October 10, 2013

Bid Leveling Your Job Offers © Justin Reginato, PhD

Justin Regionato is a professor of Construction Management at CSU Sacramento. He posted this article on Facebook and I think it is sage advice. In the article he compares negotiating the terms of employment to negotiating a bid for a construction project. Many professionals have to estimate the cost of doing a project whether is is a construction project, a consulting project, a solar power system, or a software project. If you are in the job market right now with hiring heating up you are going to be considering offers from potential employers. Many candidates are choosing between multiple offers. (I had one student last semester who had 9 offers on the table for summer internships!). Negotiating your salary is the first example your potential employer will have of your ability to estimate and bid a project. This first bid is one of the most important ones you will do - setting the tone for your career. Cici

I should be busy grading right now, but this was too good not to write right now. I just finished a conversation with a student who plans on "leveling" the job offers received over the next few months. I think this is brilliant! Much like leveling subcontractor bids on bid day, you should be trying to figure out who is offering you the best "bid" in terms of value and scope coverage. I was recently a part of a committee that selected a general contractor for a local project. All of the GCs proposing on the project were of the highest quality and all were capable of performing the work. We needed to "level" their proposals to determine who was the absolute best. We looked at several factors, including base bid, fee, schedule, etc. to see who could perform the work the best in terms of the owner’s goals. You can use similar tactics to determine which job offer (full time or internship) is the best for you. You are the owner of you career, so evaluate employers like you’re an owner.

Base Bid: When looking at contractors, of course one of the first things owners are going to look at is how much the contractors think the cost of work is going to be. When contemplating a job offer, you should as well. The base bid a company offers you is your base salary. This is important, but it’s not the only factor you should look at. Also, add any medical insurance offerings to the base bid. Most companies provide health insurance, so I would consider that part of the base bid.

Fee: As owners, we we’re particularly interested in how much each general contractor was charging to perform the project. This would be the money they hoped to take home when the project was complete, after all the costs were paid. In the job search, I would equate fee to any sort of bonus system a potential employer offers, whether it’s the opportunity for cash bonuses or stock grants (many employers/contractors are employee-owned businesses that issue stock to employees). This is the gravy on top of the base salary.

General Conditions: This is the cost to perform the work. Owners like to see general conditions broken out in a bid to see if a contractor is larding up their bid with unnecessary overhead but also to see if there is adequate resources to manage the project. For you in your job search, what is a company offering you to ensure you can adequately perform your job? Common items include company vehicles (for full-time offers), gas allowances, cell phones, laptops, relocation expenses, housing stipends (if you are being asked to move temporarily to an out-of-town location), support for training and continuing education, etc. Each of these are common items that many contractors offer and they’re all likely negotiable.

Schedule: Obviously, as owners we want to know how long a contractor plans to take to build a structure. Similarly, you need to know how long it will take to build your career with each contractor that gives you a job offer. I think schedule needs to be assessed from two angles:

Short duration: How long does my employer expect me to work per day? Is normal 8 hour days typical or is overtime expected (or mandatory! Remember, once you’re a salaried employee, laws regarding overtime go out the door). Do I get weekends off or is it expected that I’ll be on call? You need to ask each potential employer these questions. A well known and successful general contractor told me in an info session that they expect PEs to be on call 24/7 and to expect to work 60 hours/week minimum. Other contractors are much more relaxed. You want to know these things before accepting a position.

Long duration: How long will it take for you to grow into your next position, which should be a promotion? Some contractors have formal requirements for promotion ("you must be a Project E ngineer for six years before moving to Assistant PM/super") while others let you progress at your own pace ("you become a PM when you prove you’re ready"). If you have had a few years of internship experience and think you’re hot stuff, you may have your own timeline as to when you want to get promoted. And there is a time/cost tradeoff. The faster you can make it to PM, the more money you can potentially make.

The X Factor: This goes by many different names. But at the heart of it, it covers the intangibles and the qualitative stuff a company brings. For owners, we assess the team primarily (do we want to work with these guys?) You should do the same thing. What sense do you have that the people you will be working with are fun and have your best interests in mind? Remember, you will probably spend a lot of the interview process with HR people, but you won’t be working with them. Ask to meet the project team you will work with. Ask to meet with you supervisor and your supervisor’s supervisor. I can assure you, all the money in the world is not worth it if your boss is a jerk. On the flip side, less money may be worth it if your boss has your back. Construction and engineering are project-based. You want to make sure you are constantly a part of a project team or you put yourself at risk for being laid off.

There you have it: base bid, fee, general conditions, schedule, X factor. These are the basic metrics owners use to value a bid from a contractor and you should use them evaluate a job offer. Some owners put different weights on each of these metrics (e.g. base bid is 50%, fee 10%, GCs 5%, schedule 20%, X factor 15%). You can do this as well. Just as I say in class, cost always matters, so I suspect many of you will put most (all?) weight on the base job offer. It’s natural to do so, but just like an owner or general contractor making a selection based solely on price, it’s ripe with problems.

Last thing: this advice applies AFTER you have received offers. You cannot compare and contrast offers until you actually have them. Don’t start negotiating salary, company vehicles, etc. until after you have received an offer. Spoiler alert: if you get an offer, they like you. Probably a lot. That’s the time to negotiate.