www.ecao.org 22 T BIDDING STRATEGY ESTIMATING AND SUCCESSFUL BIDDING STRATEGY FOR ELECTRICAL CONTRACTORS By Dr.Awad Hanna, Professor and North American Consultant The most common means for electrical contractors to procure work is through competitive bidding. In general, most public agencies, such as provincial or federal governments, rely heavily on competitive bidding to acquire and award work to contractors. Electrical contractors typically contract with general contractors/construction managers as a subcontractor or contract directly with the state as a separate prime contractor. In addition, electrical contractors can bid for work under the traditional delivery system; that is sequential and typically the design is complete at the time of bid. The other model of bidding is the fast-track model, with design and construction overlapping, as in the case of Design-Build, and Construction Management As Agent/At Risk. Fast-Track delivery causes a substantial risk for the electrical contractor, as the design document(s) is/are dynamic, rather than static, and there is always a difference between bidding document(s) and construction document(s). In the experience of this writer, in the Fast-Track model the design documents are released between 70 and 80 per cent complete. Bid Hit-Rate and Company Growth Research conducted by this writer found that the North American average for a hit-rate is eight per cent; that is, that contractors will win eight per cent of the projects they bid on. Estimating is an expensive process, and contractors need to be selective when they bid for work. The cost of estimates range between 0.25 and 0.5 per cent of the project cost, depending on the complexity. Typically, electrical contractors have some sort of internal process, either formally or informally, for evaluating their chances of winning a bid. In most cases, the contractors’ estimates should be very close when they evaluate the direct cost components of labour, materials, or equipment. However, the difference between two estimates will largely depend on a contractor’s evaluation of risk or contingency. Contractors typically add a small percentage to their markup in terms of contingency to account for risk. On the other hand, they add higher percentages of contingency in their markup to allow for risky jobs. This system, as it stands now, is rather informal and based largely on intuition. This article provides a methodology for quantitative assessment of bidding factors, with the goal of allowing electrical contractors to improve their hit-rate. For electrical contractors to grow at a healthy rate, with minimum number of projects to bid for, they must achieve a hit-rate of 30 per cent. In order to improve their hit-rate, contractors should establish evaluation criteria and analyze both successful and unsuccessful bids. Figure 1 presents a hypothetical contractor with annual sale or annual sale increase of $10,000,000. The Figure shows the relationship between bid hit rate and the number of projects required to bid on for project sizes of 40K, 100K, 200K, and 400K. The figure demonstrates the dramatic decrease in the number of projects necessary to bid for to achieve a given sale value, as the hit-rate increases. Estimating risk Quantity takeoff can impose a particular risk to estimators. There are four principal components of quantity takeoff: •  Component 1: Items that are listed such as switch gears, transformers, control panels, bus Figure 1: Decreasing Relationship between Projects to Bid for and Hit-Rate