Commercial Bids: Rules to Follow

Posted on:

April 13, 2017

It may seem obvious, but HVAC contractors agree that before you can prepare and submit a commercial bid, you need to find out exactly what the client wants.

“If you don’t live up to your customer’s expectations, your bid will be way off,” says Kyle Sullivan, project manager, Frigi-Temp Temperature Solutions, Youngsville, NC. “When we do a commercial bid, the first thing we do is sit down with a customer and find out exactly what they are looking for and we clarify with the customer what can actually be accomplished. Once you get past that, the bid is easy.”

Sullivan usually asks customers to meet him at the work site. “We get a lot of customers who email the prints, but typically my first step is to go to the site to see what we are actually working on. I look at the existing space and determine what options the customer has. We take a look, talk with the customer, and start designing and putting together a quote to meet our customer’s needs.”

Jonathan Vaughan, operations manager, explains that Frigi-Temp, which has 18 employees and has been in business 18 years, concentrates on commercial HVAC, refrigeration, exhaust fans, and ice machines. Sullivan adds that most HVAC jobs are renovations or add-ons, rather than new construction.

Contractors also need to be familiar with state codes before submitting a bid, according to Sullivan. “Studying your code is not fun, nobody enjoys it, but by knowing your state code, you can give better bids.”

Another recommendation: Take the time to carefully prepare and research bids. “Customers want bids quickly, which is understandable,” Sullivan says. “Everybody wants something done yesterday so we get a lot of pressure from people. One of the biggest mistakes I ever made came from rushing a bid. Now I am thorough in gathering the information to prepare a bid for our customers, and I explain that the process takes a couple of days to give them the best bid possible to meet their needs.”

He explains that the company’s quotes are valid for 30 days. “After 30 days, it could change based on equipment prices and the market,” Sullivan says. “Our quotes are all inclusive. When I do a quote, we get all the subs and we give one total price. We plan the whole job.”

Vaughan adds that “each quote has a defined scope of work so it’s clear what our intentions are, making it easy to determine if an element of the job was within the original bid.”

Working With the End User

Randy Seaman, owner and president, Seaman’s Mechanical, Grand Rapids, MI, agrees that determining what the client wants is always the first step in a commercial bid. “Is it a replacement of an existing unit? A service repair? Are we working with the end user or a general contractor? We need to find out what project entails and what the end user wants to get out of it. Once we figure that out, we can go to work and design a system. Unless you know the specific project, the details are too vast to name.”

For example, on a middle-of-the-road project, something costing a few hundred thousand dollars, he would need to determine what the end user wants, what the building size is, if it’s industrial installation project, what the criterion is, whether it be people, ventilation, building envelope, or in an industrial setting, how many pieces will be run through the line at any particular time, what the temperature is, what the product is, and how many will run through in an hour.

If a bid comes in higher than the customer’s projected budget, Seaman may ask the customer to change the criteria. For example, he might ask: “Do you really need this size of equipment? Do you need this many people in your boardroom? Do you need to run your line this fast?”

“We go back and try to uncover what the customers wants,” he explains. “If they change the criteria or don’t want the system we’ve designed, we can go back and redesign and we may not have quite as many controls or components.”

The criteria often change in design/build projects, he emphasizes. “We just keep up with it. We’re always designing; we’re always engineering. We put our criteria in our bids. We know what we’re bidding to and what we’re giving prices on. When the end user or general contractor comes in with a change, if the change is made before our project is priced, then we know what to do—we change the equipment and the system design accordingly. If the changes come in after our base bid, we make changes to the bid, going up or down depending on the change. Changes happen all the time.”

On a bid and spec project, an engineer or architect designs plans and puts project out for bid. “You have so many days to put your prices together and submit it,” Seaman says. “It’s pretty regimented.”

Occasionally, a general contractor might say, “Hey, I have to have a price on this thing tomorrow.” In that case, Seaman provides general budget numbers, explaining that similar projects cost about X.

“A lot of times the general contractor will need that number to see if he wants to bid on the project,” he continues. “If we throw out a budget and the customer or general contractors comes back and says, ‘Ok, that sounds good. Let’s get some hard numbers,’ then we’ll find out the specific criteria and what we need to work out prices and components.”

According to Seaman, his father started the company—which employs 46 and averages $13 million annually—in 1961. Specializing in design/build projects, the company does commercial and industrial heating, air conditioning, plumbing, and electrical.

Low-Ball Bids

Sometimes ACCA members don’t get a commercial job because of low-ball bids from fly-by-night contractors. “It’s tough when another contractor comes in with a low-ball bid and we come in with a professional bid,” says Ryan Evancik, operations manager, R.E.E. Mechanical, Temecula, CA. “It comes down to cost. It’s frustrating.”

The company, which has been in business 30 years and employs 21, last year did $3.5 million, about 80 percent of which was commercial service and maintenance. “Most of the retro fit work comes from the service contracts and relationships with customers,” he says.

Evancik recalls a boiler replacement that his company bid on not too long ago. “We gave the customer a price to replace the boiler and all the piping and add service valves. We bid on insulated copper pipe.”

Another contactor got the job by bidding about $40,000 less. “We were looking to improve the entire system, not just change the boiler. They took the old boiler out, put the new boiler in, and used galvanized pipe on everything instead of copper pipe. We have the service contract with the building. We just went out to survey the site, and there are corroded pipes that are getting ready to burst that weren’t replaced. Next winter they will have problems.”

Seaman points out that professional contractors shouldn’t try to compete with low-ball bids if it means lowering quality below company standards. “Don’t try to be the cheapest,” he says. “You have to be competitive, but give the customer something to be proud of. If it’s so inexpensive and so value engineered that you don’t want to put your name on it, you need to walk away.”