Now that we have organized our thinking, set our goals, communicated them to our entire organization, attached proper incentives, and opened lines of effective communication, we are ready to go to work. It’s time to get a job. Let’s get out the Dodge Report, find work available in our marketplace, and have our estimators prepare a bid. So, which job should we bid? That’s the $64,000 question. The correct answer will be the foundation of profitable operations perhaps for years to come. If we pick a job that doesn’t fit our company’s profit profile, we may be working for nothing and not realize it till all the invoices are in.
Strategic Discipline
Construction companies do not succeed by winning every available project. They succeed by choosing work that fits their capabilities, produces dependable returns, strengthens client relationships, and can be delivered safely. Project selection is, therefore, a strategic discipline rather than a simple estimating exercise. A bid that appears profitable on paper can still create serious losses when it requires unfamiliar expertise, stretches management capacity, introduces excessive contractual risk, or ties up cash for too long. Conversely, a project with a modest margin may be valuable if it develops an important market, keeps a skilled workforce employed, or leads to repeat business. Effective selection requires a consistent set of parameters that management reviews before committing resources.
1 Strategic Fit is the first parameter. The company should define project types, delivery methods, geographic areas, and customer segments in which it has a competitive advantage. A contractor experienced in warehouse construction, for example, should not pursue a hospital renovation merely to increase sales. Strategic fit means the work aligns with the firm’s core skills, equipment, and subcontractor network. It should also consider whether the job advances a growth objective, such as entering a nearby market or building expertise in sustainable construction. Work outside the company’s focus may be appropriate, but only when leaders have a clear plan for procuring the people, partners, and controls needed to execute it.
2 Profitability is the next essential parameter, but it must be assessed realistically. Estimators must calculate more than labor, materials, equipment, and subcontractors.
- They must test the adequacy of contingencies, escalation allowances, productivity assumptions, and schedule-related costs.
- Job-cost data must be compared with similar completed projects.
- The company needs to set minimum gross and net-margin thresholds recognizing that the required margin rises with uncertainty. A complex renovation, a design-build project with incomplete information, or a job with difficult site access needs more contingency than a project with a well-defined scope.
- Bid reviews should also examine the probability of achieving the target margin, not simply the most optimistic outcome.
3 Client Quality and contract conditions strongly influence job desirability. Before bidding, the company should investigate the owner’s financial stability, payment reputation, decision-making process, and history of disputes. A well-funded client that communicates clearly and pays promptly makes a project substantially less risky.
4 Contract Terms deserve equally careful attention. Unfair indemnity clauses uncapped liquidated damages, broad warranty obligations, unreasonable payment provisions, or poorly defined change-order procedures can erase profit. The company should identify risks it can control, negotiate terms where possible, and decline opportunities that transfer unreasonable exposure to the contractor. A disciplined “no bid” decision is often more valuable than a low-probability chance to win revenue.
5 Capacity and operational readiness are also critical.
- A company must determine whether it has enough experienced project managers, superintendents, estimators, craft labor, and safety personnel to execute the work without harming existing projects.
- Equipment availability, material lead times, subcontractor depth, and local permitting conditions should be reviewed early. Even a profitable job can fail if it relies on scarce crews, overloaded managers, or unproven subcontractors.
- The proposed schedule should be tested against realistic production rates, weather exposure, unreasonable milestones, and procurement constraints.
6 Cash Flow deserves the same attention as margin. It may be necessary to pay labor, suppliers, or subcontractors before receiving payment from owners. Therefore, management should forecast billing timing, retainage, mobilization costs, stored-material provisions, and the potential impact of delayed approvals or disputed changes. A project with healthy profit can still burden the business if it consumes working capital for months. Bonding requirements, insurance costs, credit availability, and the effect on the company’s backlog should also be evaluated. By weighing strategic fit, realistic profitability, client and contract risk, capacity, cash flow, and long-term value, construction companies can pursue work deliberately.
The goal is not maximum revenue; it is sustainable, controlled, and profitable growth.
For more information on job selection, read more at: SELECTION
For a broader view of job selection parameters, read more at: PARAMETERS
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Please circulate this widely. It will benefit your constituents. This research is continuous and includes new information weekly as it becomes available. Thank you.
