How accurate production rates make money

Purpose

This document explains how profitable finish-trade contractors price work.

It describes how bidding actually works, how production rates control outcomes, and why some contractors consistently make money while others do not.

How bidding actually works

When a sufficient number of subcontractors bid the same job, the bids form a spread.

The truth can be found at the center of that spread.

What is the truth?

It’s the price we wish we had.

Unfortunately, jobs are not awarded at that center price, or median.

General contractors attempt to award work to the lowest bidder they believe can still perform the job without failure. This is procurement reality.

Why the low bidder does not automatically lose money

If work is routinely awarded below the center of the bid spread, a reasonable question follows:

Why doesn’t the winning subcontractor consistently lose money?

The answer is not luck.
The answer is not cutting corners.

The answer is production rates.

Profitable low bidders use production rates based on measured human field performance, not copied numbers, averages, or assumptions.

Production rates decide outcomes

Every task has a production rate.

Different substrates, heights, access conditions, and difficulty levels create different rates, but they are still measurable.

If a contractor cannot make money on a specific type of job, and no extraordinary conditions occurred, then the production rates used to bid that job were incorrect.

Jobs generally perform according to the assumptions used to bid them when prepared by a seasoned or professional estimator. When forces outside the bidder’s control intervene, those conditions must be handled separately.

Where responsibility actually lies

If the general contractor is not restricting production, crews are not idle, and access and sequencing are reasonable, then production loss was built into the bid.

Crews do not fail jobs.
Jobs perform according to the production rates they were bid with.

Why bids below the center can still work

When production rates are built correctly, bids below the center of the spread can still achieve the intended markup, because human crews have a measurable production flexibility of roughly 20 percent.

What separates profitable contractors from struggling ones is knowing which production rate to use for a given task and condition.

That knowledge must be learned.

Why contractors struggle financially

Contractors struggle for predictable reasons:

• production rates are guessed instead of learned
• rates are copied without understanding
• field performance is blamed instead of the estimate

These are estimating problems, not market problems.

What profitable contractors do differently

Profitable contractors:

• understand how bids spread
• understand why work is awarded below center
• know which production rate applies to each task
• apply those rates consistently

Results follow inputs.

Closing

If a job is not making money, the reason is identifiable — and the fault usually lies within the production rates used to bid the work.

Learning which production rates to use — and when — is the difference between guessing and control.