How to decide which jobs to bid
The estimator bids what comes in, because no one above them decided what the company should be bidding.
Deciding what to bid belongs to leadership, as part of the business strategy. The decision draws on the cash flow forecast and the labor forecast, along with relationship factors. The final bid price is a separate decision. Operations or the COO, estimating, the potential PM and the superintendent review it in a meeting of the minds before it goes out the door.
Three moves, in order
Step 04: Estimating system
The estimate maps one to one onto the job cost codes, so variance means something the day it appears.
Learn this part of the job
SPM The Construction CFO publishes this course. It's a separate company from this one, and the course is on its own school site.
Other problems step 04 solves
Other things that go wrong
What owners ask
How do construction estimators decide which projects to bid?
The estimator bids what comes in, because no one above them decided what the company should be bidding. Deciding what to bid belongs to leadership, as part of the business strategy. The decision draws on the cash flow forecast and the labor forecast, along with relationship factors. The final bid price is a separate decision. Operations or the COO, estimating, the potential PM and the superintendent review it in a meeting of the minds before it goes out the door.
Which part of the system fixes this?
The step is number 04, estimating system. The estimate maps one to one onto the job cost codes, so variance means something the day it appears. It's drawn from chapter 4 of CONTROL: C.F.O.S. Construction Financial Operating System.
Is this normal for my trade?
Across the 48 trades that publish a figure, net profit at $1M to $5M averages 7% after taxes. If you're well under that and this page describes your month, the two are usually the same story. The published average tells you where the pack is, and your own job costing tells you where you are, which is the number that pays payroll.
Where do I start?
Have leadership set what the company bids, using the cash flow forecast and the labor forecast.
Can I fix this without touching anything else?
You can try, and it doesn't hold. Step 04 depends on step 01, job cost structure and step 03, overhead calculation. Install it ahead of those and it produces numbers the field won't trust, which is worse than the problem you started with.
Wrote CONTROL, the 8 step system behind these figures. More about the author.