Have you ever gone way low on a bid, and then out of some desire, you took the job anyway? Then, the job doesn’t turn out as good as you thought it would. Truthfully, did you feel something was wrong all along?
Most of us have known a guy who began dating a lady because her beauty and smile knocked his socks off and fogged his brain. All his actions were controlled by his current state of mind. Wanting it to be a good thing, even when he hears and observes warning signs that the relationship will not work, he stays with it. The same thing can happen regarding work. Fatefully, an estimator or contractor sometimes falls for a job he wants so badly, he ignores the warning signs that are right in front of him, telling him it is the wrong job.
Wolf Creek Contracting, our General Contracting division, bid a waste water treatment plant a few years ago. When the bids were opened, we were at $1.6 million, and the closet bid to us was $2 million. Our backlog was low, the job was looking good, I wanted it, and it looked like it was going to be mine! Still, something never felt right, so I took a closer look. As I sweat for the next 24 hours, we studied each item in our bid. Upon doing so, we found that the underground plumbing was quoted at $440,000. We had $44,000 in the bid for that item. Someone had missed a zero during the bidding process, which explained why we were $400,000 low. Even though we had posted a bid bond on the project, we explained the situation to the project owners the next day, and begged for mercy. Luckily, they allowed us to pull our bid and walk away. I let that one go. It sounds like I am pretty smart guy, right? Wait until you hear of a situation where I did not walk, allowing my desire to win.
One day in 2013, the manager I had running Watertown Steel told me of a job he believed we would be awarded. Hello indoor college football practice facility: 65 feet to the peak with a 195-foot clear span! Wow. What a beauty. What a catch. I would later get to drive by, point and say, that one is mine, as we built the facility. Excited I asked him if he had enough money on it. “Plenty,” he said. “We are getting $800,000 for labor and equipment alone to erect the steel on the building.”
The bids were not opened in public, so we had no idea where the other bids came in. However, I did get a phone call from the construction manager telling me that the only way his company would award the job to Watertown Steel was if I would back it personally. This was an uncommon request. He had never called on a steel or masonry project before, asking if I would back it personally. I asked how our number was compared to the other bidders. He said he was just negotiating contract terms and wasn’t sure where everyone came in. Then, again, he re-emphasized that it was important that on a job of this magnitude, he had my commitment to back it personally. I told him I would double check with my people and get back.
I asked my manager again if the numbers were good. He assured me they were. Infatuated, I neglected to dig into the numbers to ensure we did not miss anything. Ignoring all warning signs, I called the construction manager back and told him that if he would award the project to us, I would back it personally.
Two-thirds of the way into the project, our job cost was already at $800,000. Only then did we take another look. After digging into the numbers, we found the estimator/manager had put the bid together quickly, and missed a lot of labor and equipment it would take to do the project. Being way too late to walk away, we finished the job to avoid it costing us more harm down the road. The losses we incurred erased about everything Watertown Steel earned in 2013 and 2014. We later learned that the closet bidder to us was $1.2 million. In the end, that’s what it cost us to do the job. Looking back, I felt something wasn’t right up front, but ignored it, letting my desire to land the beauty fog my brain.
There will be times that you, too, will miss and bid a job too low. Once you observe the warning signs that this is the case, don’t ignore them – even on public projects that require a bid bond. If you missed something in the bid, and you can prove you did, you usually have 24 to 48 hours to pull your bid. Avoid getting emotionally attached to the wrong project. If you missed it, swallow your pride, and don’t stay, as you can easily walk away.