By Lisa Ridgely via “Contracting Profits”:
Building service contractors need to be skilled in numerous areas of business, but if there’s one area that continues to keep cleaning contractors on their toes, it’s the bidding process.
Smart, experienced BSCs have to exercise many strengths in order to win a bid. Internally, they need to have accurate data that indicates how efficient they are and the measurements and technology that yield accurate job-costing and workloading. They need to know how to create and build the human relationships upon which business partnerships are built. Communication is the key aspect to figuring out whether an account will be the right fit, and is essential throughout the length of the contract — because all BSCs would also like to avoid seeing their good customers going out to bid, and a satisfied customer won’t go looking for a new contractor.
The components to putting together a winning bid are not universal across the board, nor is a win ever guaranteed, but there are ways to increase the chance of coming out on top in a competitive bidding situation.
Be selective
Contractors need to consider a variety of factors before they submit a bid. First and foremost, it’s key to know why the job is going out to bid.
“We always inquire their reason for going out to bid,” James Massave, president of J&S Cleaning Services in Marstons Mills, Mass. “Are they ‘shopping,’ are they unhappy with their present service, or is it a routine annual bidding process? It’s critical to know why, as this is a good tool to determine whether or not it is worth our while or possibly wasting our valuable time.”
Often, the information in the Request for Proposal (RFP) will indicate just how serious an organization is about finding a new contractor. Offers to provide a walk-through and meet privately to ask questions, and availability of blueprints and specs indicate a genuine desire to hire a good BSC, says Bob Eberhardy, controller for K-tech Kleening Services in Schofield, Wis.
“The biggest thing we look at is if they don’t give us all the information we truly need, they’re not looking to make a change. They’re just looking to go through a process and they’ll stay with who they have,” he says.
The walk-through can be one of the most crucial phases of the bidding process, as it is not only giving the BSC a clear picture of the scope of work, but for the facility manager, that interaction may help seal the deal in deciding which contractor they will choose.
Next, a job needs to be the right fit — whether in size, scope, geography or market. Many BSCs target specific types of buildings for operational efficiencies and market strength.
“One of the factors we look at is, does this particular account fit into our marketplace, meaning: is it an account that is generally in a geographic area that we operate in?” says Al Berry, president of American Services Corp., Chester, Pa., which operates in four states. “Secondly, it has to be a kind of scope that we traditionally service.”
For example, American Services does not bid on small, one- or two-person jobs, nor does it bid on accounts that are serviced less than five days a week.
With the economy in a recession, it’s smart for BSCs to check out the credit worthiness of customers.
“Many facility people now are requesting financial information from the service providers; we, in turn, are asking for similar information from them in regards to their cleaning companies in the past,” Eberhardy says.
If a customer has had more than three cleaning companies in the past five years, for example, it’s an indication that they might not value relationships with contractors enough to hire a good one.
For D.J. Rezac, president of KB Building Services in Omaha, Neb., the biggest determining factor in submitting a bid is how the prospective customer’s core business values — those by which the company is run — align with KB’s.
“If I can align my customer with my core values, if I can use my core values to judge my customer, that helps me be successful in the long run,” Rezac says.
The RFP should adequately lay out cleaning specs and expectations about employee training, supplies, equipment, insurance, safety, personnel screening and identification, and hours and days of service. Once a potential customer has passed the initial tests, communication becomes the most important factor in moving a proposal forward.
Communication crucial
Ideally, the relationship with the customer should start during the bidding process, where trust can be built based on the exchange of information, Berry says.
“You’ve got to take the time to engineer the job and build the relationship, and those two things go hand-in-hand,” Berry says. “If I’m going to go back to measure drawings in that property manager’s office, it gives me a great opportunity to spend a couple of hours in his conference room and ask a few questions and tell him some things about our organization.”
The bid process always requires a little bit of detective work when it comes to figuring out what facility managers really need, Rezac says.
Sometimes, the document contains certain specifications that a BSC thinks should be changed. Specs can be tweaked to save a customer time and money while not sacrificing service, he says.
Starting communication early helps iron out those things before they become an issue down the line.
“The people that send out the RFP and don’t actively communicate with their bidders tend to fall in the category of continual disappointment. And the ones that are really good at it look at it as a partnership,” Rezac says.
Making expectations clear is the only way to submit a good bid, says Berry. A game plan for the preparation period, the first day of operation and all the days to follow should include knowing what the customer is looking for immediately and what their long-range objectives are, he says.
BSCs should know how the customer will measure their performance, and what’s most important to them in the implementation of the contract.
An honest and open dialogue lets both parties get to know each other’s business style and can start a relationship that often results in a winning bid — based not on price but on the trust that the job will be done right, obstacles can be overcome and small mistakes can be forgiven.
“I can be doing a good cleaning job and have a terrible relationship, and I’m going to lose that account,” Berry says. “On the other hand, I can be doing an OK cleaning job and have a great relationship and I will have that account forever.”
But in times of economic duress, even the most faithful customers can go out to bid. Right now, customers are giving more weight than ever to low prices, so accurate and affordable prices need to be a huge priority for BSCs.
Pricing
Before the process begins, BSCs should be experts of their own operations and processes to ensure accurate bidding. Many BSCs don’t know the factual historical data of their own companies, says Eberhardy.
“When you get to a certain portion of putting together a proposal, you need to know what your overhead costs are, as a percentage, you need to know what you want to obtain at a net profits level,” Eberhardy says. “And many of them aren’t familiar with that information even within their own companies, so how can they be putting together a competitive bid?”
BSCs need to move out of a mindset that bidding is purely financial, Eberhardy continues; rather, it should be calculated more tactically and use a square-footage or production rate method rather than the time and material estimating that was traditionally used in the past.
Contractors are likely to overbid and lose jobs when they use a formula that was a rule of thumb a decade ago but no longer applies, Eberhardy says: doubling the hourly rate of an employee to figure out a per-hour charge for services.
“If they’re going to continue to do that, they’re not going to grow,” he says. “They’re going to stay the same size they are because they have no concept of what happens when they try to move from doing small buildings of 10,000, 15,000 square feet to doing even two- or three-story buildings of 60,000 square feet. Their economy of scale isn’t going to match.”
So either they’ll overbid, or they’ll lose money on a bid, Eberhardy says.
Less experienced contractors or those branching into new markets are often confused about what price to quote in a bid. Bidding should be based upon more than square footage; it should include total costs including labor and overhead. Many times, facility managers will let contractors know how much their current contractor is getting. This way, a BSC knows whether their bid is going to be comparable in price — and it doesn’t have to be lower, it just has to deliver what the customer wants.
“It’s far more than just getting the opportunity to give somebody a price,” Berry says. “That’s often not particularly hard to do. It’s the ability to really understand up front what that customer needs and wants and to have them understand your company and then to develop as best you can, jointly, a pricing and approach that meets that. I don’t have to be the low bidder. I just have to be in the ballpark.”
BSCs should also be performing internal re-bidding, especially in hard economic times. This involves approaching a current customer with ways that money can be saved — and that might involve lowering prices on top of cutting back services, but in the long run, it will create a trust through which price increases will be more readily accepted in the future.
“The ability to re-engineer, or in a very real sense, re-bid internally, with your customer, a job, to be able to reduce that customer’s costs, is incredibly important to our survival as contractors,” Berry says.
Vince Elliott, president of Elliott Affiliates in Hunt Valley, Md., reminds BSCs to provide themselves a cushion from the inflation that he predicts will be happening in 12 to 18 months. Contracts with fixed dollar amounts could lose a large percentage of their worth.
Bid implementation is obviously important from the time the BSC wins the bid until the end of the contract — and ideally, if the contract is with a good customer, that relationship will never end.
“If you want to know the number one thing that drives a successful relationship after the bid, it is the quality of the manager presented by the contractor,” Elliott says. BSCs should maintain relationships with customers on every level, from the front line to managerial to executive.
That also goes a long way in preventing those customers from having those same discussions with competing contractors.
“I believe that the cleaning business is a relationship business,” Berry says. “I believe that, first and foremost, to get that account, you’ve got to develop a relationship with the people who are going to give it to you and the people you’re going to work with. And if you can do that, if they feel confident that you can do the job, that you’ve looked at the job correctly, and that your pricing is in line, you will get that job.”
