How to Improve Your Odds of Winning
Increasing your bid-hit ratio
By Ed Krum
Competition in business is often fierce. In order for a company to thrive, it must achieve reasonable growth by means such as increasing profitability, jobs and sales volume. With contracting businesses, one of the primary means to obtaining jobs is through bidding.
The bid-hit ratio shows the percentage of jobs bid on in relation to jobs/contracts secured. A ratio of 5-to-1 would indicate that a company is averaging one contract for every five jobs being bid upon. In a perfect world, a low bid-hit ratio, like 2-to-1, would be ideal. A company that typically negotiates their jobs creates a false bid-hit ratio because they count all work under contract vs. work that they actually bid. Contractors that get most of their jobs from bidding public works or from bidding against a long list of competitors have a higher bid-hit ratio.
Once a contractor has identified the specific customer types that he wants to pursue, there are some simple strategies for increasing the bid-hit ratio and maybe improving overall profit margins.
- Limit the Competition. Typically all contractors want to bid on projects that have only 3 or 4 contractors selected to bid. Look for opportunities where the owner procures work through a short list of bidders. Pursue potential customers where you can compete on value and qualifications. Find those owners who recognize that the services that you offer are not simply commodities meant for the lowest bidder. Such opportunities exist, but you will have to cultivate them. This strategy will definitely increase your chance of a greater bid-hit chance. Obviously, less competition equates to a higher probability for success.
- Try Something Different. Getting stuck in chasing after the same types of projects and customers over and over hurts your bid-hit ratio greatly and reduces the efficiency of your estimating staff. Be more selective, eliminate jobs with long bidder lists and pursue only the jobs where you have some type of competitive advantage. Having a strong relationship with someone on the selection committee is one example. Making this a top priority and working hard to get pre-qualified for the targeted projects greatly increases your bid-hit ratio.
- Let yourself be Known. Try not to bid projects without first getting a chance to meet the decision maker. Your goal should be to find owners that are concerned with more than just price. When you meet the decision maker, ask questions such as: a) How many are bidding? b) Who are they? c) Who won your last project? d) How will the bids be opened and evaluated? e) What is the most important factor in selection of the contractor? f) Will they negotiate?
- Limit your Affinities to Others. As a subcontractor, why not send your proposal to every contractor bidding on that project? Oftentimes trades have an affinity to one or a few general contractors and will bid only to them. While loyalty is important, you should not utilize this practice if it negatively affects your bid-hit ratio and, ultimately, your business.
In closing, these simple guidelines may prove to substantially help your company win bids, stay competitive and increase profitability, and, in an ever-increasing market, not much could be more valuable.
Ed Krum, Senior Estimator for Triune, is a highly-accomplished, multi-talented project manager with over 25 years of commercial construction experience. He is skillful and highly regarded in value-engineered, conceptual, competitive, negotiated and design-build estimates.
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