In this presentation, Tristan Wilson explains that estimating and bidding are fundamentally different activities in public construction and that conflating them costs the industry billions of dollars each year. He describes the public bidding process, where contractors submit unit prices and the lowest bid wins, leading to large gaps between first and second place bids. An analysis of DOT data across 20+ states shows the average contractor leaves about 9% of potential profit on the table—roughly $6‑$7 billion annually—while best‑in‑class firms leave only 3‑5%. Wilson outlines the two‑phase workflow: (1) estimating, which involves detailed cost‑calculation through scope understanding, takeoffs, internal cost modeling, material price escalation, and risk accounting; and (2) bidding, which requires market analysis using historical bid data to gauge competition, set profit margins, and decide whether to pursue a job. He advocates a data‑driven, risk‑adjusted bidding strategy, emphasizing that contractors should know their true costs, price undesirable or risky jobs accordingly, and adjust margins rather than undercutting costs. Over‑aggressive cost‑cutting leads to negative margins, financial distress, and even bond company takeover. The core message is to separate estimating from bidding, use data to inform pricing, and always base bids on accurate cost estimates.
Chapters
Most contractors think estimating and bidding are the same thing. They are not. They are totally different. Estimating is figuring out what it's going to cost us. Bidding is figuring out where we should price it. And confusing the two is costing the industry billions of dollars per year. The way that public construction bidding works is that everybody, in most cases, Everybody gets the same information. You submit a bid and you provide unit prices for each one of the items that the state provides. You submit your bid by whatever time that the owner specifies, and then they open the bids up. Now it's done electronically, but they used to physically open the bids up, and whoever has the low bid is the one who gets the job. So you often have these big gaps in between first and, and second place, which is money that gets left on the table that that could be used to reinvest in equipment, to invest in people and plants and, you know, facilities and training, but that basically, you know, goes back, you know, to the market, which can be really big. And the average contractor that we found actually leaves around 9% on the table on, you know, the 20+ states of DOT data that we analyzed. And it's one thing to say that, like, it's $67 billion and you know, over $6 billion was, you know, left on the table. But like having kind of been in that seat, it's also really hard from the contractor's perspective. Like there's a reason why there are these gaps. And part of it is because there's a ton of pressure to win work. So that's kind of the balance that you're feeling when you're pricing these jobs is like, okay, how do I win the job to secure the backlog for my team? You can't build a job that you haven't won. And while I'm doing that, how do I also, you know, not give a bunch of money back to the market and leave a bunch of money on the table? Because every dollar that I leave on the table could be additional profit for my company. It's called the winner's curse, is what they call it. So every job that you won, even if you did win it, you're always going to look back and say like, what could we have done a little bit differently? And how could we price this job better to reduce the amount of money that we leave on the table. And like, the best-in-class contractors are leaving like 3 to 5% on the table over the course of, you know, a year or, or a given period of time. And the rest of the market is leaving probably, you know, somewhere between 9 to 12% on the table, which if you're doing $100 million worth of work, That's like, that could be $10 million of potential profit that could be going to, to your business and reinvesting in your company. That's not, that's basically, uh, being left on the table. And I think another thing that like really messes with contractors can get caught up on is estimating is not bidding. And it's really important to separate those two things. Estimating is figuring out what is it going to cost us to go build this job. That is the whole process of deeply understanding the scope, deeply understanding the specifications, knowing exactly how you're going to get paid for each item that's being priced, quantifying the work to be done. So all of the takeoffs, knowing exactly where the job's located, what are all the items of work, quantifying every single thing possible. Knowing what our internal costs are for each of the items that we're going to be self-performing based on the number of days and the number of the pieces of equipment and the trucks and the supervision and the overhead, as well as all of the subcontracted items and all the material prices and then escalations over the course of the job. Because if we bid a job now, maybe it doesn't get built until next year. Well, we need to account for that. We need to account for all the material prices that are going to go up. So that part is really hard and is really important and like fundamental, because if you don't know your costs, you're shooting in the dark when it comes to pricing work. So knowing your cost is the absolute critical fundamental part of estimating, and you can't bid work without knowing what exactly what your costs are. And once you've done that, then there's another phase which is totally separate, which is bidding. So bidding is where I'm trying to understand what is the market for this type of work, right? After we've figured out our costs, the next step is how do we assess this job? Is this a good job? Do— is this a job that we want? Is this a job that we're really not interested in? What if we bid on these, on similar jobs like this one? This is especially important when you're looking at like markups and profit percentages, because there's two components to a bid. Very simple. One's cost. 2 is profit, and then you add those 2 together and that's your total bid price. So based on what's happened on all these past bids, which are publicly available, it's all the data is all out there. Where have we been profit margin-wise on, on past bids? And answer a very simple question: if we didn't win, where would we have needed to be in order to win? And if we did win, What could we have marked the job up at profit-wise and still won the job? Since I have all that data, I want to be able to understand where do I think the competition is going to be and what do I expect the low bid to be on this particular job? And it's a lot of data, it's a lot of information, but it's worth it because it can really help inform my strategy and help me understand where's the market at on this job instead of what most contractors do, which is basically, here's my cost, I'm gonna add my normal profit that I typically put on the job, and we'll see what happens. When you take a data-driven approach, you're able to start recognizing trends with the competition, and you're able to really understand how do they price all of these items typically. And when you have that, you're able to build up confidence in your ability to guess what you think they're gonna do. And that's how you get to the point of being able to come in just below where you think their bid is gonna be. Nobody's perfect. It's never going to be like 100% right. But if you're right more often than not, that's how you're able to get your number from 8 to 10% left on the table to 3 to 5% left on the table. First thing is to know your cost. So the best bidders know their cost. They're not trying to win every single bid. They look at the market and they understand the competition. The other thing they, they do is if they don't want the job, price it like they don't want it. So one is know my cost really well. If a job is not desirable, I am going to price the work accordingly and also adjusted for risk, because if there's risk in the job, I need to capture that risk and make sure that I've got it factored in and included in my bid. The second part is understanding the market, understanding your comp— competition, understanding where the market is, and then removing as much emotion out of the bidding process as possible. Those two can really work hand in hand to make the best business decision when it comes to pricing the job. I would say no matter what, bid it for what it's going to cost, and don't be overly aggressive. Don't let your backlog or the business conditions dictate how aggressive you are on the cost side things because that's a double-edged sword. So if you're going to adjust, I would just say get the costs right no matter what. Always, always, always get the costs right. Do your takeoffs, get the quantities, and if you need to make adjustments, do it on the margin. If you have to bid a job— and I bid jobs at 0% profit margin. I've been there before in tough markets. I've even bid jobs at negative profit margin. But do it on the margin, right? Don't, don't do it. Don't do it on, on the cost. That's how contractors go broke. Contractors go broke by bidding stuff for what it doesn't cost, and then they get upside down, and then the bonding company has to come take over, and that's just the worst thing that could ever happen.
