Stephen A. Schwartzman, Co-Founder of Blackstone, shares a story in his book, What It Takes: Lessons in the Pursuit of Excellence, about an expensive investment lesson that led to a revelation:
In one of the firm’s first private equity investments in 1989, Mr. Schwartzman found a steel company for the fund to acquire. He sold everyone hard on the idea, and there was relatively minimal debate as he was able to convince one of the other firm’s partners that they should proceed despite the partner’s strong objections that the acquisition would fail. The deal was approved and turned out to be a bad investment. Schwartzman described how the firm made their investors on the deal whole even though they were not contractually obligated to do so. The loss propelled the company to build a process wherein all team members (regardless of title or tenure) are required to speak their mind on a deal and where teams are assigned to analyze both the upside and downside of each potential deal. A committee vote is held, and decisions are made only after potential scenarios are analyzed.
How does this relate to highway construction bidding? Like analyzing investment opportunities, bidding work is a game of minimizing downside risk and maximizing upside potential. Below are 3 ways that contractors can foster inclusion and debate to help de-risk jobs and make bid reviews engaging:
Don’t go chasing waterfalls
I used to dislike showing anyone a bid file without it being 100% completed. Only after I started reviewing others’ bids did I see how flawed my thinking was. Bid should be reviewed multiple times before the bid due date as it progresses. Preliminary reviews conducted before the final bid review is a better and more agile approach, as opposed to a waterfall approach where everything is expected to be done. Waiting until the end to review a “fully completed” bid can lead to problems.
Involve the right team members
The appropriate team members should participate including project management and field management. It is not suggested to invite the entire company, but rather management who can reasonably expect to be involved in the project. Valued contributors, especially Superintendents, generally appreciate being included and will provide thoughtful insights. It is easier now than ever to hop on a Teams or Zoom call from the job site. Studies show that groups of 3 to 7 team members are most effective, and larger groups get less done. So, finding the right makeup and size is key.
Demand and encourage team debate
People, regardless of stature or tenure, need to be heard. People with nothing to add should not participate. Unlocking creativity can unearth gems of wisdom and differentiation at the bid table. Bid echo chambers should be avoided at all costs. If every item is up for debate, it is being done correctly.
Field involvement is good business that de-risks the bidding process and promotes a people and team first approach. A hidden bonus: When a contractor wins the bid, the field managers will be bought in and that ownership increases likelihood of proper planning, execution, and subsequent safety, quality, and performance. Signals of respect and inclusion matter. And spirited debate makes the bid review process more fun for the whole team.
At Edgevanta, we are building a technology to help solve the project acquisition process for highway contractors.
Sincerely,
Tristan Wilson
CEO and Founder
Edgevanta, LLC
This is the 5th deep dive of a multi-part series on the project acquisition process of the construction cycle for highway contractors.
