Feb 1, 1999 12:00 PM, Michael Stocker
I saw the envelope in my stack of mail. I had expected its arrival; infact, I had anticipated it for years as I watched this client's businessbecome more successful. I had supported this client's growth, bailed it outof some serious technical troubles and developed a strong, trustingrelationship as it grew into an effective media department for itsinternationally known corporation. It was inevitable that some day it wouldexpand into a new facility, requiring my services as an acoustical andmedia system designer. Now, with a month between its request for proposaland this day, I assumed that my firm would be busy for the next six months.It had taken years to get to this point, so I was not in a rush to rip theletter open. I opened and filed our bills and invoices, glanced at a newproduct release, then opened the letter.
"Dear Mr. Stocker," it began, "we regret to inform you that in a stronglycompetitive field of three bidders, we have selected XY Sales Company todesign and install our new production facility."
Fortunately, there are not many times in an adult life when one feels likeI felt at that moment, but what the heck, sometimes you eat the bear,sometimes the bear eats you, right? Nevertheless, my frustration grew. Howlong had Ibeen holding these folks' hands-cutting them slack and giving them freeadvice-knowing that we would continue working as a team, rolling back thefrontiers of technology together? Did this track record mean anything?Apparently not.
In response to the letter, I wrote, "Dear Ms. Facilities Manager, I wasnaturally disappointed to hear that we didn't win the production facilitycontract, but I understand the basis of your decision. Thank you for theopportunity to bid on the project, and although we were not found to be themost suitable design firm for this project, we would be honored to have anopportunity to bid on future projects with your company. XY Sales is aqualified firm, and I'm sure you will find them capable of delivering ahigh-quality, professional product."
I have found that such letters as this help me put the loss of a contractinto perspective and bridge over any bad feelings of guilt that a prospector former client may have. The client was polite enough to let me know ofthe decision in an informative letter, and I can continue this congenialitywhile keeping the doors open for any potential business we may havetogether. It hurts, but at times like this, the only thing I can do isexercise some damage control-postpone ordering the new workstation, call upthe prospective new draftsperson and let her know that we do not have a jobright now and review what we did not do effectively enough to get the job.
Losing a bid is not uncommon. In my conversations with colleagues in ourfield, I find that a typical hit rate will land us one contract in tenproposals. If we hit one in six, we will not get much sleep. The reasons welose contracts are manifold. The prospect is just kicking tires; they donot actually have the budget to do the job; there are cheaper companies ormore qualified competitive bids; in some cases, I just do not want to dothe job after establishing contact with the prospect. In cases like thiswhere I had a working relationship with the client, however, we werequalified to do the job, and we wanted to do it. I had to dig deep and findwhy we were not the successful bidder.
The bidding arenaIn any proposed project, there are basically two sides to the equation-aprospect who wants something and a provider who has something to give. As aprovider, the art of landing a contract relies on determining what theprospect actually wants and what, if anything, we can provide to match hisneeds. The real skill involves getting a clear determination of the exactneeds of the prospect and letting him or her know how we can be of servicein meeting those needs.
Sometimes matching the prospect's needs with our skills is simple. As Ipreviously mentioned, we are an acoustical and media system design firm. Ifthe prospect wants acoustical consulting or a media system design, I caneasily match our assets with their needs. On the other hand, if theprospect wants a production facility, we might not be able to meet theirrequirements completely. We are not a sales organization, so we would notbe the best providers of equipment for the studio. We are also notconstruction contractors, wiring technicians, HVAC engineers, carpet layersor traffic managers, so we would not be best suited to bid on these jobs.When a prospect comes and asks for a production facility, I have todetermine what they mean, how they see it taking shape and perhaps mostimportantly, how they see us contributing to the project. This discussioncan lay the groundwork for our participation in a successful project; itcan help the prospect clarify their expectations, and help them determinethe actual scope of the task. Not having a discussion at this basic levelcan set the whole project up for a series of unpleasant surprises.
I often forget that what seems basic and fundamental for me is usuallycompletely foreign to my client. I frequently have discussions aboutproduction facility design and construction; the client may only have thisdiscussion one or two times in their career. It is incumbent upon me togive him the full benefit of my experience and not assume that he knowsexactly what it is he wants. In the case mentioned here, the prospectwanted two things-production facility and someone else to deal with it.They were too preoccupied with production to get involved with facilitydesign, so they handed the project over to the facilities managementdepartment with the understanding that they would provide the designobjectives and facilities would get the job done. The facilities managementdepartment had a whole new building to contend with, so they, in turn,handed the procurement of a production facility to the architects who weremore than willing to assume the role of overall construction management.
By the time the architect had the job of construction management, we werepretty far away from our cozy relationship with the media department, andit was clear from the initial request for proposal (RFP) that the architectwas far away from the media department as well. They had an architecturaloutline of a facility that included spaces for training, conferencing,video and audio post production and an integrated services technical room,presumably for media processing and distribution.
The architect was working under the design budget, so he wanted to know howmuch it would cost to design the stuff that went into the building,including the acoustics and technical system integration. After receivingthe RFP, I had what I considered lengthy discussions with the architect,letting him know that we usually bid on specifications more concrete thanbasic floor plans. They assured us that they were just benchmarking thebudget and would allow for the open-ended quality of their RFP. Still notwanting to step off into open space with some wild numbers, I spent a gooddeal of time hatching out a basic system design to serve as a foundation. Icame in with a design budget of about $45,000 with the typical caveatsabout the cost of changes in the scope of the project and modifications tothe building plan. My strategy was to provide complete design documentssuitable for submission to qualified low-voltage contractors as an RFP forcompetitive bidding and to submit acoustical designs directly to thearchitect.
Then I could only wait with the reasonable assumption that the productiondepartment-the actual users of the facility-would have some input into theawarding of the contract. I did not anticipate that the architect hadsubmitted the RFP to an installation contractor and to an equipment salesfirm to compete with our proposal for design. Understandably, both firmscompeting with us came in with much lower design costs with the knowledgethat they could make up the difference in their sales margins. Thearchitect was all too pleased to accept the lowest cost proposal for designbecause the difference would be a windfall into the design budget, bearingin mind that none of us were asked how much the equipment or systeminstallation would cost.
Mopping upIn disappointing times, it is easy to assume the victim's role and just aseasy to blame others. I could have pointed my finger at the architect fornot putting the client's interests foremost or not having a better grasp onthe project's full scope, thereby setting up the project for someunpleasant surprises. Being made aware of how strongly budget affectedselection criteria, I could have warned the facilities managementdepartment that it had painted itself into a corner and would not be in agood position to negotiate the cost of new equipment or installation. Icould have even rung my hands with my pals in production over losingcontrol of their work environment, but assigning culpability iscounterproductive. The bottom line is that we lost the contract.
In hindsight, I could have discussed the arena more thoroughly with theproduction department over the years, helping it anticipate the inevitable.When a move to larger facilities was announced, I could have been moreproactive, giving a free consultation on what to expect of therelationships found around new construction projects. I had expected ourrelationship to remain unchanged through the most profound change in theirworkplace-where they spend half of their waking hours. Somehow, I believedthat we would all make this huge transition together. Perhaps we would haveif I had kept an open dialog about our mutual and individual expectationsabout the project.
Oddly enough, XY Sales did not have this open dialog with the clienteither. It was not aware that the client did not have a large equipmentbudget; in fact, the client wanted to keep and use as much existingequipment as possible. The client's need was to occupy a facility thatcould handle expansion and upgrade without spending large amounts of moneyup front. Their spartan equipment and furnishings budget allowed them topurchase the building this year with the knowledge that they could continuegrowing the production department as needed. It seems that XY Sales was notclear with the client about its expectations of the project, and somehow,over the past few months, XY Sales has become less responsive to thecompany's requests for design work. I got a call last week from the clientwho wanted to know if I had time to help with the project.
When proposing a job for a prospective client, it would be nice if we couldsomehow understand their exact needs and our exact cost to serve thoseneeds. We could add in a respectable profit margin, shake hands, collectour fee and start the job. Unfortunately, in the complex world of sound andvideo contracting, a large part of securing-and successfully completing ajob once a contract is awarded-involves coming to a mutual understanding ofwhat the job actually entails. This requires considerable work and up-frontexpense without seeing any income. In larger projects, it is not unusual tosee the cost of proposing a job amount to 5% to 10% of the full contractprice. This cost is represented in contacting the prospect, discussingneeds and design criteria, reviewing any supporting information such assite plans or product literature, visiting the site, calling for quotationson materials and equipment, estimating how much labor will be required toexecute the job, scheduling the work and finally, summing this informationup in a written proposal.
Even after this work is done, we are not assured that we will get the job.If the full contract price is above the prospect's anticipated budget, wemay need to revise the scope and price down. To save on some of the timeand expense of proposing a job, we have generated a number of benchmarksthat help us estimate the scope and cost of a job. Some of our benchmarkshinge on the number of wire terminations a project has, square and cubicfootage of the subject space and the anticipated person-to-hours ratio forthe job. Some rely on empirical numbers; others rely on intuition and bestestimates. All of these benchmarks rely on our continuously growing libraryof experiences.
We do not like to give numbers out to a prospect prior to submitting aproposal; this could generate unrealistic expectations from the prospect.It helps if the prospect can divulge an anticipated budget or, at least, abudget range to work from, thereby allowing us to know how detailed we needto get. It is also appropriate to ask up front about the prospect'spriorities, whether the project is primarily driven by cost, time orquality and in what order the other factors fall. We have lost bids on theassumption that it was cost driven-working hard to come up with a quality,cost-effective proposal only to find out that the client was uncomfortablewith the low cost. Just as often, we have lost a bid because the prospect'sexpectations of quality did not meet the level of quality we wanted todeliver. I personally find fast and cheap jobs not worth the compromise andanxiety required to deliver them, and as often as not, these jobs come backand bite us later on. It is also more costly to manage a job that isaggressively bottom-line driven. When a client is in an adversarialrelationship with us based on cost concerns, someone has to pay the price,and it is usually us.
It is always nice to win a contract, but losing a bid is all part of thecost of doing business. Although losing a bid can be costly andfrustrating, sometimes losing a bid can, in the long run, actually be thebetter deal.