Today’s video is about The Vicious Cycle in Construction Tendering, watch the video by clicking here or continue with this quick read.
In construction, there are two types of cycles…
Vicious and Virtuous.
Imagine you’re in a competitive tendering scenario.
What usually happens is you end up bidding lower and lower to secure the project.
The cycle starts when you’re asked to be part of a bid.
Then you submit your technical qualifications.
If you’re considered technically qualified you’re invited to submit your price.
Everyone submits their price at the same time.
This usually starts a bidding war
While bidding wars can be exciting for onlookers they are seldom practical from a business point of view. This is how a lot of construction businesses end up being sucked into agreeing to a lower price than they would ever imagine.
How do you break even when your margins are unrealistic?
How do they recoup the money?
Often they cut corners.
So they hire less qualified people, Buy poor-quality materials.
The Service and Reputation go downhill.
Ultimately they can’t deliver and so they go out of business.
On the other hand, a Virtuous cycle is created by using a different acquisition channel other than just bidding and tendering for work. The keyword is OPTIONS.
- Calling people
- Referrals
- Repeat work
- Cultivating Relationships
- Using social media
If you have more acquisition channels you can charge more for your services.
Clients will pay for their reputation.
You win a project with a high margin
Because of the high margin you can hire better people, get better equipment and materials
You can deliver the best project
Best project means– Better reputation, More projects, More repeats, More referrals
You may cost more money but they get the work done and they get it done well.
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