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Value Engineering for Fun and Profit: How Contractors Can Make More Money

By The Profit Guys Many people say that the contracting business is just like gambling in a casino.  Virtually all contracting activities are a form of gambling where sometimes you win, and sometimes you lose. And, of course, you want to win more than you lose. Remember the phrase years ago communicated on ABC Sports: “The thrill of victory and the agony of defeat”? Well, in the contracting business, you want to enjoy the thrill of victory by closing more work and effectively executing on those jobs. And winning is most often measured in profitability. Profits are the logical outcomes from strategic and tactical excellence that starts with closing work. In fact, a KPI (Key Performance Indicator) for success is The close rate on jobs won vs. jobs lost. What is your close rate?  1 out of 10, 2 out of 10, 3 out of 10 jobs closed vs. bid?  If so, you are losing 70% or 80% or 90% of all the jobs you bid.  All that precious time, effort, cost, and resources are “lost” because jobs are not closed – and that’s when you feel the “agony of defeat.” Another element of contracting success is considering and assessing what you bid; how and when you install products and systems for the job. In this Value Engineering blog, we will focus on the “What You Bid” element. Now, it’s time to find a way to close more work and make more money (profit). One of the most successful ways to do that is with strategies and tactics associated with Value Engineering. Here are the key principles:
  1. Value Engineering offers better value to an owner of a building or a lessee than what was specified or shown on the plans.
  2. Design material selection decisions are explained in the specifications based on
    • aesthetics – how a product looks
    • functionality – how a product performs
    • economics – the cost of the product.
  3. So, the key to success in using Value Engineering as a tool to make more money is to offer the owner, architect, and GC/CM similar or better value for building materials than what was specified.
  4. And to do that, your Value Engineering strategy and tactics must address the issues of your alternative value engineering offer in terms of how the building material looks, how the construction product performs, and what the job materials cost.
  5. Doing these things will position you to close more work and increase your profit.
So, what are the keys to success?  Consider these steps part of your strategy and tactics to close more work and make more money:
  • Align yourself with a building supplies distributor, like Metro Interior Distributors, to assist you in the approach and techniques for value engineering supported by Metro’s strong relationships with their vendors. We work with contractors and builders in the New York Metro area and surrounding regions, including New Jersey, Connecticut, Pennsylvania, and Delaware. We will become your advocate and partner in the process
  • Develop and document the aesthetic, performance, and cost scenario for your value engineering proposal. Metro can help with this by providing all the product information on the building materials and contractor supplies necessary for the value engineering proposal.
  • Strategically position the value engineering proposal for the “benefit” of the owner, architect, and GC/CM. Benefits are typically expressed in terms of $$.
  • Determine the best time to make the Value Engineering Offer. Sometimes the best time will be prior to bid or, during the bidding process, or in the negotiation phase. Each one of these options should be assessed for the best possible outcome – Metro can help with that.
Once the value engineering proposal is determined, submitted, and approved, you can then focus on what’s most important to you: the most efficient and effective way to install the products and systems on the job. Once you take on a value engineering challenge, the outcomes will surprise you. The process will allow you to close more work, make more money, and enhance your position and value in the market.  With Metro on your side, you will have a loyal, trustworthy, and dependable partner who seeks to find ways to enhance your profitability when other distributors are just trying to “sell you something” for their benefit. Yes – you too can enjoy “The Thrill of Victory” with Value Engineering for Fun and Profit! Contact us today to get started.