Bidding: The Anatomy Of A Bid
Bidding and estimating is the Achilles heel of many building service contractors. Without the right numbers, they’ll never get their foot in the door. Some BSCs further their bidding problems with a bad habit of wanting to generate their bid prices quickly. So, instead of taking the time to build a quality bid, they reuse old figures or plug in a so-called “magic” number to charge per square foot.
But no two accounts are exactly alike and that magic number is just a figment of many BSCs’ imagination. Truth is, in order to bid successfully, you simply have to do the homework.
Typically, more than 60 percent of the bid price will be labor costs, says Dannette Heeth, director of medical treatment facilities, Aztec Facility Management, Houston. With so much of the bid tied up in this number, it is crucial that BSCs make the proper calculations.
There are several software programs available to help compute the labor price, but whether BSCs consult these tools or not, the workloading equation remains the same.
The first data a BSC needs to gather are the cleaning times. There are books full of cleaning times available for consultation or BSCs can rely on their own experience or time studies. Once these numbers are in place, they are multiplied by the building’s square footage.
To compile square footage, BSCs can either physically measure the rooms, consult current blueprints or computer-based drawings, or take the facility manager’s word for the supplied specs.
The total square footage of a building is its gross cleaning space and a lot of people confuse this with the actual cleaning space, says Jim Peduto, president, Matrix Integrated Facility Management, Johnson City, N.Y. By removing all the areas they won’t be cleaning, such as elevators and utility closets, BSCs will get the net cleaning space.
The price per square foot also can be affected by a room’s density, says Deb Olson, manager and responsible for bidding and estimating for Kettle Moraine Professional Cleaners Inc., West Bend, Wis. A room with more objects covering the floor space will be more labor intensive and therefore cost more. For example, cleaning a 10-foot-by-10-foot room with three desks in it is more time consuming than cleaning a similar, but empty room. Even if the BSC isn’t contracted to clean the desktops, the edge cleaning and wastebaskets accompanying each desk still creates more labor.
The last step of the equation is multiplying the work by how often it will be performed. The frequency price is determined by how many days the cleaning staff will be in the building. Generally, the frequency price decreases as the days per week a BSC cleans increases.
“If you’re there every single day, you know what has to be done,” says Olson. “When you’re only there once a week, you have to do everything.”
Finally, BSCs should add taxes and insurance into the equation to find the total labor burden.
Larger BSCs who operate in more than one market region need to pay close attention to each state’s requirements for wages and worker’s compensation insurance, says Heeth. These costs vary in each state and using the wrong numbers will affect the overall bid.
Labor costs will amount to more than half of the total the bid price, but calculating correct prices for the other categories is just as important. The largest of these other categories is the direct expenses, which covers all the supplies it will take to clean the account.
“These expenses are tied directly to the job,” says Peduto. “If the job goes away, the expenses go away.”
The expenses include all cleaning supplies, training, uniforms and identification badges, and vehicles, including their gas and insurance. If the BSC is responsible for purchasing consumable supplies such as towels, tissue, soap and can liners, these, too, would be considered a direct expense.
Also, any new equipment such as vacuums, burnishers or floor scrubbers a BSC needs to purchase will be amortized over the entire contract. This is typically done over a three or four year period so the client does not balk at such a high upfront cost, says Heeth.
Direct expenses are account-specific and will vary from bid to bid, says Peduto. For example, the cost of consumable supplies will fluctuate depending on the size of the building and number of tenants.
There are still two more categories comprising the bid: indirect expenses and profit.
Whereas direct expenses are the costs of maintaining a specific account, indirect expenses are the costs of running the company. BSCs need to cover their sales, administrative and general overhead expenses and every one of their clients should help foot the bill. To determine the indirect cost percentage that is applied to each bid, divide the company’s total indirect expenses by the account’s total direct expenses.
And finally, no BSC would forget to submit a bid without a mark-up and profit. Whatever price the BSC thinks the market can bear, he will add on, says Peduto. If a BSC needs to lower his price to beat out the competition, unfortunately, this is the number that takes the hit.
Once the numbers are compiled and the data is calculated, there is still one aspect to consider — the competition.
Since contractors pay their employees different wages and pay different prices for different products, no two bids will be the same, says Peduto. But, the real difference in price will be how competitive and innovative the BSC is, he adds.
Staying abreast of new products can lead to faster cleaning times, which can reduce labor costs. Developing a good distributor relationship may lead to value-added services such as free employee training or lower product costs.
Unfortunately, no matter how many ways BSCs find to cut down their price, many times it still is not enough — some other BSC will promise cheaper prices.
One way around this is to build a relationship with the facility managers, says Bob Merkt, owner, Kettle Moraine Professional Cleaners, Inc. At Kettle Moraine, Olson meets with the client three or four times before a bid is even submitted. She asks questions about the building and performances of previous contractors. She attempts to find out what is most important: health, appearance, or money. She also tries to determine what the cleaning budget will be so she can customize a cleaning program accordingly.
At times, a facility’s budget is so insufficient that a BSC can’t submit a bid that does not involve performing substandard work. For good reason, many BSCs don’t want their name associated with poor service and they walk away. But with these accounts, BSCs have learned to exercise patience. After years of hiring the cheap contractor, these facility managers will eventually realize that they have to pay to get the building clean, says Merkt.
Editor’s note: Jim Peduto will be speaking at the ISSA/INTERCLEAN® show in Las Vegas on Oct. 19. His presentation titled Benchmarking For Everyone: How Do My Numbers Stack Up? will be delivered in two parts and is part of the Facility Service Provider Track sponsored by Contracting Profits.