Stan: All right, guys, we're bidding and estimating today, but we're not just doing any bids and estimates. We're looking at some pretty massive projects. One of them is right here. Another one is out on another site.
Stan: Whoa, actually, guys, we're not actually going to go look at that other job, because I realize that it's a lot of numbers. These are big projects, and I don't want to overwhelm you and get you confused. Some of you guys really want to start learning how to do bidding and estimating, so I'm going to break this into two separate videos.
Stan: Today, we're going to be looking at the project I'm on, and down the road we're going to be looking at another project, entirely different.
Stan: Now, you're going to see this huge variance between the numbers. On this job, guys, the low bid was $54,000, and the high bid was over $137,000 for the exact same job with the exact same set of specs, and it actually isn't surprising.
Stan: Don't let this get you afraid.
Stan: Did you just say, "Get you afraid?" You should speak good language.
Stan: What we're going to be looking for is the meaty part, where everybody else falls. That's really where you want to be at. If you guys are really looking into construction and getting into it, make sure you go check out Dirt Monkey University. We have a nine part series on bidding and estimating, and we also have an entire group of people that help each other out on a daily basis on refining their numbers. It's called the mastermind group.
Stan: But today we got a big job, so what are we waiting for? Let's get into this.
Stan: We are taking this even a step further. On this particular project, we get to actually see what my five competitors put their numbers in at. We get to analyze what happened on this project, and try to determine where we want to be on the next job site. This is raw education. This is real world. This is a job we just got done bidding. The next job you look at we're in the process of bidding as well. So let's see how today goes, because get ready, guys. We're going to have some fun, but we're going to learn a ton.
Stan: All right, guys, we're going to be looking at a job that I bid. This is a government job, so this project we actually get the opportunity to look at other ... Well, let's see, I'll look at ... So, this job we actually get the opportunity to look at other people's bids.
Stan: All right, guys, so on a government job we always get to see what the other guys put their numbers in at. It's because it's not private funds. It's public funds, meaning, the government spending your money. They are accountable for how they spend it. It's the Freedom of Information Act, so any time you guys are bidding on a government project, know that your numbers will be disclosed to everybody else out there, but all their numbers will be disclosed to you. That's pretty cool, especially when you're trying to refine your bidding process.
Stan: I'm going to show you my numbers, and I'm going to show you the numbers of the four other people, four, other people that we were competing against, but we are going to then look at how our numbers fell, good, bad, and in between, so we can get a better feel so that next time we go up to a project like this we know where we need to be at.
Stan: Before we get into the actual prices, let's get you familiar with the project and the specs. As you're watching this, try to formulate your own numbers, and put your best guess down below.
Stan: Now, before we get in ... Yeah, what I said earlier.
Stan: Let's look. Let's check this out. This, guys, is a concrete swimming pool, so everything that you see within this fence line is gone. Now, that concrete swimming pool is built like a bomb structure. When I say that, I mean that that thing is fortified with rebar. It is probably one of the toughest structures to remove. It's much tougher than a building, so that building right there is way easier to take down than a swimming pool, by far. That building will come down in an afternoon. This swimming pool, not a chance.
Stan: As part of this demolition project we're also going to be taking out this building right here and this shed. It all comes out over here.
Stan: All right, so guys, here's the specs on this job site: 1800 cubic yards of granular fill. Select granular fill, meaning that this is a government job, so you're going to have an inspector breathing over your shoulder making sure that the fill that you bring in meets their very specific specifications. Plus, on top of that, you've got 200 cubic yards of top soil that has to come in over the top of this job site.
Stan: Now, the reason I had red flag earlier in this video is because you can't do this job the way that you think it should be done. It has to be done to the very specific set of standards outlined in the RFP, Request For Proposal, that you bid on. You cannot deviate from that, and you have an inspector that could either, A, look the other way, or, B, look even deeper into what you're doing. You've got to put your numbers together like this guy's going to be looking deeper into what you're doing.
Stan: Now, you guys, knowing that you got a concrete swimming pool that has to come out, 1800 yards of select granular fill, an inspector that's going to be watching everything you're doing, plus 200 cubic yards of top soil coming in, plus two buildings that come out, an entire fence, what would you bid it at? Take your guess in the comments down below. Give me some numbers; but remember guys, I'm going to show you the numbers of everybody else that bid this as well. This is an opportunity, even though we didn't get this job. In full disclosure, we didn't get this job. This is still, probably, one of the best educational opportunities that you can have.
Stan: Any time you guys have a chance to go out and bid on a project, even if you don't want the job, because then you can ink your numbers up; where if you do get the job, you win. And if you don't get the job and you didn't want the job, and you get to see everybody else's numbers, you win. I like winning.
Stan: When you're first getting your feet wet bidding and estimating on jobs, you should be bidding everything that comes your way, even if you don't want it. Just for the experience of putting numbers together, especially on a government job, where you get to look at where everybody else came in, and compare how you did to them.
Stan: Everything you see here is coming out, and that pool is 15 feet deep, reinforced with rebar. Everything comes out.
Stan: Hey, Tim, would you say that the guy that got this job, at the price he got the job, is sweating bullets right now?
Tim: I don't know. Maybe his costs of operating are different than other peoples, I guess.
Stan: You know that the guy that got this job at 50G is sweating bullets. He has to realize he absolutely missed something in his bid. He's got to be able to look at everybody else's numbers and go, "Oh, crap!" That's exactly what we'd be doing. If you got this job, and the next guy, the next bundle of guys that came in were in the 90s, would you be worried?
Stan: Right. So would I.
Tim: Yeah, I'd want to renegotiate, maybe?
Stan: It's too late, though.
Stan: All right, so here's how this job broke down. There were two guys fighting for the bottom of the barrel. They were in the 50s on their bids. There was a whole bundle of guys that were right in the 80s and 90s, and that's right where we fell. Then, there was a guy way up above everybody else at over 137,000, which is a guy that I imagined looked at the job, probably took about five minutes, threw a dart at the board and said, "If no one else bids, and I get the job at 137, I win, win, win." That actually happens.
Stan: But let's talk about this race for the bottom. This is something that I would say a majority of contractors are guilty of, but to talk about it, let's talk about a video I made a few years ago.
Stan: A few years back, I made a video on How to Make Money on a Landscaping Job Gone Wrong. Now, in that video, my guys kind of screwed up and we literally had to start everything all over again, but we still made a lot of money on that job. One of the comments that came through over and over and over again was, contractors were saying, "Oh, I could have done the job for $400."
Stan: Now, I call this The Race for the Bottom. There are guys that are willing to work for dirt cheap, have nothing to show for it, and work themselves to death without realizing that they're digging their own grave.
Stan: In that video, I did the job for $2,000, but I would have guys say, "Oh, I could do that job for $400."
Stan: In this example, even when there's no competition, contractors are willing to fight against themselves in the race to the bottom to become the lowest possible bid when the exact opposite should be true.
Stan: All right, think of it this way: when you charge a premium price for your services, you can deliver premium results. When you get into that mind frame, you want to be able to deliver quality that is even beyond the maximum quality that your customer perceived you would deliver. This, instead of bringing you down to the bottom of the barrel, starts to eke you up towards the top of the barrel.
Stan: What struck me as odd is how these contractors are willing to drop and negotiate their price right down to where they are literally making next to nothing, and then they wonder why they don't have any money leftover at the end of the year.
Stan: It's true. I can't even make this up.
Stan: Now, in my mind, if I told them in that video that I was doing the job for $2,000, they shouldn't say, "Oh, I could do that job for $400." They should say, "Oh, I could do that job for $1,990."
Stan: What I'm saying to you guys is when you get a job for a premium price, don't deliver mediocre results. In fact, take where you believe your customers expectations are, and over deliver on top of those. That's what's going to lead you from one amazing job, to another amazing job, to another amazing job. Don't be the contractor racing to the bottom.
Stan: That's what allows a contractor to do extra quality and to make their customers happy. When they undercut themselves, they find that they've got to sacrifice quality on the job to complete it. When they raise the price up, they don't have that problem, and they can deliver the extra quality to their customer, which makes them happier.
Stan: Just like Phil, my favorite guy from Duck Dynasty, always says, "Happy, happy, happy!"
Phil: Happy, happy, happy.
Phil: Happy, happy, happy!
Phil: Be happy, happy, happy.
Phil: She's going to be happy, happy, happy, happy, happy, happy, happy, happy.
Lady: Happy, happy, happy.
Phil: Happy, happy, happy.
Boatman: We're happy, happy, happy.
Phil: Everybody happy, happy, happy.
Stan: All right, so now, let's go back out to our site and see how things are going over there.
Stan: The guy that got this job, I feel sorry for him. I really do. He's got to realize that he missed quite a few somethings. Let's take a look at these numbers and what do they mean.
Stan: We've got two low bids that are both in their 50s, but you've got to look at the companies that bid those jobs. Are they companies that are well established in the area? Then we look at the next bundle of people, and there's Veit and Bolander. Now, when we actually look at the names of the people, we know that Veit and Bolander are two of the most established companies, at least in Minnesota, for demolition. Any time that we're bidding, if we can fall somewhere around where Veit and Bolander are, we know our numbers are right where they've got to be.
Stan: In this case, guys, it's not just a matter of where did our numbers fall, but who did our numbers fall by?
Stan: Now, we got to remember when we're looking and analyzing numbers we're not racing for the bottom, so we don't necessarily care about who the low bidder is. We want to know who the qualified bidders are. Who are the guys that actually know what's going on in the industry, and where are their numbers lying? Because if we're getting in the ball park with those guys, we know on future projects we can trust our numbers. We don't have to second guess ourselves.
Stan: When we're looking at that feedback, are we right, wrong, in between. We look at where we want to be at in relation to our competitors, but not just the competitors because you got to realize any Tom, Dick, and Harry that has a pen can put a bid in on a job. It doesn't mean they know what they're doing. It doesn't mean they got the right numbers, but when we have the Tom, Dick, or Harry that's done job, after job, after job, and they're falling in line with the other guys that know what they're doing, it tells us, well, we're pretty darned close. We're right about where we want to be.
Tim: Well, now, they've just-
Stan: You were saying, Tim, the company that got this job is right in this area, right?
Tim: I think so, yeah.
Stan: And you were saying ... What were you saying about the cost of operating in the stockpile fill?
Tim: Well, who knows what they've got. If they got a big, giant stockpile of fill, or they got soil ready to go that they need to get rid of, or they got an angle on it, well, then they just ... Now they're not buying it, like everybody else, so their cost of operating is going to be a lot cheaper than ours is, because we'd have to buy all the soil, so I guess you never know what people ... That's why prices vary so much. Everybody's got a different situation they're in.
Stan: Okay. But, that's why they also have specs on a job that require everybody to conform to the same standard, so maybe they have this giant stockpile of fill ready to go, but if it's not a select granular that meets their specification, they can't use it. That's the problem on a government project. Now, if this was a private project, I could understand where their numbers are coming from, absolutely. But this is not a private project. You have an inspector going to be breathing over your shoulder. They've got to put their initial numbers in as if the fill soil they have does not pass that specification, unless they've already had it inspected and they know that I passes.
Stan: You're right, Stan.
Tim: It's just hypothetical, man. So, I'm just saying that it can change. Just saying. It could be different. Everything could be different.
Stan: All right, guys, so we've talked about the race for the bottom, and not to be one of those guys in a rush to put yourself out of business. But let's actually talk about this very specific job, and let's break it down into its most basic categories. I call this, How Do You Eat an Elephant?
Stan: It's a phrase that I repeat over an over to myself every time that I get into these giant projects that are very complicated. I always break them down. On this job site, here's how I did it: I take the actual swimming pool itself as one lump sum, so I go through all the numbers and I calculate, "How much will it cost me to break up this swimming pool, to load it into trucks, and to haul that away?" That becomes one number, all by itself. Then I look at how many cubic yards of select granular fill do I have to bring in. Now, if this was just common fill, this number would dramatically change, but now this is a fill that is regulated and could be overseen by an inspector, so then I calculate how does it cost me to go buy it, to make sure that it passes all the screening requirements, and to take it from the pit where I bought it, to bring it out to the site, to place it, and then compact it, and to also be aware that the inspector may be watching as I'm compacting it.
Stan: I calculate that. That's number: number two. Number number two? I guess it's so important I had to say, "Number," twice. Well, now it's three times.
Stan: Then, we have top soil, and site restoration. How much for me to import 200 yards of top soil, to lay down seed, to lay down straw blanket, to put up erosion fencing all the way around the site, and to make sure that everything is safe and secure until the time that the seed establishes, and then I got to go back out and I've got to get somebody to remove that silt fence, and to rake everything in and make it flush. That's number: number three.
Stan: Really? You're still doing that? Do you think you could think of a better way to say it, that? Wait a minute. Did I just say, "Do you think you could think?" I give up. I think I'll just stick to numbers.
Stan: Then, we also have mobilization fees. How much is it going to cost me to move all my equipment back and forth? How many days am I going to be out on the job site? That's number: number four.
Stan: There was a number five, but I can't remember what it was, but it doesn't make a difference, because in this video, is I'm breaking the project down into it's most basic components, and then I add them all up together to come up with my lump sum bid that I turn in to the state. Anytime that you guys are looking at these massive projects, start to break them down into their parts and pieces that make logical sense, as if you were actually working on the job site, actually experiencing the project first hand. But, I want to also caution you: you can tend to overanalyze everything when you start to do this. Make sure that you're not getting overanalytical, you're going to deep, because then what happens is you're going to way overinflate your numbers when you do that. You've got to be able to step back a little bit as you're doing these numbers.
Stan: All right, guys, well, I hope this video's helped you out. I know it got a little long in the tooth, but bidding and estimating is an absolute science. It's the make or break of a lot of companies. This is where a lot of guys race for the bottom, and put themselves out of business. We want you guys to race for the top. We want you to be able to differentiate yourself from other companies by the quality that you're able to do, because you have the prices set at a point that allows you to do better work for your customers.
Stan: If you guys need more help than what you found in this video, make sure you go over to Dirt Monkey University, because we have a nine part bidding and estimating series over there; but every single day, we have over 350, almost 400, members working together, helping each other out with bidding and estimating and scheduling and all sorts of things. It's called the mastermind group. When you guys are ready to take your business to the next level, that's the next logical step. I promise you guys: you won't regret that. You're going to find all the answers you need right in there.
Stan: God bless! Let me know what you guys think of this video. If you like these bidding and estimating videos, I'll try to make more of them for you.
Stan: Go get 'em, you guys.