Is Your ‘Bid-Hit’ Ratio Okay
Your ‘Bid-Hit’ ratio is the rate at which you successfully bid or propose on construction projects. For example, a 5:1 Bid-Hit ratio says for every five jobs you bid or propose on, you are awarded one. Do you know what yours is? Do you keep track of it? How do you use it? What should it be?
Most estimators, sales people, business development managers, and company owners don’t have a clue as to what their ratio is. In a survey of over 2,000 construction companies, less than six percent knew and tracked theirs. That is like driving a race car blindfolded without knowing where you are headed.
Keep Track of Your Win Rate
In order to determine how many jobs to bid, what type of jobs to go after, and which customers give you a higher percentage of their work, you must know your Bid-Hit ratio. Track it monthly, quarterly, and yearly. Track it for all types of projects you bid on and each customer you bid to. Also, track by job type: large versus small; local versus out of town; commercial versus industrial or residential; bid versus negotiated; plans and specifications versus design-build; or new construction versus remodel. Another item to track is the number of competitors you bid against on each project.
As you study your Bid-Hit ratio trends, you’ll find certain customers who give you more work than others. You’ll find certain kinds of jobs you do better with. You’ll also discover that if you compete against too many competitors, your success ratio isn’t the best it should be. This simple tracking system will help you determine which jobs and customers to bid to. It will also help you determine when to eliminate a project type or customer from your plate and seek out better opportunities to invest your estimating dollars.
The Right Win Ratio
Recently, there was a survey of over 5,000 construction and subcontracting companies to determine what a good Bid-Hit ratio should be. The results varied from the best case of 1.5 bids to one job awarded, to a worst case of 35 to 1. Obviously, the lower the ratio, the better, but the right win ratio is what works for your company.
Companies who negotiate a lot of work tend to have lower Bid-Hit ratios. They also require additional overhead expenses, marketing, pre-construction services, customer development, and public relations. Companies which obtain most of their work from public works or bid against a long list of competitors tend to have higher Bid-Hit ratios. They also usually have more estimators, which offset the fewer marketing dollars needed. The trade-offs usually balance out at the bottom line.
Bid-Hit Ratios Revealed
Look at how your proposal or bid win rates compare to other construction companies. As the economy moved slower over the past few years, most contractors experienced a significant increase in the number of competitors bidding every project. The smart contractors used their Bid-Hit ratio tracking system to make good decisions and move out of the too competitive marketplace into less competitive areas where they could maintain a reasonable Bid-Hit win ratio. The average win rates for contractors typically in a good, but not great, economy are as follows:
General Contractors Bid-Hit Ratio
- Public Works 6:1 to 10: 1
- Private Bid Work 4: 1 to 6: 1
- Negotiated Work 2: 1 to 4: 1
- Design-Build 2: 1 to 4: 1
Subcontractors Bid-Hit Ratio
- Public Works 7: 1 to 11: 1
- Private Bid Work 4: 1 to 6: 1
- Negotiated Work 3: 1 to 4: 1
- Design-Build 3: 1 to 4: 1
The right Bid-Hit ratio is what works for your operation. Thirty-five to 1 is too high and 2 to 1 is nearly impossible in today’s competitive market. The highest reasonable ratio for subcontractors or public works contractors should not exceed 10 or 11 to 1. Higher than 11 to 1 will cost your company too much in estimating expenses and won’t provide a reasonable profit on jobs that you are the low bidder on. For private work, strive for a 4 to 1 ratio or less. This can be accomplished by pre-qualifying your customers before you bid to ensure you are on the right bid lists. Additionally, aggressive marketing and working hard to build loyal customer relationships will improve your win rate and keep it improving.
The key is to track and know your Bid-Hit ratio. With an accurate history of your results, you can determine which road you want to take. Keep your eyes open and headed for your destination, look for ways to improve your Bid-Hit ratio, and hit your target every time.