Construction is one of the few industries that requires demanding qualification work. Since, high risk is part of the fabric of construction; owners make contractors go through hoops to prove their mettle and capability. Owners make the word caution take on a whole new meaning.
Construction Contractors have to win twice to win most projects.
1) They have to qualify with the Client (Owner or General Contractor) by interviewing and by providing information such as:
• Past projects
• Financial statements.
• Insurance coverages
• Bonding capacity
• Other important factors
2) Giving the client (Owner or General Contractor) specific value that matches the specific need the client is looking for. Some clients only want price. Others want service and quality with a competitive price.
• Capability to do this particular project such as experienced superintendents and PM who are available.
• The ability to identify client wants and critical success factors about the project.
• Specific project experience in upcoming job type
• Past work with the client
• Price with terms and conditions
The concept is simple, but works hard. Strong and seasoned contractors do well on the first test and almost as well on the second one.
In this area of giving the client of specific value, it is really not a question of price. When superb contractors compete against their brothers, fair and justified profits / terms and conditions are bid.
So, what is one of the takeaway ideas here? Contractors, who work hard to make projects come in on time and on budget, make their own future. This is not a corporate business, it is an owner – operator one. The owners of above average construction firm don’t live in their office; they visit jobs and are on site decision makers. In essence, the most time is spent outside running the business, keeping people productive and projects profitable.
Young contractors should not be impatient about winning a negotiated project. They have to win twice to do so. Strangely, an inexperienced construction company will do better on the second part than on the first part. However without qualifying first, a contractor can never sit at the negotiating table with the client.
What is interesting, contractors actually have to win three times to win a superior project. State licensing and business requirements are more demanding that ever before. Field experience, testing and financial requirements have to be satisfied before a contractor may go into business. This is a third, but primary win.
Construction contracting is a unique business. There is little that resembles other industries. Understanding it takes dedicated study, field experience and business knowledge. There is no shortcut. However, it does reward the diligent and the hard working more than any other business. I have personally seen many contractors improve their financial standing by over a thousand fold in their business lifetimes. That speaks volumes about the greatness of the construction business.
For more information on this critical subject, purchase a copy of my McGraw-Hill book, Managing a Construction Firm on Just 24 Hours a Day. We offer a bundle with Excel templates that are featured in the book and 5 on-line courses to help teach construction business concepts. Go to www.stevensci.com and click on the book link