How To Compete on Price in Commercial Construction

As a construction subcontractor, you know that breaking into high-end commercial projects can feel like trying to demolish a concrete wall with a rubber mallet. You're skilled, you're eager, but those coveted projects seem out of reach with your current resources. That’s where a strategic approach to bidding and relationship building can help you leap-frog your competitors.

Remember this: In construction, your first bid is the foundation, but high-quality work is the structure that rises above the competition and ensures you win repeat work for your GCs.

How do you manage cash flow, ensure timely payments, and still maintain the quality that wins you contracts? Many subcontractors face the daunting challenge of proving their worth in a market that often prioritizes established names. But here's the blueprint for success: strategic pricing to get your foot in the door, followed by craftsmanship and interactions that leave clients in awe.

Here's how to lay that foundation with competitive bids and then build your brand reputation sky-high by delivering exceptional quality.

Selling a Fiat, but delivering a Ferrari

When you’re getting started building your reputation in the world of high-end commercial construction one advantage you have over your competition is the ability to come in with a lower bid.

The calculation here is that by accepting a lower profit margin to get your foot in the door you gain the opportunity to showcase what you’re capable of. “It’s like selling them a Fiat, but delivering a Ferrari,” shared CEO Gary Grooms of Mesh Fabrications speaking on how he grew his company. Both are products of Italian ingenuity, but while the Fiat is assembled with a charming 'that'll do' attitude, the Ferrari is crafted with painstaking precision. Your goal is to start with Fiat determination but quickly accelerate to Ferrari quality.

The key to this strategy is consistently delivering quality that far exceeds the price point. While it may mean lower profit margins initially, the long-term benefits in terms of reputation, referrals, and future opportunities can be substantial.

It’s not about 'winning at all costs'

While the strategy of underbidding can be effective, it's crucial to approach it with careful consideration rather than as a blanket tactic. Know why you're submitting a lower bid and do so strategically. Focus on projects that will serve as an excellent showcase for your skills and craftsmanship. Target opportunities that introduce you to the general contractors, designers, and owners you aspire to work with in the future. High-visibility projects can also be worth the initial investment of a lower bid, as they can significantly boost your portfolio and reputation in the industry.

However, it's equally important to recognize when underbidding doesn't make sense. Here are some questions to ask yourself before diving head-first into this strategy:

• Are there time constraints?  
  Delivering higher quality work often requires more time, which might not be feasible within the project's deadline.
• Would you be setting unrealistic expectations? 
  Consistently overdelivering can set a precedent that's unsustainable to maintain, potentially disappointing future clients who expect the same level of service at low prices. Building personal relationships with GCs, Owners and Designers can help you manage expectations as you start to grow.
• Does the client prefer the Fiat? 
  Some clients might actually prefer the "Fiat" they asked for, and might be uncomfortable with receiving a "Ferrari" they didn't request. Getting clarity on expectations upfront will help you bid on projects that’ll be a good showcase for your skills and avoid projects with a ‘that’ll do’ attitude.

Avoiding a race to the bottom

While strategic underbidding can open doors, it's crucial to consider the broader impact on your industry. Consistently undercutting market rates risks creating a race to the bottom, potentially eroding profit margins across the sector. This practice can make it challenging for all companies, including your own, to maintain sustainable operations in the long run. As you build your reputation, aim to strike a balance between competitive pricing and fair market value. Your goal should be to stand out through exceptional quality and service, not just by being the cheapest option. Remember, a healthy industry benefits everyone, and your long-term success depends on a robust, profitable construction ecosystem.

As you navigate your path to success, remember that your ultimate goal isn't just to win bids, but to build a reputation for reliability, quality, and integrity. By balancing competitive pricing with exceptional delivery, you'll not only secure your place in the high-end market but also contribute to a thriving, sustainable construction ecosystem. Your journey from a determined Fiat to a precision-crafted Ferrari is not just about personal success—it's about elevating the standards of the entire industry.