retainage is often held until closeout documents are accepted.

Crew capacity and backlog

Compare the project schedule to what the company's crews can actually produce. Consider current workload and backlog, not only the crews available today. A job that would be profitable on its own can become a loss if it pulls technicians away from existing commitments or forces overtime to hold the schedule.

Liquidated damages and bond exposure

Liquidated damages set a daily amount the contractor owes for each day the work runs past the contract completion date. On a tight schedule with a thin crew, those charges can erase the profit on a job quickly. If the project requires a performance or payment bond, a failure to perform can also lead to a claim against that bond, which affects the company's bonding capacity on every job after it. Make sure the schedule, the crew, and the cash flow can support the obligations before taking them on.

Making the call

With the bid brief complete, the decision usually comes down to a few questions:

• Does the company meet the Division 01 requirements, and is it willing to follow the site rules?
• Is any added insurance cost justified by the size of the job?
• Can the company buy, install, and support the specified systems long term?
• Does the offered system meet every performance requirement in the specification?
• Can the company fund the work under the stated payment terms?
• Do the crews have the capacity to hold the schedule without risking liquidated damages?

If the company can fulfill the obligations of the project, and the system requirements align with its risk profile and capabilities, bid the work. If not, pass on it. The hours saved can go to a job the company is better positioned to win.

Bringing it together

Every bid costs time, and most of that time is never billed. Checking who is asking and how far along the design is, then reading Division 01, reviewing the specifications for the scopes the company actually wants, and checking the financial terms against the company's capacity filters out the jobs that were never a good fit before a full estimate is started. The bid brief produced along the way becomes the foundation of the estimate for the jobs that pass.

A job passed over early costs a few hours. A job that was a poor fit and was bid anyway can cost far more.

Next in this series: doing takeoffs.

Planning and device counts are numbers. Those live on the calculators. The estimating workbook that follows the method in this series is in The Kit. The rest of this series is on the estimating page.

Related on this site

• Estimating low voltage work, part 1: the software an estimate runs on
• Starting a low voltage business, part 5: building a working number for startup costs and overhead
• Calculators