Underbidding a Cleaning Contract
By ROBERT KRAVITZ
Nearly 10 years ago, I wrote my first book
on the contract cleaning business – The Janitorial Contractors Bible. To
help market the book, I visited Internet message boards, answering a variety of
questions from building service contractors (BSCs) about cleaning, customer
relations, hiring employees and, most of all, bidding. I soon learned that
bidding issues, including how to bid and what to do with an underbid contract,
were the biggest concerns.
Having had three contract cleaning
companies by that time, I had certainly learned a lot about bidding. There are
several ways to bid: based on the square footage, the time to clean the
facility, payroll and other employee costs. But most important, BSCs should
know that there really is no one “right” way to bid on an account. The
determining factor: if you win the contract and make enough money for it to be
worth having, then you have bid correctly.
But making enough money to have the account
is often the big concern. Many times, even after considerable thought, visiting
and re-visiting a facility and evaluating a variety of different bidding
scenarios, a contractor wins a bid only to find he or she has underbid the
contract – sometimes seriously. However, all is not lost. There are ways to
handle the situation that can save the contract and raise the monthly fee – at
least most of the time.
Two Underbidding Scenarios
The first thing every BSC should know is
that underbidding a cleaning contract happens to everyone, often many times.
The issue then, as mentioned earlier, is how to handle the problem. The
following are two of my own underbidding experiences, how I handled them, and
what finally happened.
This Bank is NOT Where the Money Is
My second business was in Northern
California, an hour north of San Francisco. Because this was a semi-rural area
with few major cleaning contracts available, there was heated competition for
the few that did surface. Such as the case when the largest bank in the area
decided it wanted one BSC to clean all its branches plus their corporate
offices.
The bank opened the bidding to several
contractors and had only two requirements: that the BSC be insured and bonded,
and that they provide proof that they had been in business for at least two
years. This way, the bank administrators believed, they would be working with
more professional and experienced cleaning contractors.
After touring all the branches as well as
the corporate offices, I decided to bid on each branch based on how many hours
I thought it would take to clean them and bid on the corporate offices by the
square foot. Costs such as payroll, supplies, insurance and other factors were
all calculated to reach my final bid amount.
Two weeks after submitting the bid, the bank
notified me that I was one of three BSCs they were considering. They asked me
to meet with the bank’s facility managers for a “get to know you” and to review
the bid. At the meeting, they asked if I would like to revisit the locations,
if I had any questions, or if I wanted to make any changes to my proposal or
bid amount. Believing I had given them a fair bid, and felt comfortable with
it, I said no.
Two weeks later I was notified my company
won a one-year cleaning contract with the bank and was to start service in a
month. But as soon as we started service, my problems began. All of the branch
locations took considerably longer to clean than anticipated. On top of that,
many of the branch managers were accustomed to a much more detailed service
than our contract allowed. We tried to accommodate the managers and give each
location more time and more service, performing cleaning tasks that were not
included in the proposal.
I decided to give the account more time,
hoping the time and service problems would smooth out. However, after about six
months, many managers remained dissatisfied and even asked the bank’s facility
managers if they could rehire their old cleaning service. At the same time, I
realized we were making so little profit on the contract that it was not really
worth having.
To rectify the situation, I met with the
bank administrators and explained that I had underestimated their cleaning
needs and would need to raise the monthly service charge. I also told them that
many of the locations demanded much more thorough service than our contract
allowed and we were trying to accommodate them as best as we could. I also met
with each branch manager to explain my dilemma and ask for their understanding.
But it is very hard to negotiate with a customer
if they are not happy with the service. About a week later, I received a letter
from the bank. To my chagrin, the letter said they were not going to pay more
for our services, and what’s more, our contract was cancelled. Apparently, our
company had been selected because we were the lowest bidder. The BSC with the
second lowest bid was hired to take over the cleaning contract.
An Advertising Company With Feelings
A few years later, major San Francisco
advertising company hired us to clean their five-storey office building, an
interesting but cumbersome, 100-year-old warehouse filled with many employees.
Just as with the bank, I submitted a bid that I thought was fair and would
provide an adequate profit margin.
We won the contract, but within a week, I
knew I had underbid. There were so many employees, the cleaning work was much
more involved than estimated. And the building, originally designed as a
storehouse, had nooks and crannies that slowed our time down considerably.
Not wanting to repeat the same experience I
had with the bank, I met with the office manager the very next week. After I
told her that I had significantly underestimated the workload, we reached an
agreement: We would continue cleaning the building for three months. If the
service was satisfactory, they would agree to the higher rate.
This situation worked out much better. I
met with the office manager two or three times per month to check on the
service and make sure they were happy with our work. After three months, our
bid was re-adjusted quite handsomely because they increased their service
needs, and the company remained one of our clients for several years.
What Was Learned
There were not the only two underbidding
experiences I had in my 30 years in the contract cleaning business. Like most
BSCs, I had several. But I learned first-hand that how you handle the
situation often determines if you can keeps the customer and make a profit at
the same time.
With the bank, I should have met with the
facility manager within the first month of service to discuss my concerns.
Additionally, instead of just trying to please the branch managers, I should
have met with them individually and explained what our cleaning tasks were –
and were not. Instead, I did nothing for nearly six months. By that time, the
managers were frustrated, the profit margin was virtually nil and ultimately,
the client cancelled the contract.
With the advertising firm, I communicated
my concerns within a few days of starting the service. I met with the client
regularly, we talked often, my company provided the quality of service they
wanted, and the account became one of our most profitable.
The key in rectifying this situation is
communication and meeting with the client as soon as possible. Through this
strategy, I have even had large clients, who first said they would not make any
adjustments to the bid amount, later agree to a higher monthly fee. They agreed
because I communicated the problem early, because I made sure the quality of
service was satisfactory, and because most businesses, whether they provide a
service or make a product, have been in the same underbidding scenario
themselves at one time.
