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The Real-World Challenges of Bid Closeout

REGION:AUS

 

Originally aired on 10/29/2020

43 Minute Watch Time

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In this webinar, The Real-World Challenges of Bid Closeout, you’ll learn how leveraging the latest technology can help you mitigate the stresses that often occur after being awarded a new contract. InEight EVP of Industry Engagement Rick Deans demonstrates how digital solutions provide the strategic analysis you need to solve the pain points associated with the bid closeout process.

Transcript

 

John Klobucar:
Hello, I’m John Klobucar with InEight and I’d like to welcome you to our latest webinar. Today’s is titled The Real-World Challenges of Bid Closeout.

John Klobucar:
Our presenter today is InEight’s Executive Vice President of Industry Engagement, Rick Deans. In this role, Rick works with InEight’s largest and most strategic customers to ensure they’re continuously getting value from the use of our tools. This includes working with clients during the pre and post-implementation phase. He also heads up InEight’s industry advisory group which provides valuable feedback to the company around industry best practices and product roadmap validation. Rick has been working with InEight customers for over 20 years.

John Klobucar:
Now if you have any questions as you watch this webinar please enter them on the left hand side of the screen and Rick will do his best to answer them following the program. Also, this presentation’s being recorded. I will be sending you a link to the video in about a week’s time. And now let’s get things started so let me introduce again, Rick Deans.

Rick Deans:
Hi, this is Rick Deans with InEight and I appreciate you joining us for this webinar entitled The Real-World Challenges of Bid Closeout and another title for this could be the kind of stuff that keeps estimators up at night.

Rick Deans:
We’re going to take a look at what some of these challenges are and some of the ways that we can address and hopefully mitigate some of these challenges and try to reduce a little of the stress that comes along with closing out a major bid proposal for your organization.

Rick Deans:
One of the first things that I want to talk about is we’ve got a lot of different audiences that depend on us so we’re going to undoubtedly do a few internal reviews of this project and of this estimate and again, we’re going to have different audience types. For instance, we’re going to have an operations group and that operations group is going to be very interested to learn from us, how will this project be built and what kinds of resources are we going to use and what assumptions have we made about the productivity of those resources and when are we going to need those resources? A timed phase analysis. We’re focused on this one project.

Rick Deans:
Our operations team is looking out across the organization and maybe they’ve made some strategic decisions in terms of where our equipment might be or where our best people are or other assets, how those are going to be prioritized across multiple projects while our point of focus is on this project. They’re going to want to know what assumptions did you make about using key personnel, about using key equipment as we’re hopefully going to win and execute this project. They’re also going to want to know what dependencies are there on third parties, not just for material vendors and supplies but specialty subcontractors that we’ve included in the estimate. As we get ready to go into that first internal review these are the things that we want to make sure that we have good answers for.

Rick Deans:
We’ve also got a finance and an accounting group within the organization. They’re going to be interested more in terms of, how much is this project going to cost us and what do the risks look like and what have we done to mitigate those risks? Okay, this project’s going to cost us x, how are we going to get paid for that, what margins have we got, et cetera.

Rick Deans:
Then ultimately we’re going to have our business leadership team. They’re going to be interested in things like how strategic is this opportunity for us, how will this project affect our growth objectives that we’ve come up with and stated as an organization, how does this project align with our strengths and our weaknesses?

Rick Deans:
All of these interests are going to be competing for our time and our energy as we’re trying to justify the job that we did putting this estimate together.

Rick Deans:
I’m going to flip into InEight estimate and we’re going to take a look at how a software tool might help us to at least talk about some of this stuff.

Rick Deans:
I’ve got a project here that I’m going to be submitting a bid for and one of the things that I’ve done and this is part and parcel of the InEight solution is I’ve spun up some data fields here and I want to know, for instance, if my finance people are asking me what risk do we see on this project? Well, you can see I’ve created a data field for risk level and maybe I want to filter this down to what I think the high risk items are. You can see that I’ve got a brief description of that risk right next door so I can see that almost all of this earth work I’ve labeled as high risk. Well, why is that? Well, the core samples are coming back saying there’s going to be some rock. We don’t know exactly how much there is, what type of rock it is but we’re getting a good indication here that there’s going to be some rock associated with this.

Rick Deans:
Okay, that’s great. We’ve identified some risk considerations. How do we monetize that? Well, up here at the top of the estimate is a line item for contingency and what I’ve done here is I’ve created a line called contingency and then what I’ve done is I’ve created a dependency. What I’ve done is I’ve filtered on those high level items so as I’ve gone through the estimate and I’ve decided which of these items are going to be high risk, we can then come over here and see a summary of what those items are going to cost us and I figured hey, if it’s excavation and we’re going to be using our own people and our own equipment, that’s really where I have the risk so I’m going to put an uplift on those types of costs as we’re performing this work so I can monetize that risk and I can talk about it with my internal teammates and we can determine whether or not that’s adequate. But at least I’ve called those out of the estimate and I’ve got a good plan for how we’re going to answer the question how have you mitigated those risks. Well, we’ve assigned some contingency relative to certain cost categories on those items where we’re expecting adverse conditions.

Rick Deans:
Some of the other things that we want to consider as we’re getting ready to defend our estimate and put a bid proposal together for the customer. We want to consider market conditions and this can be a little misleading. Everyone thinks hey, when the market’s good that’s great and that’s true. A lot of people are working and the economy’s pumping but that also means in a hot market that certain services are going to be in demand. Specialty subcontractors, for instance, they might have a really, really full dance card, if you will, and it might be difficult for them to come in at a specific time and fulfill requirements for us. Certainly the case for commodity materials. Gosh, you don’t have to be too old to remember when copper and concrete prices were just going through the roof because there was such demand for those types of materials. Supply chains could be affected in a really hot market. Your long lead items could be affected and we also have this thing called escalation. So in the hot market where labor is really in demand you see the rate increases go up that much higher.

Rick Deans:
Then on the flip side when we’ve got a cooler market there’s some things we want to pay attention to as well. First and foremost because it’s a cooler market other folks might be willing to cut their prices a little bit so we call that buying work and that doesn’t apply just for the folks that we’re bidding against but that could also be our subcontractors. So where they might give us a price that looks too good to be true, what we really want to do is ensure that the scope is well understood when we’re getting their pricing. One thing that we can look for as well is what’s really that delta? What’s the difference between that low bid and the number two bidder? That equates to risk. If someone says they’re going to come in and do an activity for $10,000 but the next highest bidder is at $30,000 I’ve got a feeling they might’ve been way too aggressive with that quote. Maybe they don’t fully understand the scope, maybe it’s a timing issue so let’s flesh all that out the best we can.

Rick Deans:
And I’m going to show you again some examples in the live software that can help us mitigate some of these risks. When we’re taking quotes from third parties we’ve got a pretty elaborate setup that allows us to send out RFQs, to enter the quotes that we’re getting from the subcontractors as well as the material vendors and then do some on screen analysis in this part of the tool that we call “comparison and award”, and if I pop into there we can arrange the entire estimate by groups of items and when we’re taking quotes we can make sure that certain scope items are accounted for when we’re getting these quotes in. In this case with the signage I knew that because of the phasing of the project there would be an additional need for the contractor to come out and finish the project so does their quote include a cost for additional [inaudible 00:10:08] due to the phasing of the project?

Rick Deans:
You’ll see over here where my subcontractors are. If there’s a check box on that row what that means is that’s included in their price. If there’s a monetary there they did not include that so I’m going to add some additional money to their apples to apples number so that I can do a thorough analysis and see if that’s actually been covered. Things like a survey, temporary traffic control. Did we put in time for a flagman? Again, you can see some of these folks included some of that stuff but didn’t include others and I need to be able to equalize these.

Rick Deans:
I also need to be able to look across my quote groups and make sure I’ve got adequate coverage. In this case I didn’t go out to a second seller. I’ve got a single source here with my rebar installation. That might be a risk. Maybe I need to go and do a better job of understanding what the market prices really are for that work.

Rick Deans:
Again, you can arrange your work however you like to and we can also see, for instance, we can do a comparison between that apparent low bidder and the next higher bidder. Here I’m off by a very small amount, $800 on a $30,000 quote. I don’t interpret that as a huge amount of risk. If this was a really big spread, if this person came in at $30,000 and this one was at $80,000, well maybe I want to split the difference. Maybe I want to create what we call a plug number for $50,000 and award this work to my plug number. Again, lots of different ways of doing that. What we’re trying to do as a software vendor is allow our customers some visibility into those types of issues that they might want to consider when they’re putting the final touches on this bid proposal.

Rick Deans:
Keep in mind what is the condition of the market because in both hot markets and cool markets there are certain things we want to look for and certain things we want to identify. Make sure that our third parties that we’re relying on have the same alignment on these issues as we do.

Rick Deans:
Avoiding common omissions. Well, as we’re putting it together, an estimate for our direct costs, just simple things like resource rates. Do I have the correct rate information in this project? The materials that I’m using. Do I have the correct pricing for those materials? Do I have the correct quantities for those materials? Maybe I want to keep track of those items that need a little extra review or consideration. Maybe the client has given us a few different alternate scenarios that we need to consider so let’s hop into the live tool and just look at some of these and we’ll come right back here in a second.

Rick Deans:
First and foremost what I’d like to do is show a report that we’ve continued to refine and enhance over the last 20-25 years and that’s what we call our audit report and what the audit report looks for are things like pay items without prices. It looks for cost items without costs. It looks for labor resources that don’t have a base rate that are utilized in the estimate. Are we using the correct bond rate tables or do we have a layer of our bond rate table with a cost of zero? So lots of things we can automate the process of looking for by running reports and seeing what issues this report snags as it looks across our estimate and then we can do other things too.

Rick Deans:
Earlier I showed how we could use some of these user fields and tags to identify risk scenarios. Well maybe we also want to be able to see what’s been reviewed and what needs a little bit more look. If I do a filter I can see here all of my process equipment work, I need to go back and review this and make sure I’m using the right resources and the right rates. We’re going to talk about this a little later but here are 17 items that I’ve labeled as needing additional review. I want to offload that to the tool. I want to be able to come in here and as I say yes, these have been reviewed, they will pop off my list. It’s just 17 less things that I have to remember in my head as I’m getting ready to finalize this bid proposal.

Rick Deans:
Indirect costs. Are we including the appropriate amount of escalation on this project? What about things like small tools, general and administrative costs, field office expenses? Do we have those covered? What about our corporate overheads? Do we have those covered? And a great way of doing this is through templates. Templates can be built for each type of work that we perform and embedded in those templates can be calculations for small tools, GNA, office expenses, et cetera.

Rick Deans:
Let me show you a couple of examples I’ve got. Within the application we give our users that ability to differentiate between template estimates and actual production job folders. The templates can be managed by one group of people that have permission to go in and build out and modify these templates but they can be used by everyone within the organization. You can see I’ve got different templates for the different types of work that I might do. If I were going to be building a waste water treatment plant I can bring in this template that’s a completed model of what waste water treatment would typically look like and then I can spend all of my available waking hours trying to understand where the risk is on this project, what’s different about this project than what we would normally see and how I’m going to mitigate that risk and how I’m going to attack those differences. Instead of spending 100% of my available time estimating this thing from the ground up I can use the computer, I can use automation to help me automate those redundant tasks and spend five percent of my time doing that and spend 95% of my available waking hours really trying to understand what’s different, what’s unique, what are the risks of this particular project.

Rick Deans:
When it comes to margin and pricing there are certain types of key performance indicators. KPI has done a lot of our customers will look for. Also, when we’re pricing out this project we’re also going to be very concerned with quantities. For instance, maybe we’re doing a unit price public agency type of an estimate and we realize that the client has provided us with some quantities but we’ve done our own take off and we’ve come up with some areas where we think our quantities might be a little bit more accurate than the time the owner spent developing their quantities.

Rick Deans:
Let’s take a look at some of that stuff. Again, within the application I can go to a place of the tool called the price breakdown structure. What the price breakdown structure does is it just really summarizes how the price of my job is built up. If you think about it in really simple terms, the price of my job is going to equal all of my costs plus whatever profit or markup I want to make on the job. These can be expressed as percentages. Of this bid price of 12.4 million dollars, almost 90% of it is costs and about 10% of it is margin. If I expand out the costs you can see that we can include the contribution of our direct costs as well as any sort of indirect costs. Maybe a lot of our customers might look at this ratio here. How much indirect cost do we have relative to our direct cost?

Rick Deans:
Over on the right side of the screen I’ve got tons of KPIs looking at this markup amount and showing that to me as a percentage of all of my costs, as a percentage of my labor costs, as a percentage of my direct labor or of my indirect labor. This is really key stuff because most of my risk on a project, if I’m a self-performing contractor, most of my risk is going to be in my labor and my equipment and I can see how much of that markup that I’ve got to cover if we ran into some delays how much of my labor am I able to cover using that markup? If I’m on GC and most of my risk is in subcontracting the out work I can see my markup really only represents 27% of my total subcontracted costs on this estimate. Maybe I need to go back and look at that.

Rick Deans:
These tabs just give us different ideas of things we might want to look for. How is the job currently priced relative to where I want it to be? In this case I’m off by about $350,000 so that’s something I’m going to want to look at. How much of the estimate do I still have represented by plug numbers versus the bottom up detail method versus how many quotes have I taken and decided those are the numbers I’m going to use for coverage within the estimate? What sort of man hours am I looking at, equipment hours? These are kinds of things I want to be looking at. At a high level we can always drill down into detail.

Rick Deans:
Maybe again this is a publicly funded project and we have different minority, MBE, DBE goals that we have to satisfy. Great, I’ve got a summary here. I can see all of the different subcontractors and the material vendors that I’m going to be using on this project. So again, during bid review maybe we want to vet these out a little further. Maybe we’ve got some organizational experience with these particular sellers. There’s a lot of things I can be doing before the 11th hour to take the pressure off myself and vet some of this stuff out in advance.

Rick Deans:
We talked about escalation. One of the things our software does a great job of is not just being a one dimensional estimate in terms of a cost sheet but we can integrate this with a schedule as well. So we can look at things like organizationally we can look at our cash flow situation across a project. We can see when we’re going to need key materials on the project. These might represent certain resources or certain things that we’re going to need at a point in time. Do we have enough carpenters in our stable to fulfill these requirements at these points in time. Again, that time phased view of the project.

Rick Deans:
Did we include finance cost in the jobs target price? How are we accounting for when we’re getting paid? How is money changing hands? We’ve got some options, some questions that we can answer in terms of how we submit invoices, how long we wait to get paid on those invoices, what percentage of those invoices will be held as retainage and then when do we receive invoices from our subcontractors, from our material vendors? How long do we wait to pay those, are we holding retainage? What does it cost me to go to the bank and borrow money for this project? If I happen to have surplus funds am I earning any interest on that? All of these things can go into our bid and we can really do some analysis well before we’re on the hook for this project to really vet out what that’s going to look like for us.

Rick Deans:
I’m going to talk a little bit about checklists. One of the things that’s really evident about living in this day and age is there’s no shortage of data. We’re all in a state of information overload. If you think about internally what sort of information you might have access to, plans, specs, reports, emails, meeting minutes, RFIs, maybe there’s addenda issued by the client. Just tons of information coming at us and the issue is we have so much information available to us it’s hard to decide what do we want to act on and checklists can really, really be helpful here.

Rick Deans:
Checklists can help us reduce stress by offloading some of that anxiety. If I’m carrying around a list of 17 things in my head that we have to check because they haven’t been reviewed, can’t I offload that somehow? Can’t I create a checklist? Can’t I mark those items in the estimate such that when I revisit those they’re there for me and I don’t have to rely on my own memory to bring those up. Checklists can also save time by reducing or at least minimizing redundant efforts. They can save us money be ensuring routine costs or coverings. We don’t have to remember to include those in our estimate. More importantly than all of these checklists can allow us more time for proactive problem solving. Again, doing that analysis or trying to understand what is it about this project that we’re well suited or not well suited to do and how should I try to mitigate those risks.

Rick Deans:
Another thing that our software can allow folks to do is to create a list of attachments. Over here on the quote piece this is where I would have access to my attachments register and one of the things that I might want to build into my estimate is just a good old fashioned Microsoft Excel checklist. Are the project requirements clearly documented and understood? Is the criteria for meeting each requirement defined? Are the project requirements base lined? As I’m going through this estimate I can use standard tools like an Excel checklist to determine whether or not I’ve thought about these things and then I can come in here. Maybe I take a week off and I come back from my vacation and I’ve got a great place to pick right back up, just my own notes.

Rick Deans:
What’s great about this is this is not an Excel sheet that’s a one off somewhere on my hard drive. This is actually now been copied into the estimate file and someone else on my team would be able to open the estimate and access this checklist and see where I am. So if I were out on vacation and I called back and said, “Hey, I missed my flight home. I’ll be there on Wednesday rather than Monday.” Someone else can pick right back up where I left off and see what the state of this is without having to rely on any special tribal knowledge relative to how that checklist is progressing.

Rick Deans:
While we’re on the subject of checklists. We talked about templates earlier. I also want to talk about a concept that we have called cost item assemblies. Cost item assemblies are really great ways for us to create a big checklist of things that we want to include in every estimate file we create. For instance, there’s a menu command here that’s going to let me insert a cost item assembly as a subordinate. So if I were taking off a concrete footing I could set this up organizationally where anyone in my company would be taking off this concrete footing and they’d be prompted to input the length, the width, the depth, even waste percentages, what size rebar we’re going to be using and all of these inputs are then going to drive these calculations down here. So once I’ve reviewed what we’re looking at and I’ve made my inputs I can go ahead and hit the okay button here and you’ll notice that the system has built for me an assembly of this footing with form work as well as the angle of repose for excavation already included so all of these calculated values here, those are the result of those inputs that I made.

Rick Deans:
Again, I don’t have to remember on the fly how that math works. Oh yeah, that’s right, we’re doing cubic yards instead of cubic feed so let’s make sure we divide by 27 or divide by 2,000 if we’re going from pounds to tons. All of that stuff is baked into that cost item assembly for me. It’s been vetted, it’s been [inaudible 00:27:32], we’re confident with it, we’ve used it many, many times before. I can just focus on making those inputs and then as I get addenda or new plans, new specs, new drawings, I can always go back in and edit those cost item assembly inputs. So if we decided the depth of this is really going to be four feet, boom. My structure has been updated based on that new input. My new quantities, my new costs are living in the estimate as a result of that. That can be a great way to really take that concept of a checklist a little further and make sure that we’re including everything we should be including when we’re putting this together.

Rick Deans:
What is a best practice approach to implementing checklists? Well, we talked about it, right? Templates, parameter based estimating, looking at previous estimates and proposals to help us validate those assumptions.

Rick Deans:
As we’re validating those assumptions we want to look at things like our self-performed work. We want to look at crew sizes, productivity rates, what unit costs are we coming up with? Again, when it relates to materials, availability of commodities, consumables, long lead items, have we got those covered in the estimate? We could look at things like cost reports, emails, meeting minutes.

Rick Deans:
Let’s go ahead and look at this in context within the tool. I’m going to bring up something that we call benchmarking. What benchmarking is in our world, benchmarking is the ability to leverage our past to help us understand the future. What I mean by that is here’s a concrete example. We’re going to be putting in some form work and I’ve got a crew and a productivity rate and a unit cost and I can see visually how the estimate that I’m working on compares to previous experience we’ve had with this type of work so this is very powerful because as an estimator I don’t have to make a bunch of phone calls or send out emails or pick up a three ring binder. All of that data is right here in our tool. This is showing me organizationally the different times we’ve estimated this project.

Rick Deans:
If I click on the settings box you can see that I can include or exclude certain data points based on what I know about these particular projects and really give me an idea of how are we priced to do this work relative to the way we’ve actually estimated it and performed it in the past. There might be a really good reason why I’m sitting up here at 63 cents a unit when my average for performing this work is at 46 cents. I would want to know the answer to that question before I stepped into a review meeting with my internal management team.

Rick Deans:
The benchmarks can be very, very powerful and you might be thinking, well not all projects are going to be alike. As we’re setting up our benchmark and parameters we can determine which projects we want to include. Projects could be differentiated by region or by client or by type of project. So lots of different ways that we can slice and dice this data so we can be getting the most applicable data points as we’re doing our analysis. Here we’re looking at our benchmarks at a very, very low level, we’re looking at them at an activity level but we can also follow these benchmarks up the tree so instead of just looking at form work I could be looking at concrete across the board. So very powerful way to help validate our assumptions and help look at those comparables from our history as we’re planning for the future.

Rick Deans:
For subcontracted work again, we want to make sure we’re doing that apples to apples comparison. So there’s lots of tools we can use to make sure that if someone left out the cost of that second mobilization that we can include that and make adjustments to their bids. Inclusions, exclusions, split conditions. Well, I told you all of those prices were contingent upon me providing all of those piping materials. I’m not going to let you split out the PVC separate from a duct or pipe. We need to understand that stuff and we need to make sure our assumptions are validated for our internal work, for our subcontracted work and then guess what?

Rick Deans:
The customer has a vote too, right? What obligations can we count on from the client? Pre-bid information, clarifications, do we have a list of bidders that we’re competing against on this project? Maybe I want to go back organizationally and see how we’ve competed against these folks in the past. Again, all an estimate is at the end of the day, it’s a big collection of assumptions that we’re making and the more work we can do to validate these assumptions the more accurate and the more predictable our estimate is going to be.

Rick Deans:
Let’s do a deeper dive into third-party quote management. As we’re working up to submit this bid proposal there are going to be some considerations we want to make sure we’re covering up front. Maybe this is six weeks or in some cases six months before we turn in our actual hard bid. Do we have well-defined scope? Have we sent out invitations to bid or requests for quotes? Have we receive unsolicited quotes and do we know how we want to manage those?

Rick Deans:
As we get a little closer to turn in our estimate we want to consider some things like those scope items, those scope sheets. What’s included in this bid? What’s not included? Are we aligned on our take off quantities? Again, getting back to those split conditions, did someone say that they would honor that unit price regardless of how much we bought from them or is that tied into a larger package price that we need to recount for? Then of course there’s always that frantic 11th hour, right, when last minute adjustments are being made to these prices, package pricing changes and we want to ensure we have coverage within our estimate across all of these different disciplines.

Rick Deans:
Again, this is when we can go back in and really take a close look at how we’re doing relative to our coverage in the estimate and one of the things I’m really excited about is that we continue to make improvements to this part of the tool. So for instance, I have the ability to edit my pricing right here on this finalized sheet. So if someone were to come in and give me some updated pricing it’s very easy to change those prices right here on this screen without having to go and run around to different parts of the tool to be able to input those changes. So very powerful tools right here at my fingertips when I’m closing out this bid.

Rick Deans:
I think any kind of discussion about bid closeout would be remiss if we didn’t talk about differentiators and differentiators fall under, in my opinion, in my mind they fall under a few different categories. Certainly geographical differentiators. Maybe it’s a big paving job and guess what? I’ve got plants located right by that stretch of highway that we’re going to be repaving. Great. I’ve got a geographical advantage. It’s going to cost me a lot less to truck my materials to that job site than my closest competitor. Maybe this is in an area where I’ve got other projects ongoing and I’ve got resources mobilized there so my proximity to other resources organizationally could give me a benefit or maybe it puts me at a disadvantage. These are things that I want to know as we’re getting ready to close out this bid.

Rick Deans:
Maybe these have to do with the investments that we’ve made as an organization. Maybe we’ve got some specialized equipment or we’ve invested in some focused training and we have some really good expertise and some competencies in some areas where we don’t think our competitors are as good as we are. Maybe we’ve got a particular track record with this client that sets us apart for good or for bad on this particular project. These can be things that we want to be aware of and if appropriate, leverage these.

Rick Deans:
Talking about the equipment, we’ve talked about applying escalation in the project to help us understand the difference between 2020 rates and 2021 rates for instance. Maybe this is a multi-year project. Maybe I want to be able to discount my equipment. I can do the same thing. I can make negative adjustments. Maybe I own my fleet of equipment and it’s bought and paid for and the market is starting to slow down and it’s really important for me to get this next project so maybe I want to take a hit on my equipment costs just a little bit so I can keep our crews working and keep this revenue coming in, keeping our company thriving during this downturn.

Rick Deans:
What are some of the things in the market that we want to consider? Our backlog versus our competitor’s backlog. Is this a strategic pursuit for us? Might it make sense for us to come down a little bit on our price so that it opens up a lot of opportunities for us in the future? Again, making sure I’ve got adequate coverage across all of the disciplines in the estimate.

Rick Deans:
When we come in we start to put together our final pricing for this estimate. We’ve got some scorecards up here that tell us how much we need to cut or add to the bid to hit our target. If I wanted to balance this, hit my target total, great. I’m right at that 12.37 million that I thought I should be at. You’ll notice some of these line items are colored red. Some of them are colored green. This is that difference between the client’s perception of what the quantity’s going to be and my perception of what the quantity’s going to be so if we think the quantities are going to under run we color that line item red for you when there’s certain mechanical things that we can do as we’re starting to put our final pricing on this item and of course the green ones mean just the opposite. In this case we’re expecting a little bit more structural excavation and backfill than what the client had taken off. We can also have things jumping out at us if they don’t meet certain thresholds. In this case, I’ve indicated I wanted mobilization.

Rick Deans:
Let’s just double click on this and take a look. I’ve wanted mobilization to be somewhere between eight and 10% of the price of this job. Maybe there’s a 10% cap and I want to make sure I’m getting at least eight percent of those mobilization costs up front when we’re starting to roll equipment out to the job so if something’s in red it jumps out at me. Rebar, for instance, I’ve got it here at a buck 69 a pound. If I double click on this I can see that I really … My comfort zone for this is between a buck and a buck 50 a pound so I’m priced outside of that range. These are things that are designed to jump out at the user as they’re starting to put their final touches on this estimate. Again, as we’re looking at our target margins and our target profit might we want to consider some input from the business if this is a really strategic event for us? Might it open up doors in the future? Might be willing to come down a little bit on our markups while still being assured we’re covering our costs?

Rick Deans:
These are the things we want to consider as we’re putting our final touches on this bid proposal as well. Then finally I’ll talk about this a little bit. What’s our cash position going to look like on this project? What is the timing of our costs? How are we going to be paying for our labor and our equipment and our subs, our materials? What does our staff and support situation look like? What about the timing of our revenues? Have we negotiated payments terms with the client? What if there are schedule changes? How much is the client going to be holding for retention?

Rick Deans:
All of these things can be really mitigated by using our cash flow analysis. Again, I didn’t show this earlier but we can come in here, turn on and off certain things. One of the things I might be interested in doing is just looking at my net net cash flow across the project. What does that look like? What does that look like by month? When do we become cash flow positive on this other job? Do we have six other jobs that are going to take us down in the hole at this point in time before we finally become cash flow positive at the beginning of January of next year?

Rick Deans:
These are all strategic things that we want to consider as we’re putting our final touches on the estimate. What is our cash position going to look like? Again, what are those payment terms look like? What does the invoicing cadence and have we accounted for the cost of money?

Rick Deans:
One of the options is to include a finance cost in the jobs target price and calculate that automatically based on this cash flow graph. So now if I were to go to my price breakdown structure I can see that the tool has actually included job financing for me based on that interest that I’m going to be paying on money as well as the interest that I’m earning on any kind of surplus funds.

Rick Deans:
There’s a lot of things we can offload and get off our plate and have the computer automate those tasks and I really hope that you’ve learned something in this session. We wanted to really talk about the overall issues of putting a bid together and those last minute pressures but we didn’t want it to be tool specific. Clearly, our tools are designed to help our customers in some of these areas but whether you’re using a legal pad or an Excel spreadsheet to be able to do this we want you to be able to consider these things and hopefully we’ve brought some things to your attention that you can think of as you’re putting your next final pricing together on a bid proposal.

John Klobucar:
Thank you Rick. To learn more about InEight as well as our broad portfolio of construction project management software visit InEight.com and click on the request a demo button. If you’d like to see a schedule of upcoming webinars visit InEight.com/webinars. Thanks for watching. This concludes our presentation.