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Sunday, April 26, 2009

The general contractor's question: What criteria do you use in deterining which sub trade to use?

Frank DeCaria, president of Eastern Construction Company Ltd. at the Ontario General Contractors Association Symposium

At the Ontario General Contractors Association symposium president's forum, an audience member asked this rather important question: "What criteria do you use in determining which sub trade to use?"

If you are a sub, obviously, the answer to this question may be one of the most important ones you need to win more opportunities and bids.

Although there were four panelists, only Frank DeCaria, president of Eastern Construction Company Ltd. of Toronto and Windsor, had the opportunity to respond.

"The trades give us most difficulty are the M and E (mechanical and electrical) trades; they can vary from 25 to 40 per cent of the project, DeCaria said. "When people are closing a project, they have 'here's this price, and here's that price,' depending on the spread (between bidders), you make a decision, depending on your risk.

"You know (the low bidder), he can't perform -- no one can take him," but it comes down to our risk matrix, on that scope of work."

"The M and E, and perhaps five critical trades, we make sure they can perform. . . to give you one example, we were doing a project in Toronto . . . the decision was made to carry a former contractor, with a significantly lower bid (than the competition... the sub trade) couldn't perform; he put us in a real bind."

"it's better for us to take care of the extra $100 grand . . . if we don't get the job, its cheaper for us to keep two bodies in the back cleaning stuff, than putting the company at jeopardy."

So, reading between the lines here, if you are a sub trade in a secondary area where the project won't succeed or fail because of your non-performance, your low bid, even if it is way below what it should be, might be accepted, and the general contractor will take a flyer on you -- but if your trade is critical to the project's success, only a sloppy GC will rush to accept your bid.

Of course, readers of this blog know that the conventional sub-trade approach to winning commercial work; pushing forward the lowest bid possible in order to win the work, is hardly the best way to make money. In fact, subs which have built substantial businesses based on marketing principals steer clear of commercial and institutional work where they are in bidding wars to win the general contractors' business.

Nevertheless, I think the question is important enough that I will survey some additional general contractors for their opinions on the topic and report back to you. While I can argue any which way that the best way to grow your business is NOT to fight for bids with the general contractors, you probably don't want to know that if you are a sub; instead, you want to know ho you can really win the job through the bidding process you follow routinely. So I will see what I can do to help find the answer you are seeking, even if it isn't really your best solution.

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