Branding and public bidding

You might be thinking: "This 'branding' stuff might be relevant if I am competing for work with residential clients or perhaps for non-public commercial work, but what does it have to do with conventional public sector advertised bidding opportunities?"

To some extent you are right. In the purest environment, where low price rules the space, it isn't about brand as much as it is your efficiencies in keeping costs so low that you can win the work, and still make a profit (hard to do.)

But things aren't always as they seem to be, and if you are one of dozens chasing public works, you should appreciate that in many cases the game is stacked against you from the start, and you can't even see it -- because your competitor has quietly won the branding war.

I've often cited an example of a Midwestern contractor who must obviously remain unidentified. His business consistently wins work at the local hospital, even though tendering rules there are always that the lowest bid must win the work. How does he do it? The contractor and hospital administration pre-arrange change order authorizations, so he can bid the work low and know that, with the change orders approved, he will still make a profit.

You may find the ethics of this story dubious; but there is nothing fishy about why this is happening. The hospital administration had been burned too many times by low bidders not completing work well, so they want to be sure that the contractor they really wish to win the work gets the opportunity.

If you are one of the many 'outsiders' thinking you can win by bidding low, do you stand a chance?

The gaming of "low bid wins" rules almost inevitably reflect two possibilities. The first is corruption -- someone is greasing some palms to restate the rules. The second is branding -- the successful contractor has built so much trust, and such positive relations and such a healthy brand, that the game is stacked from the start.

Assuming you don't want to get into bribery, if you aren't connected (with a great 'secret' brand with the public sector purchasing authority), you often can't get in, no matter how hard you try.

And where the competition is truly fair and open, and when the project size is small, the competition is likely to be so fierce that the low bidder will be working for minimum wage, if anything. In other words it is a victory that counts for little if you want to succeed in business.

In some cases, especially for design work in the public sector in the U.S., this favoritism is formalized legally through the Brooks Act provisions which mandate that experience and quality count more than price.

Are there any answers to this problem?

• First, you must be realistic. If you don't have a previously established relationship and some inside track knowledge of your likeliness of success, your chances of winning are remote. So focus your resources to where you have some relationships and a reasonable chance of success.

• Second, spend far more of your marketing time building these relationships than chasing bids once the opportunity is public. In other words, get to know the people who can authorize business with you if they are comfortable with your capacities. You may find value in joining and participating in associations relevant to your potential clients.

• Third, when you get your first job, live up to every possible standard of communication, quality, and service you can. Build your brand. Then the next time around things will be much easier.

• Finally, while proposal presentation is more the icing on the cake than the substance, consider carefully how you document and answer the RFP and tender calls. Of course, ensure you provide all information required to comply, and don't include any information not required which might cause problems. Then consider creative options including the effective use of photos, video clips (if the application is on-line), testimonials, references, and constructive suggestions to increase the project's success. If you believe you have a realistic chance, go all out and ensure your proposal is far better than the norm.

Should you start your own business?

I've been following (and enjoying) John Poole's Constructionomics blog as he struggles with the challenges of unemployment and is now at the early stages of starting his own business. Recessions are often the best time to open a business because you simply can't afford bad habits and if you are determined and skillful, you can find opportunity.

But you need to find the opportunity, of course, and that is the challenge for anyone who is uncomfortable with the selling occupation. Starting up, unless you have some incredible good fortune, you will need to sell -- and it rarely is easy, especially when you don't have a track record.

John has wisely (but I deliberately put wisely in small type) chosen to use resources like SCORE, operated by the SBA. Experienced businesspeople, unless they live in the government space, tend to be a little wary of government assistance programs. Yes, you can access them, and if you play the system well, make good money in that space, but it can be an uphill battle as you battle bureaucracy, existing relationships, MBE rules, and the like.

I'm happy to note that quite a few readers are googling this blog through my references to the Brooks Act. Anyone hoping to sell construction design, engineering and project management services should read this stuff carefully because unless you are well connected, you won't gain access to direct government business and you will be relegated if you are "lucky" to be an underpaid sub-contractor for much government infrastructure work.

Sure, it is easy to tell a budding entrepreneur what won't work, but what will? Here things get complicated because the advice I gave myself would not necessarily resonate with others. Before I started in business in 1988, I had a secure, relatively high paying government job, which I quit to sell real estate. But I made that truly risky move at the end of a boom, where neophytes in the real estate industry could do well. (I simply don't know how well someone just starting out as a commissioned Realtor would do now.) The decision proved wise in an important way: I needed to learn how to sell to be in business, and that is just what I did.

Can you overcome lack of selling ability/experience and knowledge with great marketing? To a point, yes. Great marketing (including great blogging) often creates opportunities, and it is wonderful to receive the invitation to propose a project, or have your call returned quickly because a previous or potential client recognizes you from your marketing. But if you can't ask for an order, and actually go out and find the business, all the marketing in the world won't do you much good.

My advice to John would be to be ready to accept a commission sales job, whether it be canvassing, telemarketing, or whatever. Not as a permanent career, but as a base for learning some of the realities of selling. Spend three to six months doing this stuff and you'll at least understand the basics and receive some rudimentary sales training. Perhaps take a few different jobs -- no one is going to hold it against you -- and cross fertilize ideas and insights.

My next piece of advice is going sound like sacrilege in relation to my previous posting (and with respect to the misfortune befalling anyone who tries to canvass at my home.). I think anyone starting out in the construction industry has the best chance by seeking and winning smaller residential jobs, and the best and most inexpensive way to win these is to pound the pavement -- yes canvass! You certainly don't need to worry about the Brooks Act!

(You can assemble a crew of inexpensive subs and suppliers to do the actual work, of course.)

John and others should take this advice with a grain of salt. I am not the oracle of brilliance and one thing is clear, there are many different paths to business success. It is good to get started.

Where is the stimulus money going?

Engineering News-Record (ENR.com) reports where the money is going in in The Stimulus Bill, Sector by Sector. I first learned about this useful online article in the Linkedin.com Washington DC Design & Construction Network initiated by Tim Klabunde.

If you want to go after the Federal stimulus money, remember the Brooks Act rules. You will win the federal work by experience and relationships, not primarily by how low your prices are.

To succeed, you will want to build up and maintain your local/regional business relationships, and combine these with connections with relevant businesses and professional organizations closely tied with the Washington money. With this combination, you'll be able to package your proposals to appeal to the political and bureaucratic minds disbursing the funds. If you have gaps in your relationships and relationship-building knowledge,

I encourage you not to waste time in filling them -- this is a stimulus bill, after all. For insights, consider your peers in non-competitive markets, your relevant trade and professional associations and, especially (for marketing issues) your membership within SMPS (Society for Marketing Professional Services).