Estimating and submitting bids are one of the most stressful and nerve-wracking sides of your construction business. It is essential to keep in mind that "break-even" in the construction business is challenging to calculate because most projects are one-of-a-kind custom jobs. Proactive contractors have systems and cost libraries with pre-priced assemblies for bidding, which works in conjunction with Strategic Construction Accounting to provide management with progress invoicing, job costing, and job profitability.

With poor bookkeeping, misguided judgment, and clerical errors come bad decisions on what projects to bid and not to bid on until eventually, you'll run out of time and money. This is why some construction projects fail or worse, construction companies get bankrupt.

Whenever someone decides to have some work done they get several bids from competing contractors because that is what they heard someone say a long time ago. There are two things to consider:

#1 The Low Bidder

Good / Fast / Cheap - Choose Cheap & Fast or Cheap & Slow! Expect the project to Late and over budget!

Base costs - Taxes, fuel, cell phones, nails, glue, and small parts are the same for all contractors; no savings here.

Labor - Cheap labor makes mistakes and causes damage because they are learning, by experience, on your project!

Material - Price is King! So they buy and install cheap material!

Tools - Cheap tools take more time, and the finished product may be hard on the eyes, but they have to cut costs!

Trucks - Rickety old trucks and vans may break down, which means the job may take longer, but costs have to be cut!

Office - They work out of their house or truck; so called no-overhead

Cheap Construction Manager - Biggest, "baddest" construction worker. Also, the bill collector. Also acting as a "Working Project Manager," which means the company is attempting to save money in the short run and ends up losing money in the long term. Assembling parts and building something takes a "Tactile" mindset. Running a project is "Strategic." Put another way no man can serve to masters as he will hate one and love the other, and the inevitable outcome is the Peter Principle, which leads to a construction train wreck.

Invoices - Make no sense, the total cost may exceed the bid, and you will pay the contractor to avoid violence!

Warranty - Cheap contractors cannot afford warranty work because they are "One-Hit-Wonders" never to return

#2 The Other Bidders

Good / Fast / Cheap - Choose Good & Fast or Good & Slow! Expect the project done on time and on a budget!

Base costs - Taxes, fuel, cell phones, nails, glue, and small hardware are the same for all contractors

Labor - Skilled labor costs more, produces more work faster with fewer mistakes, which means a quality project.

Material - Quality and reputation are King! Skilled labor can install quality material faster than cheap material.

Tools - Quality tools and equipment cost more and will produce a product that is easy on the eyes and lasts longer.

Trucks - Reliable trucks and vans mean the job is done quicker and with fewer delivery issues

Office - Skilled staff and office equipment provides for effective communication

Qualified Construction Manager - Has a construction background and formal training in project management. Most professional construction companies with good reputations will have people with credentials like PMP (Project Management Professional) assigned to oversee projects.

Invoices - Are Pay Applications that make sense because they show a history of costs and payments made.

Warranty Work - Is a marketing cost because the first project is the beginning of a relationship.

In conclusion:

Never hire the lowest bidder. The sweetness of low price fades quickly while the bitterness of poor quality lingers on. When hiring a contractor, discard the low bidder because you will get what you pay for and sometimes less than what you paid for. See to it that you have enough time to review subcontractor pricing and make clarifications from the project manager, architect, or owner in case there's anything you are unsure of. This is where writing down a list and checking it twice will come in handy.

About The Author:

Randal DeHart, PMP, QPA is the co-founder of Business Consulting And Accounting in Lynnwood Washington. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the USA. He is experienced as a Contractor, Project Management Professional, Construction Accountant, Intuit ProAdvisor, and QuickBooks For Contractors Expert. This combination of experience and skill sets provides a unique perspective which allows him to see the world through the eyes of a contractor, Project Manager, Accountant and Construction Accountant. This quadruple understanding is what sets him apart from other Intuit ProAdvisors and accountants to the benefit of all of the construction contractors he serves across the USA. Visit http://www.fasteasyaccounting.com/randal-dehart/ to learn more.

Our Co-Founder Randal DeHart - Is a Certified PMP (Project Management Professional) with several years of construction project management experience. His expertise is construction accounting systems engineering and process development. His exhaustive study of several leading experts including the work of Dr. W. Edward Deming, Michael Gerber, Walter A. Shewhart, James Lewis and dozens of others was the foundation upon which our Construction Bookkeeping System is based and continues to evolve and improve. Check out our Contractor Success Map Podcast on iTunes.

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