Construction contracting in the United States is going though an upheaval. The contractors are shifting their market focus. This ranges from small contractors going after larger projects and larger contractors going after smaller projects. Some contractors are leaving the business. Some are even sitting on the sidelines avoiding the carnage of taking work at a loss. This part of the upheaval has its benefits. It is the nature of our business.
Another part of our industry consists of contractors bidding work that have no business bidding on a project in the first place. One of our Friday Tips, “Know What You Can Do”, touches on this.
Contractors that lose their market focus can ruin the bidding opportunities for other contractors. When a home builder enters the commercial or retail sector, bidding conditions change, as do the project management requirements. The costs of the project management is oftentimes omitted or under estimated. Labor productivity is far different from the housing sector to the commercial sector. Material requirements are more stringent with some materials not allowed on commercial projects. The new market requirements are usually not fully understood.
These changing conditions are not recognized by many that are moving to a new market. The cost differences due to this are not included in the bid. This brings in a low bid that otherwise would not have occurred with a “knowledgeable and competent bidder” on the project. This hurts the other bidders, the owner/developer of the project and will end up hurting the low bidder and/or subcontractors on the project.
It is not just one market sector. While using the home builder to commercial example, it happens in other market segments such as retail to commercial, commercial to medical, heavy to industrial, power to chemical, private to governmental and through out the different sectors.
Sad to say, but this is the nature of the construction industry too.
