Same number of bids. More wins. (Part 3 of 6)
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For most of my time as a VP of Preconstruction & Sales for a specialty subcontractor, I never considered how a GC’s Agreement with the owner might change how we bid and win projects. In my mind, it didn’t matter! Build relationships, be low (or close to it) on bid day, and hope the GC isn’t a jerk. That’s what I knew. And it honestly worked well enough to win some great and profitable Contracts. But it always seemed like way too much work—a 10%-20% win rate isn’t enough!
Then, I learned that the GC’s agreement with the owner greatly matters. Subcontractors can gain a competitive advantage by being smart about it—especially because most subcontractors are like I was: clueless! After that, while other subs were out there bidding on every job the same and treating every client the same, I started treating each project and client in a unique way, depending on their agreement with the owner. It simplified everything about the bidding, sales, and preconstruction processes.
Over the next 6 weeks, I will give you a clear understanding of 6 common delivery methods used in the construction industry, and some really good tools to get smarter in how you approach each of them. Today is about Method #3: Preconstruction Services Agreement (PSA)
In this series, I hope to help you subcontractors who want to increase your win rate. I also want to help general contractors understand what their subcontractors go through when pursuing a project.
Please note that there is increasingly very little difference between the terms GC (General Contractor) and CM (Construction Manager). As a result, I use the terms interchangeably throughout the below. Let’s dive in.
Method #3: Preconstruction Services Agreement (PSA)
What it means:
The Owner has hired a GC/CM to provide cost estimating, constructability reviews, schedule feedback, and more to the ownership team, architect, and/or engineers.
How it works:
The agreement between the GC and Owner is quite narrow: it typically starts after the architect has created a preliminary set of design development docs and ends when the architect submits the final “for construction” documents. I.e., The GC’s contract only lasts for the preconstruction phase of the project; there is no guarantee the GC will win the Contract to build the project! It should give them the inside track—and often, owners will end up awarding the construction phase to the same GC—but it’s important to know that the owner has every right to go out to the GC community and get competitive bids even after working with a single GC through preconstruction.
Why it’s used:
Having your GC on board before you reach final design documents is a huge value add. Not only do they bring all their experience to the table, but they bring the experience of every subcontractor in their network. In a preconstruction services agreement, GCs often send the design documents to their subs and ask questions like: How much would this cost? Do you see any problems with the documents we should know about? Are there ways we can do this cheaper? The GCs then provide all this awesome feedback to the owner and architect to make the drawings better and (hopefully) less expensive.
Therefore, subcontractors that respond are providing an immense amount of value.
What you need to know:
Just because you’re providing immense value doesn’t mean you’ll be rewarded for it—subcontractors often do not receive an inside track just because they budgeted the project. Why? Because remember: this isn’t the GC’s job yet! They only have a Contract for the preconstruction. So, when the final design documents go out for bid, they may appreciate your efforts during the design phase, but they still need to win; which means they’ll typically do what they need to do to get low—like use other, cheaper subcontractors who didn’t budget the project.
Kinda stinks, right?
But don’t get me wrong, it can be useful to budget projects under a PSA as long as you go in with both eyes wide open. In other words, get all the details before devoting your best estimator to a budget that isn’t going to move the needle on your award. To save yourself time and make a better bid-time decision, ask questions like:
Is this your project?
Are you under a preconstruction services agreement? Or do you have the contract to build the project as well?
How will budgeting this project impact your award criteria on the project?
Imagine we budget every round with you. If we beat our budget on bid day, do we get the job?
Imagine we budget every round with you. If we are within 5% on bid day, do we get the job? 10%?
Once you know for certain that budgeting will get you an inside track, pull out all the stops: awesome constructability reviews, detailed proposals, VE options, and the like. A good GC partner will reward you for it in the form of a “last look” once the project goes to award.
Key question to ask yourself: How can we make sure we budget only when we will be rewarded for it?
The Great Ones Have Coaches
The owner of one of our general contractor clients once said to me (we are both huge Baltimore Ravens fans): “Lamar Jackson didn’t get a $250M Contract by going at it alone. He has coaches for almost every part of his game. That’s the same reason I wanted to hire you guys.”
And he’s right! Hiring a coach or a consultant is something all the great athletes do to up their game, yet business owners are often hesitant to do the same! (Imagine trying to play tennis against Roger Federer without ever going to a coaching lesson)
So, if you’re reading the above and wondering:
How do we become sophisticated like the top Contractors out there?
How do we set a strategy for the type of company we want to be?
How do we set a strategy for the type of work we want to chase?
How do we create a sales process that increases our hit rate?
How do we make our operations truly better and different?
Then I hope you’ll reach out to us. Our consultants and coaches have hundreds of years of construction experience and are well-suited to help you make the kind of changes you are looking to make. If you’re ready to talk, then email me at mverderamo@wellbuiltconsulting.com
Good luck, and happy growing.
Spark Notes:
A Preconstruction Services Agreement (PSA) allows a GC to provide cost estimates, constructibility reviews, and scheduling insights during the design phase—but doesn’t guarantee them the construction contract.
While budgeting under a PSA can be valuable, subcontractors should ask the right questions to ensure their efforts actually increase their chances of winning work.
The smartest GCs leverage their subcontractor network early, using real-world feedback to refine design documents, reduce costs, and add value for the owner.
Just like great athletes have coaches, top contractors invest in strategic guidance to refine their business, improve their hit rate, and differentiate their operations.
