Changes to Bidding Structure Makes Jobs More Profitable
A Connecticut contractor was losing bids, and losing money on those bids he secured, due to a bidding format that did not adequately account for all costs incurred in running his business.
The bidding format used by the contractor took into account the direct costs of each job, such as materials and labor, but often ignored or underreported indirect costs such as insurance, fuel and repairs. The contractor was uncertain on how to apply an appropriate percentage of indirect costs to each job he bid to ensure that the bids were both competitive and ensured profitability.
BlumShapiro assembled a team to review the contractor's entire bidding structure, including both direct costs and the hidden indirect costs. Adapting a software program that fit the needs of the business —BlumShapiro showed the contractor how to account for direct costs such as each hour a laborer worked on the job, while simultaneously applying an appropriate cost percentage to each job that accounted for the hidden costs – the overhead.
The team created an understandable format for allocation of all business costs for each job which the company submitted a bid. Using this new software model enabled the contractor to redesign his bid preparation process, resulting in bids that far more accurately represented real costs and real profits.
The changes implemented allowed the contractor to easily understand the true cost of each job and how much leeway was available when preparing bids. The new system enabled the contractor to not only be far more competitive on each bid, but also keep track of all bids won throughout the year, allowing them to adjust upwards on bids later in the year if the profit margin was too narrow on earlier bids.
These procedures have given the contractor a distinct advantage when submitting new bids, keeping the business profitable. BlumShapiro and the contractor now have an ongoing relationship with staff on call to assist in any future business challenges that may arise.