One of the Biggest Mistakes Construction Companies Make on Proposals
In my role as a construction marketing consultant, I am asked all the time what is the most common and biggest mistake that construction companies make on proposals. While the list of mistakes that I’ve seen and heard is quite lengthy, one does stand out.
Many people assume the biggest mistake is some small detail, like misspellings and typos. While typos will deduct points from your score and may be the difference between first and second place on a bid, this mistake is not one of the most vital. One of the biggest mistakes that I see all the time in construction is one that is generally unnoticed – when companies only show that they are qualified. You are probably wondering what the heck can be wrong with showing that you are qualified as a company? I’ll explain.
Showing that you are just “competent and qualified” narrows down the prospective buyer’s decision to you and 725,000 other construction companies in the US (according to the 2007 statistics on Census.gov). Even if you remove the residential contractors, you are I still competing with at least 250,000 companies who are “qualified.” Just because they are not in your neighborhood does not mean they will not bid. Need proof? The road in front of my office in New Orleans was paved by a Michigan company two years ago. In addition, one of my heavy-highway clients recently lost a paving bid to a residential roofing company. Companies can get larger bonding and rent equipment they do not have yet, and with the internet any company can compete for just about any bid.
So, what do construction companies need to do if qualifications and competency are not enough? They need to explain explicitly why they are the one and only choice for that buyer, for that project. Companies must differentiate themselves from the pack. You want your prospective client to read your proposal and think, “Wow, this company gets it! I want them because they are clearly the best option.”
You have to go for the win and not settle for being just qualified. People want to buy the best option they can afford, not the cheapest or the qualified. When you think like a consumer, you realize people only buy the cheapest option when they have to do so. Either they absolutely can not afford anything more or, more likely, they do not understand the difference in the options so they choice the cheapest bid because money is the only differentiation between each option.
I’ve been there, too. My industry of marketing and design is a commodity. The only way I can compete is by standing out to my clients and prospective clients by explaining to them why my team is the best, industry focused and only option. I must make my prospective buyer understand that they are making a mistake by not hiring us and that our expertise in construction is worth every penny. In my industry of marketing and design, people can go online and get those services for pennies on the dollar. Consider yourself lucky, you do not have to compete with companies across the globe in India and China like we do. However, you are still in a cut throat industry where there is always a company that will do it for less money. You have two choices: 1) Either drop your price to compete or 2) Show your clients the value of paying more. (I highly recommend the latter.)
Don’t assume your prospects know your differentiation or value either. I had a client ask me to debrief their bid because they could not understand why they lost a $8.3 million bid when they were a million dollars cheaper than the next highest bidder. It was simple – the selection committee scored the proposals first, then looked at the price. They divided the score by the price to determine the best value. This is a great method for choosing a winner and if you want to compete you have to be ready to go beyond “qualified” in your proposal. (Some selection committees will even throw out the highest and lowest bids.)
This company’s mistake was assuming the selection committee knew their value and differentiation because they are a big company in the area. I reminded them that they never worked with this client, so the client probably did not know about the company outside of their proposal. Also, this was a public bid. The selection committee needs a reason to validate their decision. You could be the committee’s favorite company and have the inside track, but they probably won’t bet their careers on you. They need you to give them ammunition on why to select you to validate their decision to their boss and the public.
I will reveal eight more reasons why construction companies often lose bids, including my #1 reason, in our upcoming webinar “9 Biggest Mistakes Construction Companies Make on Proposals” on Thursday, February 26. This webinar is part of our educational workshop series. I hope to see you there.