Life is not fair (and therefore, why you should be aware of construction marketing)

Tonight, I spent the day and evening at the Annual General Meeting of the Ontario General Contractors Association (OGCA).

Partly an expenses-paid break (for those fortunate to have the money for such indulgences), partly an informative event with insights and observations and lessons, I looked a little beneath the surface and remembered an life lesson: "Life isn't fair, and if things are fair, you will wish they aren't."

The issue that brings this concept to life arrived in my email yesterday. A general contractor, interviewed for an unrelated story, told me about his problems with the pubic bidding process at the Ontario Realty Corporation (the crown corporation which administers provincial buildings.)

He said the number of contenders for simple jobs had grown truly outrageous recently. More than 50 prequalified contractors are bidding for some jobs, jamming up site meetings, and making it virtually certain that any regular and well-established business would lose to a low-ball offer from someone barely eking out a living, with no overhead and little sense of what needs to be done to earn a fair profit for the work. (Certainly, the contractors winning this sort of public work would not be able to spend a few thousand dollars to bring their wife to a weekend in Ottawa for the OGCA conference -- in fact, most could not even afford the association's membership dues.)

Trouble is, as the contractor reported to me in a letter he had sent to OGCA President Clive Thurston, the excessive competition resulted from the OGCA's negotiations with the ORC for a transparent and fair bidding process. Previously, general contractors felt they had no chance at the public-sector work as service providers and third-party contracting organizations played games and favorites. How could businesses which played by the rules and really could do the jobs break into the closed circles of qualified bidding lists and restrictive tendering?

Clive Thruston confirmed today the ORC has listened to the association's concerns about transparency. Trouble is, the Crown Corporation is responsible for many smaller projects, which require limited bonding capacity, and which are within the range of many smaller contractors. And, like lemmings, these contractors are chasing after the dream in the open bidding process -- with dozens of bidders competing for each simple job.

Thurston acknowledged the contractor complaining about problems has a point; this excessive competition discourages reputable contractors from bidding, and could result in badly managed jobs with bidders under-pricing their work. He said the optimal number of bidders for a job is six to eight -- this allows for fair competition, but not the craziness when 50 or more are competing.

Solutions might include some system of rotational qualification. As well, Thurston noted, contractors are evaluated on their past performance, so if they mess up once, they won't be back again.

Many small construction businesses can perform the same services. Without marketing or relationships to differentiate themselves from the others, their only option is to compete on price for openly publicized projects.

There is only one escape from this trap: Marketing and sales. If you can differentiate yourself from the others, if you can stack the deck to your favor, if you can win the opportunities that are invisible to others, and discover clients who wish to do business with you because they want to, despite all the competition out there, you can earn a fair price, make a profit, and afford the conference fees which allow hours on the golf course and five course dinners.

Otherwise, prepare to struggle, hoping to "earn" less than you could if you took a job at a fast food restaurant.

Life isn't fair.