Part II: Selecting the Right Work – Market Analysis
In the second part of our 10-part series on bidding insights we take a look at how to go about selecting the right work to bid on once you’ve been able to identify the right work for your company.
(Note: In order to assist our readers, we have provided supporting spreadsheets that may be accessed through links in the text. We recommend you save the spreadsheet locally before you close it to preserve any changes you decide to make.)
In order to select the right work, contractors should review past projects and determine what type of work they are actually good at doing. This may be different from the type of work that the contractor likes to perform. Contractors need to conduct this review in an objective, data-driven fashion. This is no time for intuition or gut feelings.
In order to analyze their market, it is recommended that contractors use a Closed Job Analysis which consists of reviewing what a contractor has bid on over the past year, as one quantitative method to determine the best work for the firm. Contractors can develop a simple spreadsheet showing, among others:
Type of Work
Final Contract Amount
Final Cost Amount
Gross Profit %
Original Contract Amount
Original Gross Profit %
Additional categories could include field supervisor, project manager, client, and location. By sorting this spreadsheet by various fields, contractors can obtain a picture of their most profitable type of work, location of work, clients, etc.
Another methodology that is recommended for contractors is the Focused Market Analysis. In this type of analysis, based on the firm’s own data on projects over time, the contractor is looking for what makes the perfect market for the firm. A perfect market is defined by clients, work types, and locations. There is no set correct answer to these questions and the answer will be different from contractor to contractor.
What is standard among contractors is that the definition of “perfect” contains, in some aspect, the fact that the client, type of work, and location are highly profitable.
Each of the factors of the market must be clearly defined by the members of the team conducting the analysis. The Client Type and Customer Rating is simply a listing of clients over the past year. The Focused Marketing for Location is defined geographically – e.g., states/counties, rural/suburban/urban, cities, or military bases. The Work Type Rating includes a level of specificity that is determined by the team conducting the self-analysis. Contractors may define work type by the type of structure – apartment, hotels, office buildings, etc. – or the type of construction – new construction, renovations, fit-outs, etc.
The firm must then develop the criteria that help to define what is “perfect” in each market category. For the client rating, firms may decide that perfect clients are those that pay on time, have predictable bid scopes, and demand quality work.
For the location rating, firms may decide that the perfect locations include those with a large number of suppliers and/or subcontractors, the cost of travel, etc. These criteria are then assigned a level of importance, on a 1 to 10 scale, to profitability. The most important criteria are assigned the highest weight. In order to ensure a complete and clear analysis, no two factors should have the same weight or rating. Each contractor must dedicate time and energy to determine the “perfect” market for the firm. This involves reaching a consensus among those team members involved in the firm’s self-analysis.
The analyses for each of the market factors are completed separately in order to develop a clear picture of each factor. The members of the team develop a score for each of the categories and the score is multiplied by the weight of each criteria. The total gives an overall score for each category.
The categories that score highest are considered the most ideal (“perfect”); while those that score the lowest are less than ideal. Through this method a firm can determine the “perfect” client(s) to work for, the “perfect” location(s) in which to perform work, and the “perfect” type(s) of work to perform.
Firms must position themselves for winning more bids by becoming more selective in terms of the clients, locations, and types of work they bid upon.
Be sure to join us next week for Part III which will focus on Marketing & Selling.