When Bids Go Bad: Contractor Horror Stories

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ℹ ABOUT THIS EPISODE

Ready for some real frights? Forget ghosts and goblins – these true contractor bid horror stories will keep you up at night checking your Excel formulas. 

Wade and Stephen share spine-chilling tales of million-dollar spreadsheet errors, last-minute sub pullouts, and bid day disasters that cost contractors their profits (and sometimes their jobs). 

Learn from these nightmares with practical tips to protect your business from bid day terror. Perfect Halloween listening for contractors who want to avoid their own estimating horror story.

⌚️ Key moments in this episode:

• 01:33 Setting the Stage for Bid Day
• 02:25 Common Bid Day Mistakes and Their Consequences
• 05:04 Real-Life Bid Day Horror Stories
• 14:04 Technical Issues and Their Impact
• 17:24 Preventing Bid Day Disasters

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Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | SuretyAnswers.com

Transcript

Wade Carpenter: [00:00:00] Forget ghosts and goblins. You want a real fright? Try realizing your bid spreadsheet's off by $1.2 million with two minutes left on the clock. On this Halloween episode, we're not carving pumpkins. We're carving up margins. These are real bid day horror stories. Tales so scary, they'll make you double check your Excel formulas before bed.

This is the Contractor Success Forum. I'm Wade Carpenter with Carpenter and Company CPAs, alongside Stephen Brown, with McDaniel Whitley Bonding and Insurance. Stephen, this was your brainchild and I love it. When you told me your idea, I immediately thought of several stories I had myself. Maybe we should call this episode Nightmare on Estimator Street.

Stephen Brown: I like that name. That's perfect, Wade. You know, it's Halloween and the idea came from Deltek, who provides computer solutions for contractors for this sort of thing not happening. She had a fun article just tied to horrors and nightmares involved with bid day.

But you know, that's a great way to describe it, Wade, because everybody's had [00:01:00] this experience. Everyone has this story. As a bond agent, I have a million of them. And as a result of it, you either lose money or you're embarrassed, or it just about nearly kills you. You know, the stress of it all. And these things that happen on bid day, they happen over and over again. And I was just hoping we could talk about what happens, why it happens, tell a few stories, and kinda what to do about it. Because this nightmare does not have to be your nightmare. It is a great topic. It is scary. It'll certainly get our listeners' attention, I could tell you that. 

Wade Carpenter: If we could just maybe set the stage a little bit, because a lot of times you spend several days pulling together bids for your subs and getting the paperwork in place for your bonding and making sure those kind of things are done.

You get this call before the bid opening. You're rushing and get those things in. You're getting last minute supplied quotes from the subs and it's just a stressful time. Talk about that a little bit from your perspective. Well,

Stephen Brown: and your bid [00:02:00] is quadrupled from what you got your bond approved for, you gotta get that cleared at the last minute because some sub price has gone wacky. It may have all started because the owner of the company tells you as an estimator, hey, this job is bidding tomorrow, you turn in a bid on it. And you're like, wait a second, I gotta turn in a bid on it. And I haven't even started working on it yet. You know how hard can it be? This is what you do for a living. So turn in a bid.

Wade, I can just tell you that absolutely every week there seems to be some sort of bid situation that s omebody in our office is going through with one of their customers.

In the bonding world, we have this thing that's called the bid spread. Our listeners know what that is. You take the second low bidder and subtract it from your price. And the difference, as far as the percentage, is the bid spread. Generically, if it's over 10%, we got some, as Ricky Ricardo would say, got some splaining to do to the bonding company.

So some people say [00:03:00] 10%, some people say 12%. What about last week, I had one that was a 38% bid spread.

The job was really ugly. The incumbent that did the first three phases of the job turned in a bid that was six times the engineer's estimate. I mean, crazy number. Pretty much saying, I don't want the job.

And then the Excel spreadsheet did not pull over the unit price factors afterwards. And then all the estimators were called out of town with the company for a training convention at the same time this job was bidding. So they're all at a convention, they're bidding a job. They're bidding something that was not their cup of tea.

It was something they did and they could definitely do, but it was gonna take a lot. And there were probably a hundred different factors involved in this particular job that made it spooky, you know, or scary. But yeah, leaving almost $4 million on the table you know, that'll get your [00:04:00] attention.

As it turns out, they were able to prove that there was some material, huge miscalculation error in their bid, and they were able to pull out of it with the blessing of the owner. Here's the thing. They don't want you to do the job if you're gonna lose money, then you'll do a lousy job, you know?

But at the same time, there are people that will hold you to those bids and those bid spreads. And then the law says in most states, that you can pull out of a bid from a material mistake So what about subs? What about using a sub bid that pulls their bid the next morning after your low bidder, and then the second low sub bid is 40% higher? That's not a estimating problem. That's a bid problem that you've gotta eat.

So back to horror stories. The horror of being a contractor is, again, we always say this, Wade: there's no limit on how much you can lose on a job, but there's a limit on how much you can make on a job.

We're here to debunk that and to help you out with that. Because you don't have to have this [00:05:00] emergency to not have this happen to you. You don't. Learn from others. 

Wade Carpenter: Yeah. As you recall in my book, Profit First for Commercial Construction, I had that exact example, where they were bidding and they were already on thin ice with the bonding company, and they came in at 9% low. They were just under that threshold that you're talking about.

Bid day is a pressure testing. You know, you're scrambling and scrambling to get all this stuff pulled together, and you've already thrown out some things that we end up having failures. Maybe we can talk about some of those thoughts and learn from them.

You talked about spreadsheets. I had one where an estimator had a spreadsheet from the last job. And he did a copy paste kind of thing from the other one, but he didn't realize the material prices had jumped 25%. And so this copy and paste and not really paying attention, he underbid by $380,000. We had some problems with the supplier, refused to honor that quote. Anyway, it became a huge mess. Talk about some of your thoughts on some of these other issues.

Stephen Brown: [00:06:00] Spreadsheets and formulas are a huge part of it. You have your equations in your Excel spreadsheet that do the math for you. And, those formulas are wrong or they're corrupted in some way, and that information isn't moved over. And some jobs are big just because there's a handful of particular quantities involved that are pretty easy to measure.

Some are extremely difficult and the subs are everything in your ability to get that job, their knowledge. So one thing is understanding the scope of the project and communicating it with everyone in time. Time seems to be the main thing that causes these nightmares. Timing issues.

Wade Carpenter: We do see the spreadsheet issues all the time, but sometimes it's just fat fingers. I don't remember the exact numbers, but it was a concrete subcontractor and they missed a decimal. So it was like, say, $45 a square yard or something like that. But they had accidentally dropped $4 and 50 cents into the bid sheet. And this general contractor, just [00:07:00] what your story a while ago they thought they scored a killer deal on it, and then they got the bid and then the sub called and said, they couldn't pour concrete driveway for that, and wasn't gonna honor the bid. They were stuck like your previous story. 

Stephen Brown: Yeah, you're stuck. Just simple math, clerical errors. Again, because of time, not having an extra set of eyes on that bid.

Another thing is when we talk about scope, we talk about the timeframe and we talk about what kind of project's going on and then where it's going on.

Your ability to put a bid together quickly in your own hometown, doing something that you do all the time that's pretty straightforward, that's pretty easy. But I've seen people make big mistakes on this too. And it's like the more you do it, the copier you get at your bids.

And Wade, I think about the estimators out there. What a nightmare for them when their job depends on giving good, accurate estimates and pulling the [00:08:00] job off as bid. Yeah. No stress there.

Then you make a material problem, you embarrass your owner, you maybe lose your job. You say I'm branded as someone that can't bid work. But Wade, I would argue that in every situation, those people that have gone through that are the absolute best estimators you can have.

You can't just tell someone, this could happen. Here's a horror story for you to listen to. Sometimes unfortunately living the horror story makes you the best. Does that make sense? 

Wade Carpenter: Yeah, absolutely. I had one where a supplier quoted free freight was included if it's in by Friday. They planned on that, but the bid went in on Monday. Freight was $27,000. It wiped out their whole profit on this job.

So some of these time sensitive terms, there's a lot to think about when you're bidding a job. I keep going back to Excel. Part of what you had talked about with Deltek and-- you know, I'm not advocating anybody use anybody's software, Excel is all over the place. But I had a well-meaning [00:09:00] intern, it was a friend of owner's family. And he noticed what he thought was a broken formula. He "fixed" it himself thinking he was doing something to help. But his adjustment removed this cost escalation, and it significantly underbid all the materials on that one.

Some things like locking your cells and limiting access, stuff like that where people can't play with numbers so that they can-- it's too often, every estimator in the place has their own way of bidding. That's some of those things I see.

Stephen Brown: I remember, Wade, back in the highway bid letting days, the contractors and their estimators would be up all night putting their bids together. The subs would be there, the surety agents. We were all there. They were up all night, and then the bid opening was at 10 o'clock in the morning. And you couldn't be one second late.

One agent was literally standing with one of his customers bids under his arm, and he was just kinda... it wasn't me, but he was just BSing around with everyone at the table. They put the gavel down. [00:10:00] He turned around and handed him the bid envelope and they said too late. And they would've been low bidder on the job.

You know, forgetting to put your contractor's license number on the envelope. Wow. I've seen about 20 of those, Wade. Forgetting to put your contractor's license number on the envelope.

Also from our standpoint, there are horror stories as bond agents where we screw up the bid bond. If something's not perfect, if it's not executed perfectly, they can throw that bid out. And they have to be incredibly technical and evaluating the pre-bid are all submitted fairly. They just simply cannot and will not say you were standing right here. It was technically here. No. They had their procedures in place. And this just happens over and over again.

You know, it's not just the terror of the estimating numbers being off, that's bad enough. But it's having your bid thrown out just because you didn't put your package together right.

We had a customer lose a $40 million [00:11:00] project that they were bidding in a joint venture where their venture partner turned in the proposal and left out 18 pages of just boilerplate stuff that the government required. They would've made $5 million on the job, and they had an agreement that they were going to review that with their partner because my customer had more federal contracting experience than their joint venture partner. We will review that with you before you turn it in.

But she said I do this, I know what I'm doing. She put it together and turned it in. And they would've gotten the job. It's the simplest thing in the world, right? But it happened. And I don't know, I just think about a $40 million bond I would've gotten to write. It's painful.

But, so yeah, there's that part of it. There's bid spreads. They're saying when they open the bids, they announce your number and they read your number out and everybody goes, oh, oh, because, you know, you just look around, it's so crazy low. They're just like, oh man. If you want it at that price, go ahead. [00:12:00] That'll keep you from being a competitor of mine. If you do it at that price. You know, everybody feels that way.

And on bid day, and if you sit in the bid lettings. Yeah, you're going through this. I personally took advantage of it In the old days, Wade, I would go to the bid lettings you know, with lucky pens and pencils for everyone bidding it.

Because I wanted everybody to know who I was. And it was the time where everybody was, their bids were ready. They were waiting for the bid to start. They were nervous. It was before cell phones and you could just visit with them a little bit. And yeah, bid day, what a nightmare. Leaving money on the table, subs, pulling out, math errors. What else have you seen? 

Wade Carpenter: In addition to math errors, some of the times it's units mixed up. I do remember one in particular, price per pound or price per ton or the imperial metrics system versus fluid ounces versus, or millimeters to inches.

There was one in particular that was off by a factor of like 2000. It was [00:13:00] ridiculous. And they did luckily not have to get held to that. They threw the bid out because of that. But they put a lot of effort into it. I still vividly remember that one.

There was also one that I wanted to talk about real quick. A sub got a supplier's quote, and they gave them across the board a 5% preferred partner discount is whatever they called it. They planned on that. The supplier already threw that in his bid, but then the estimator came along and put the 5% on top of that.

So again, some of these guessing, they cause issues like this and so it's really-- really

Stephen Brown: And

that's a horror. They didn't get a job they probably would've gotten because they put too much in there by not communicating. 

Wade Carpenter: They thought they were in good shape, but they actually did win that job and they lost money on it. So that's why I remember that one very vividly. 

Stephen Brown: I've had one turn in a bid on the East coast and forget about the time zone difference and turn their bid in an hour late, you know? Every weird thing that can seem to happen, that's why, horror stories of things gone [00:14:00] wrong, it's a great topic. Because it really is how you feel when you're going through this.

Another thing, Wade, is technical snafus. Just to show my age, there was a job where the fax from the sub came in and only part of it came in, and the second page with the total didn't. And they threw that number in the bid. I think they lost three or $400,000 on that job.

Not just losing profit, but losing three or 400,000 on the job. It shows how old I am, fax machines, but, you know, take that Wade, with technology, you're uploading your file at the last minute when everybody else is.

We had a job at a Department of Transportation three or four months ago where there was a huge storm and power outage on the computer system of that Department of Transportation. They got it up and restored, but not until 30 minutes before the bid letting, and then everybody jammed it up trying to get their bid in.

And you would say [00:15:00] they should just cancel it and rebid that, right? No, they didn't. Literally uploading your files, making sure they're perfect, and then pushing that submit button is another terrifying issue.

And then beside that, the number one thing that you see that causes me to be terrified is when there's an addendum to the bid that you didn't read. The addendum, it's your job to read and interpret what it means. I saw an addendum once that literally quadrupled unit price in one area. I've seen addendums that just take material, entire scope issues out of the equation. And then I see addendums where they're just putting more language in the contract that you're responsible for.

So talk about terror.

Wade Carpenter: Your story about uploading also reminds me of a different spin on this. We had this general contractor, they had multiple estimators and they were using a Dropbox folder. They weren't consistent between it. They put together this big bid and [00:16:00] uploaded but they didn't label it or whatever. Another estimator just, you know, thinking it was trash because it was poorly labeled, they deleted it an hour before they were supposed to submit it.

So they sort of scrambled to rebuild the numbers. They had very weak backup and they did get their bid in. They didn't win it luckily. But they went back and tried to figure out how they came up with it. That was just another one. They accidentally deleted the bid. So it was funny, but it wasn't funny to them, obviously. 

Stephen Brown: Yeah, I mean, please have at least something in place that says, this is the name of our final bid file. Have some way of naming a nd systemizing that. Yeah, I've seen that too, Wade. And it seems so fundamental. In these days of you sending emails and there's just a thread a mile long, you know, that you gotta decipher in there it's especially difficult. So I get how a good system in place can keep that from happening.

No matter what system you have, there's nothing [00:17:00] better than an extra set of eyes. Now, if as the owner of the company, you being the extra set of eyes, the buck stops with you when that bid turns in. 

The estimators are pretty safe. You've asked all the right questions. The estimators truthfully answered your questions. You're safe. But what about the questions you forget to ask as the owner? And at this time you get really big, you can't micromanage every estimate that goes out. You just gotta trust it. You gotta trust your systems. You gotta trust your people.

Wade Carpenter: Had another one that had a brand new estimator that came in, years of industry experience. I see this not just among estimators, but the owners, all of them, the markup versus margin. This new estimator applied a 10% markup and wasn't using the right factor.

I know there's differences, but it went back exactly to your story that nobody reviewed the bid. And because this guy came in, he had years of doing it, but he had years of doing it a different way. So in that particular case, that bid went out like 6% too [00:18:00] low on, I think it was about a $5 million job. Markup math, you can't just assume. To your point, you have to have somebody put another set of eyes on it, and it can save you quite a bit of money.

Stephen Brown: You're so right. So many folks will bid work with a pre-bid construction meeting, and that's time to discuss it. But you haven't had time to go over the specs of the plans yet, and then you're supposed to submit your questions to them, and then they take however long they wanna take to answer that, and then right up to the time your bid's ready, they changed the addendum.

That's fundamental. But I can't tell you for public bid lettings how many people lose their jobs because of small things or technical issues. And just something fundamental like putting your contractor's license number on the outside of the envelope.

I had been in bids with my customers where my customers made a mistake in their bid. I've been sitting there praying, oh, please. They go, oh, we got a problem here. They're opening the bids and they're shuffling through all the papers and then [00:19:00] they're bending over and talking to each other and you're like, oh, Lord, that's our bid. What happened? Please don't be the bid bond. Please don't be the bid bond.

You know, not sealed, not dated correctly, not the power of attorney in it. Just something fundamental like that. Yeah. We lose. We're like a restaurant. We just have to be consistent. We have no choice at all. And you do too, as a contractor, you have to be consistent in your bid practice.

So who would've known this story about all the estimators being at a learning conference the week before a huge bid. This was a job initially put out for bid six months earlier. And it just disappeared. And then all of a sudden it just dropped in the lap and the owner said, Hey, I want to bid this. They're expecting us to turn in a bid, and this is right up our alley, so we don't wanna embarrass ourselves. You know, it's a perfect storm, wasn't it?

Wade Carpenter: Yeah, there's a lot of them, and I know I had some other ones, but a lot of them are very similar to some of the stories you told. But I agree. You do have to try to have some [00:20:00] systems in there.

Sometimes if you're bidding different federal government work versus city, county, whatever it is, some of these cities and counties have their own rules. And unfortunately you gotta know all the rules, to the extent you can, make sure somebody puts another set of eyes on it. Make sure that you do have some kind of checklist put together.

And I think that can go a long way to eliminate some of these things. 

Stephen Brown: That's the first thing you do after the bids are open, is worry about your bid. And if you're high bidder, you talk among your competitors to try to share info with each other. It's a terrifying business. It's a risky business, construction. It's terrifying to have something happen after the fact.

But, you've got things that can help you. Wade, you've got systems, okay, you've got laws, sometimes your bonding company can be your best friend when these situations happen.

I'm thinking of a situation where there was a $10 million bid spread, and the contractor that was low was good with the bid. They were like, we stand by [00:21:00] this. Our bid is good. We don't know what everybody else was thinking, but our bid was good. And so that bid went straight to the home office who had an engineer estimator on staff that just looked at it and did the takeoff. And they said, these unit prices, everything they've done is exactly right. I think this bid is good.

Not only were they awarded the job, but they made a huge profit on it. So if we hadn't had that situation with the right bonding company and home office, that bond may have been denied. And then you'd say what happens now? All of a sudden, this bond I thought was approved, is no longer approved. What do we do about it?

Again, it's important. What was the engineer's estimate at the time of the bid opening? What did they come up with? Sometimes that helps a little bit. But when you're low bidder by 40% and second, third, fourth and fifth are all grouped in there real tight together, and then there's a real high ball one, you gotta think you did something wrong. That's what the surety companies think. 

Wade Carpenter: Yeah. That's a great [00:22:00] story to wrap up on. We probably could do another 30 minutes on this topic, as well as I wanna hear more about this particular situation you talked about. But anyway, I think you got some great thoughts and topics in here, Stephen. I appreciate you bringing it to us today.

Stephen Brown: My final thoughts are again, think about the things that we discussed that seem to happen over and over again. Simple mistakes because there's not a second set of eyes. Having a final file name or control number. The final file. Wow, that was huge. Making sure that your team is signing off, that they have read the latest addendum, pre-bid.

Verify all your submissions, making sure you get with your subs to go over the scope in every detail of the units that they're bidding, and understanding their bid before you turn in their bid. And then have a second person cross check it. If your number seems too low, recheck it. If you're like, this can't be right, just recheck it.

So these horror stories [00:23:00] can be wonderful happy endings, but what a horror bid day can be if you do it wrong. 

Wade Carpenter: Yeah, on that, I enjoyed this episode. Our listeners probably can relate to these things. We'd love to see some comments and thoughts below. Have you had a horror story that we'd love to hear about? Drop it in the comments below.

We thank you for listening to us. We do this every single week.

If you would please share, subscribe, it always helps to channel out. We very much appreciate it and we will see you on the next show.