# Large project margins



## Siteguy (Jan 4, 2014)

So I am currently bidding on a very large project. We're talking in the $10-20M range for our part of the work. It's site prep including grading, paving, signage, landscape, concrete, etc. This project is quite a bit larger than we are used to bidding but we have assets to handle the job. What I'm looking for is advice on gross profit margin. How low should it go for a project of this size. I have always been told that the higher the over all contract value the lower the GPM. Normally we would figure all exact costs and go somewhere in the +20% range. That is for jobs of say $2M or less.


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## ohiohomedoctor (Dec 26, 2010)

If I was doing a job for 20m id try to keep one...


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## Dan_Watson (Mar 1, 2008)

You came online and asked a bunch of strangers how much you should make on a $10-20 million dollar project? Are you insane?

Lets say $15,000,000 project, I say 1% - $150,000, another guy says 2% - $300,000

WOW!


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## Siteguy (Jan 4, 2014)

I'm not an estimating expert. Someone else does that. Just looking for opinions from the "Peanut Gallery" and a little discussion. I guess I should also add...I'm more on the sales and client relations side of things. I'm not actually writing this bid. What I am looking for is a better understanding of what this bid should look like. So I can speak more intelligently to the client and look at it more critically before I even present it to them.


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## ohiohomedoctor (Dec 26, 2010)

I am sticking by keeping one. It'd be too tough not to..


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## CENTERLINE MV (Jan 9, 2011)

The percentage is dependent upon how much overhead your company has, how much profit you want to make, and a percentage for contingency. Since none of us know this information, we won't really be able to help you.


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## Jaws (Dec 20, 2010)

Matt is greedy. I'd stick with a half mil...


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## ohiohomedoctor (Dec 26, 2010)

Jaws said:


> Matt is greedy. I'd stick with a half mil...


No you wouldn't...


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## Jaws (Dec 20, 2010)

ohiohomedoctor said:


> No you wouldn't...


Chit... half a mil is Oprah money to this country boy. 

Bruno rubbed off on me. I'd under cut your azz just to under cut you:whistling:laughing::thumbup:


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## ohiohomedoctor (Dec 26, 2010)

Jaws said:


> Chit... half a mil is Oprah money to this country boy.
> 
> Bruno rubbed off on me. I'd under cut your azz just to under cut you:whistling:laughing::thumbup:


:laughing:

You underestimate me. Id be talking all sorts of chit about a million dollar markup and then come in at 470k with an all expense paid vacation for the prime gc...


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## Jaws (Dec 20, 2010)

ohiohomedoctor said:


> :laughing:
> 
> You underestimate me. Id be talking all sorts of chit about a million dollar markup and then come in at 470k with an all expense paid vacation for the prime gc...


I'd get fallen down drunk with the client in his yard and then see your BS and come in at 468k , all expenses paid vacation WITH hookers :thumbsup::thumbup::laughing:


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## ohiohomedoctor (Dec 26, 2010)

:laughing:

Hookers win every time... :notworthy:


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## Kent Whitten (Mar 24, 2006)

If you are in the 10-20m range, I sure as hell would find out if it was 10m...or 20m. I don't think you want to err by 10m.

You may not be an estimating expert but you better damn well find a way to get it right or you will be in a really big pile of ****.


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## ohiohomedoctor (Dec 26, 2010)

He said he doesn't even do the estimating. Im wondering what the real point of the op was.. Perhaps day dreaming..


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## AllanE (Apr 25, 2010)

*Margin*

I would say after overhead, supervision, and indirect costs associated with the job are covered, your company should net 5%-7% depending on what type of job it is and how long it will take. 

Allan


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## SDel Prete (Jan 8, 2012)

How long would said project take? I mean lets just say I did a 20mil job that had 19,999,000 in materials but it took me an hour to do the job. My % stinks but I made $1000 in an hour. Not to bad lol.


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## Siteguy (Jan 4, 2014)

CENTERLINE MV said:


> The percentage is dependent upon how much overhead your company has, how much profit you want to make, and a percentage for contingency. Since none of us know this information, we won't really be able to help you.




I guess my question would be what is a permissible profit margin on something that size? Net profit after operational overhead. We don't really need a contingency percentage because that is covered in the "exceptions." IMHO


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## Siteguy (Jan 4, 2014)

AllanE said:


> I would say after overhead, supervision, and indirect costs associated with the job are covered, your company should net 5%-7% depending on what type of job it is and how long it will take.
> 
> Allan




That's what I am looking for. Thank you. We don't have answers to the how long/how much question yet. We just got plans yesterday. So it will take a while until we figure out all the details. My estimator is VERY good at figuring out direct costs but even he was unsure what the "volume discount" should be for a job of this size.


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## ohiohomedoctor (Dec 26, 2010)

I wouldnt touch something with that much responsibility for anything less than 15%.


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## pcplumber (Oct 12, 2008)

*I would not take the chance.*

If you have to ask the question then you are not absolutely positive and if you are not absolutely positive then you are gambling and the risk can wipe you out

The profit for most large jobs is 3% to 8% if everything goes perfect. That means you have a maximum of 8% for error. If your error is 5% you will net 3% to zero profit.

There are too many variables that can wipe you out on big jobs like weather, delays, and a thousand things you can't think of.

Don't let jobs with large amounts get the best of your ego. The only reasons most contractors land large jobs is they are the lowest bidder, or they are best contractor that can be trusted to deliver.

I have an A General Engineer license and I have some guys working for me who are bidding jobs up to $20 million. If the time ever comes that a bid is accepted I will not proceed to enter into a contract without seeing everything very clearly and I will most-likely back out because this bidding is something I am letting them do, but I'm really not interested in getting wiped out after hearing many horror stories.

And....many of these estimators were also very good. It is too easy to miss things on blueprints.


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## VinylHanger (Jul 14, 2011)

At 10-20 million it doesn't take much of a mistake percentage wise to slap you silly.

That being said, I would take a cool mil off the top and then not worry about it much. :whistling

Doesn't your company have people who do do this? Won't they know where you must come in no matter what the size of the job? Let them tell you the pricing, then you talk to the customer about it.

Nothing like talking to the customer as if you are only needing a 7 percent margin and you really need a 15 percent due to material to labor ratio's or time of year or owner bonuses, or whatever. It has to be somebody's only job at this level to make sure you don't lose money.


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## SDel Prete (Jan 8, 2012)

Can you do a cost plus? You will most likely make less but at least you won't lose.


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## B.D.R. (May 22, 2007)

Don't you figure out. How much will it cost, double it, and add 50%. :laughing:


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## Siteguy (Jan 4, 2014)

"Doesn't your company have people who do do this? "


We are pretty "small" as far as staff goes. Just the owner, his wife, and me. I'm pretty decent at sales and all the detective work it takes to find these bids but I'm no construction industry expert. I have to refer to the owner for that. He has been doing this for 10-15 years and has had plenty of $1M+ jobs. This is just a bit of new territory even for him. He knows we have the financing and the physical capability to do the job. I'm just trying to make sure I gather as much info on this to help us be successful.


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## Jaws (Dec 20, 2010)

Siteguy said:


> "Doesn't your company have people who do do this? "
> 
> 
> We are pretty "small" as far as staff goes. Just the owner, his wife, and me. I'm pretty decent at sales and all the detective work it takes to find these bids but I'm no construction industry expert. I have to refer to the owner for that. He has been doing this for 10-15 years and has had plenty of $1M+ jobs. This is just a bit of new territory even for him. He knows we have the financing and the physical capability to do the job. I'm just trying to make sure I gather as much info on this to help us be successful.


Are you an operator?


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## Siteguy (Jan 4, 2014)

Jaws said:


> Are you an operator?


Hahahahaa...........I can drive a dozer but I wouldn't by any means call myself an "operator." We have highly experienced people for that. When I said "staff" I meant leadership/admin people. Not the field employees.


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## Framer53 (Feb 23, 2008)

The correct answer is, as much as you can get.

Actually I would have the prints doubled check with an outside estimator.


I have seen contracts of this size mostly in the 3-8% range, after all costs and I mean all costs.....


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## Siteguy (Jan 4, 2014)

"Actually I would have the prints doubled check with an outside estimator."



That's actually one of the things the boss has mentioned already. Just to be sure we don't miss anything.


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## huggytree (Nov 3, 2013)

I just talked with a ex-plumber yesterday....he had 30 guys and had a $1,000,000 project.....the project went under and he lost that $1,000,000.....he lost his 30 guys, his business, his HOUSE...everything

your taking a HUGE risk....just wanted you to realize that....with that much $$ into it if ANYTHING happens your screwed

I would NEVER consider anything under 10%

if your not making 10% why be in business for yourself..go work for someone else

I would NEVER consider a project anywhere near $10-20 million.....for plumbing I wouldn't consider anything over $100,000

what if something goes wrong? what if your guys screw something up? what if they are 30% slower than you think, what if part costs rise 15%?

and some people here are suggesting 5% profit?

if something happens that $1,000,000 profit could become $(-1,000,000) pretty quickly

making a million is great, but to me a $20,000,000 job is not worth the risk...not even close


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## EricBrancard (Jun 8, 2012)

ohiohomedoctor said:


> I wouldnt touch something with that much responsibility for anything less than 15%.


You should see the margins of some of the biggest construction companies in the country. When you are dealing with such large numbers, small percentages of those large numbers are also large numbers. Whole different ballgame than residential.


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## EricBrancard (Jun 8, 2012)

huggytree said:


> I just talked with a ex-plumber yesterday....he had 30 guys and had a $1,000,000 project.....the project went under and he lost that $1,000,000.....he lost his 30 guys, his business, his HOUSE...everything
> 
> your taking a HUGE risk....just wanted you to realize that....with that much $$ into it if ANYTHING happens your screwed
> 
> ...



You are thinking in terms of your business. Larger business that deal with big numbers every day operate much differently.


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## Dan_Watson (Mar 1, 2008)

I threw out 1-2%..then started seeing 10-15, I thought I must have been crazy, but there is no way 10-15 is profit on those projects. 

http://images.businessweek.com/slideshows/20110118/most-and-least-profitable-business-types#slide1


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## huggytree (Nov 3, 2013)

EricBrancard said:


> You are thinking in terms of your business. Larger business that deal with big numbers every day operate much differently.


you are correct....I cant think of doing a $20,000,000 project


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## huggytree (Nov 3, 2013)

Dan_Watson said:


> I threw out 1-2%..then started seeing 10-15, I thought I must have been crazy, but there is no way 10-15 is profit on those projects.
> 
> http://images.businessweek.com/slideshows/20110118/most-and-least-profitable-business-types#slide1


how could you do 1-2%?? what if you make a mistake? 1% gives you nothing to recover from it....I question if 10% gives you enough wiggle room for possible errors or delays

material prices go up...sometimes without notice....I remember when copper piping went up 200% in 4 months a few years ago...what if that happens mid way through the project?

what if your employees are just 5% slower than you expect? that's something no one can control....that 5% may = $250,000

I don't get why anyone would be in business to make less than 10%...id prefer 30-40% myself....10% is peanuts (even if its $2,000,000) ..to me it doesn't matter the size of the project...

from my limited experience ive found the larger the project the more poorly managed it is and the more room for problems are...also pressure from the prime contractor to give discounts because they made mistakes......this has happened 100% of the time when ive worked on bigger projects whether it be a large home or a commercial job

im a small 1 man shop....so my advice means nothing.....but I hope you think about the downsides to giving a low profit margin....a project like this may put you out of business if you may 1 tiny mistake


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## Dan_Watson (Mar 1, 2008)

I am not saying I would or could do it for that. 

The question was "What I'm looking for is advice on gross profit margin. How low should it go for a project of this size." 

I think people are giving both net and gross...Gross is very hard to answer for someone else since we do not know there company profile and expenses.


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## BlueRidgeGreen (Apr 21, 2012)

No margin on a 1mil+ job is absolute. You earn the margin.

What margin do you bid too? The highest margin you can based on the variables involved.

Go for too much....you lose the bid.

Go for the lock on the job....you (may) lose your a$$.

That's why in the big commercial co's the Lead Estimators make $$$bank$$$.

My opinion....go for 15, you'll be lucky to get 7.


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## EricBrancard (Jun 8, 2012)

huggytree said:


> how could you do 1-2%?? what if you make a mistake? 1% gives you nothing to recover from it....I question if 10% gives you enough wiggle room for possible errors or delays
> 
> material prices go up...sometimes without notice....I remember when copper piping went up 200% in 4 months a few years ago...what if that happens mid way through the project?
> 
> ...


Mistakes are made in dollars. Profit is made in dollars. Percentages are just values assigned to those dollars. Yankee Stadium was a $1.5B project for Turner. Do you think they made more than 10% on it? 

Most jobs of that size and scale we are talking about are way outside the wheelhouse for us residential and light commercial guys.


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## CarpenterSFO (Dec 12, 2012)

You don't just cut your profits to the bone because it's a big job. Big jobs have financing and other risks that small jobs don't.


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## slowsol (Aug 27, 2005)

Big jobs cater to big boys. 

Working at one of these companies, I would never consider carrying your bid for a $20 million without previous projects under your belt of similar size. 

Big companies have a prequalification process. It's unlikely you'd pass them, even with good financials.


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## Metro M & L (Jun 3, 2009)

Siteguy said:


> I guess my question would be what is a permissible profit margin on something that size? Net profit after operational overhead. We don't really need a contingency percentage because that is covered in the "exceptions." IMHO


I just read an article on this. Non rsidential construction has the lowest net profit margins of any industry at an average of .81 percent or .0081 to be clear.


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## Moxley-Kidwell (Jan 28, 2011)

slowsol said:


> Big jobs cater to big boys.
> 
> Working at one of these companies, I would never consider carrying your bid for a $20 million without previous projects under your belt of similar size.
> 
> Big companies have a prequalification process. It's unlikely you'd pass them, even with good financials.


100% agree. Not to be rude, but doesn't sound like something you should be getting into. You've done multiple 1m dollar jobs, but this is a whole other league.

I wouldn't even consider bidding something that size unless you could work something out with the owner to make sure you make a profit. Like others have said weather, bad soils, changes of scope and plenty other things could kill all profit. If you can stay busy with smaller projects why cut profit just for sheer size of the contract. I do 99% of our estimating and have been though it all as well. This guy has a ton of work, if we do this one cheap maybe we will get all the work. I've fallen in love with projects also do to size, but now all I want is any project big or small that I can get paid what I need/want for the work.

Sounds like your company is close to our size and that project would be 2-4 years gross sales for me. At full staff we are 3 people in management/office and 14-16 field guys. I don't want any project that would take me that long. What happens when it goes bad, you're stuck in a bad deal. Either suffer though or close the doors and hire the lawyers to figure it out.

To answer your question though, you would get looked at like you had 3 heads if you came in at 20% profit. Will go way cheaper. I just got beat by one of the big boys around here on a widening job that was only $1.5-2m by 30% or better. No way I was going to walk with 30% lucky if it would have been 10-15%.


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## VinylHanger (Jul 14, 2011)

EricBrancard said:


> Most jobs of that size and scale we are talking about are way outside the wheelhouse for us residential and light commercial guys.


I've run a few 750,000-1,000,000 dollar jobs in the past for my buddy. In the scheme of large residential work, jobs that size are usually awarded to you by referral, or past performance for the same group of investors. Not hard to get if you are in the group or are known by someone in the group. Once you've done one, you will do the next one.

Once you get to the 20,000,000 dollar job area, which I have zero experience in, I would think you are now swimming with the big boys. Not to belittle your company, no pun intended, but you would probably have very little chance of pulling this job in. 

Break into the 5 mil range first and work your way up. You will also need a boat load of cash reserves or a way to get it when needed.

Like I said, I have no experience in the big jobs, but that is how I would approach it the first time.

And definitely use an outside estimator to check your numbers.


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## Siteguy (Jan 4, 2014)

slowsol said:


> Big jobs cater to big boys.
> 
> Working at one of these companies, I would never consider carrying your bid for a $20 million without previous projects under your belt of similar size.
> 
> Big companies have a prequalification process. It's unlikely you'd pass them, even with good financials.



Hilarious......cause that makes ZERO sense. We should never do a big project because we have never done one? With an attitude like that I doubt we would even still be in business right now. LOL Why in the world would I put on arbitrary limit on our success? I think it'll be a huge challenge but I also trust the owner's skill in this business. If he feels he can do the work.......I'm confident that he will get it done. He's smart and has a lot of experience. 


I'm not sure what you consider "big". Every single company we deal with has a pre-qual process. Some are far more detailed than others. I was a bit surprised that this GC's was pretty short and straight forward. I'm confident we'll be just fine where that is concerned. We are on very solid financial footing and have plenty of outside backing from the bank.

As far as if we'll actually win this bid. My gut tells me the chances are slim and none and slim is out of town on vacation and not answering the phone. However...... the fact that I even pulled the opportunity to put in a bid of this size says a lot about both me and the company. I think at the VERY least it's a learning opportunity for the entire company and getting the name in with someone that does projects of this size is a win all by itself. Being in the "rolodex" of a GC this size is not an easy feat. These guys do job site visits in helicopters. I'm winning already and if we actually pull it off successfully I just made some long and lucrative careers for everyone in this company. It's a lot of risk but the rewards are astronomical.


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## slowsol (Aug 27, 2005)

Siteguy said:


> Hilarious......cause that makes ZERO sense. We should never do a big project because we have never done one? With an attitude like that I doubt we would even still be in business right now. LOL Why in the world would I put on arbitrary limit on our success? I think it'll be a huge challenge but I also trust the owner's skill in this business. If he feels he can do the work.......I'm confident that he will get it done. He's smart and has a lot of experience.
> 
> 
> I'm not sure what you consider "big". Every single company we deal with has a pre-qual process. Some are far more detailed than others. I was a bit surprised that this GC's was pretty short and straight forward. I'm confident we'll be just fine where that is concerned. We are on very solid financial footing and have plenty of outside backing from the bank.
> ...


Laugh all you want. I've been bidding projects this big for a number a years. We self perform our own sitework, concrete, masonry, and some carpentry. We've bid concrete jobs to Kewitt and Bechtol for $30,000,000. 

I've been at two different companies doing this type of work. The first with annual revenue between $80m-$100m and this one with revenue approaching $500m continually. 

The first thing I look at when I'm deciding whether or not to carry a sub number is whether they have ever done work of similar size. Doing a million dollar job is a completely different thing than doing a $15 million job. 

A $15 million sitework package caters to the biggest earthwork contractors in the industry. We would do it, but there are few other contractors in our area that we would feel confident awarding to. If forced, we would likely split the package into multiple disciplines and award multiple bid packages. 

This isn't my made up way of doing it. It's the industry standard. People want to see proven experience at similar levels. :thumbsup:


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## Siteguy (Jan 4, 2014)

"The first thing I look at when I'm deciding whether or not to carry a sub number is whether they have ever done work of similar size. Doing a million dollar job is a completely different thing than doing a $15 million job. "



Oh you are 100% correct. Luckily, as of today, we are getting "handed" a job that is actually better than the first one. It's about the same "size" but the type of work needed on the site better suites our likes and needs. It's coming from a project manager that we have a good working relationship with. So.....we'll still be going after the original one too. Now we just have another job of similar size to help offset the risk. Plus when we list prospective business on the pre-qual.......it looks very good to have comparable work on it. 


Thanks for all the discussion on this thread. It really has been helpful in confirming a lot of what I already knew. It's just nice to hear it from other people just so you know you aren't crazy. This business is a little crazy and fraught with danger but if you want to win big you have to risk big. The trick is........DON'T SCREW UP!!!! :laughing:


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## CarpenterSFO (Dec 12, 2012)

Siteguy said:


> Hilarious......cause that makes ZERO sense. We should never do a big project because we have never done one? With an attitude like that I doubt we would even still be in business right now. LOL Why in the world would I put on arbitrary limit on our success? I think it'll be a huge challenge but I also trust the owner's skill in this business. If he feels he can do the work.......I'm confident that he will get it done. He's smart and has a lot of experience.
> 
> 
> I'm not sure what you consider "big". Every single company we deal with has a pre-qual process. Some are far more detailed than others. I was a bit surprised that this GC's was pretty short and straight forward. I'm confident we'll be just fine where that is concerned. We are on very solid financial footing and have plenty of outside backing from the bank.
> ...


I can see the sense in much of this. On a much smaller scale, I've gained quite a bit by bidding jobs that I didn't win, and in retrospect had little chance of winning. I've learned about the bidding process, about estimating, about particular customers' requirements, about why the job was given to the original bidder, and a couple of times I've been relieved that I didn't get the job. As long as you really have the operational and financial wherewithal to do the job, and you've estimated it correctly, what's the downside?


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## Siteguy (Jan 4, 2014)

:thumbsup::thumbsup::thumbsup:


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## Siteguy (Jan 4, 2014)

CarpenterSFO said:


> I can see the sense in much of this. On a much smaller scale, I've gained quite a bit by bidding jobs that I didn't win, and in retrospect had little chance of winning. I've learned about the bidding process, about estimating, about particular customers' requirements, about why the job was given to the original bidder, and a couple of times I've been relieved that I didn't get the job. As long as you really have the operational and financial wherewithal to do the job, and you've estimated it correctly, what's the downside?




There are always unforeseen risks. The world is a crazy place. If it were easy and there was little to no risk everyone would be doing it right? Hell I spent 8 years getting shot at for a whole lot less money than I'll make in this business. I think people view risk in the context of their life experience. This risk doesn't look so bad to me.


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## Moxley-Kidwell (Jan 28, 2011)

Good luck, but don't get your hopes up just because you get to bid with the big gc's. I could staff 3 more estimators and be on a list of every gc in the d.c. Area that do huge government and private projects. They will take numbers from anyone they think can remotely have a chance to do the work, but at the end of the day it all comes down to numbers. Who can make them the most $. And don't get me wrong I don't blame them, but they have ceo's, stockholders they need to answer to.

I've done a bunch of bidding with a huge outfit here that have a six-seven story office building outside dc and they want you to bid any and every project they are bidding even with a pretty loyal head estimator that loves our work, but they still try to buy every sub at their price. It's a big market and if you can hit their numbers you can get a ton of work.

Like I said good luck, but be careful I've seen big projects at low margins kill what we thought were very stable companies. There is a huge company in our back yard that did huge highway and site jobs, they have there own asphalt plant and we're running at least 5-6 paving crews and prob. 30+ nice new triable Pete's/Mack's that had to be bailed out by another big site work contractor in the area. They now had to give up majority control of the company.


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## CarpenterSFO (Dec 12, 2012)

Moxley-Kidwell said:


> Good luck, but don't get your hopes up just because you get to bid with the big gc's. I could staff 3 more estimators and be on a list of every gc in the d.c. Area that do huge government and private projects. They will take numbers from anyone they think can remotely have a chance to do the work, but at the end of the day it all comes down to numbers. Who can make them the most $. And don't get me wrong I don't blame them, but they have ceo's, stockholders they need to answer to.
> 
> I've done a bunch of bidding with a huge outfit here that have a six-seven story office building outside dc and they want you to bid any and every project they are bidding even with a pretty loyal head estimator that loves our work, but they still try to buy every sub at their price. It's a big market and if you can hit their numbers you can get a ton of work.
> 
> Like I said good luck, but be careful I've seen big projects at low margins kill what we thought were very stable companies. There is a huge company in our back yard that did huge highway and site jobs, they have there own asphalt plant and we're running at least 5-6 paving crews and prob. 30+ nice new triable Pete's/Mack's that had to be bailed out by another big site work contractor in the area. They now had to give up majority control of the company.


One of my customers used to build ballistic missile silos, back in the day. He said the primes just went through the subs, big ones, killing them off, one by one.


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## CarpenterSFO (Dec 12, 2012)

...


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## slowsol (Aug 27, 2005)

If you think you will get a shot at the project, by all means bid it. I was just trying to save you the heart ache of spending weeks working on an estimate, and then being told you don't pre-qual for the job. I've seen it happen. It sucks.


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