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Do You Bid or Price HVAC Jobs?

April 22, 2022
Some customers want nothing but the lowest bid. That's fine, but is this your ideal customer?

While the terms bidding and pricing might have the same meaning to many in our industry, there are subtle differences. These differences influence the quality of work you deliver and how your company relates to and interacts with your customers. Let's look at bidding a job versus pricing a job and consider which may be best for you. 

Bidding a Job

Bidding a job refers to a fixed scope of work without any variation. The bid can be as simple as "replace my condensing unit" or as complex as a full set of plans with specifications that must be met.

A contractor that bids work often plays the numbers game to deliver as many proposals as possible and hopes to succeed.

Bidding often refers to projects where the low bidder "wins" the job because they have the lowest price. Unfortunately, this is because they often overlooked a component in the takeoff. This oversight leaves the contractor struggling to make up losses throughout the job as they secure change orders and cut corners.

A contractor that bids work often plays the numbers game to deliver as many proposals as possible and hopes to succeed.

Government work usually takes this approach to get the lowest price. In 1962 John Glenn, the great American astronaut, proclaimed the classic low bid quote when he said, "…as I hurtled through space, one thought kept crossing my mind - every part of this rocket was supplied by the lowest bidder."

When an owner launches their company, the only approach they often have is to throw out as many bids as possible to get any work they can. Established companies outgrow this approach and move into more profitable work. Others eventually rise above the industry norm and see there is more to business than being a low bidder. 

The mindset of a bid job remains that the lowest price wins. Do you see how a low-bid mentality influences every aspect of your company? You're forced to beat up your vendors for their lowest price, and your payables average 90 days. One indicator that suggests you're stuck in this business practice is if your closing rates remain in the 20% range. 

Some customers want nothing but the lowest bid. That's fine. If they are willing to cut every corner possible, settle for the lowest bid, and live with the results for years to come, that's their right. Granted, a percentage of our population doesn't have the money or credit. But is this your ideal customer? 

Some struggling HVAC salespeople price jobs based on their personal financial circumstances. This approach assures you'll remain poor and continue to deliver the cheapest system possible.

Some struggling HVAC salespeople price jobs based on their personal financial circumstances. This approach assures you'll remain poor and continue to deliver the cheapest system possible.

Look at your marketing, trucks, and building. Does your marketing message scream, "If you want the lowest price and quality, we're your guys?" How is this a great foundation to build a business on? 

Pricing a Job

Perhaps bidding and pricing a job still have the same meaning to you. As we continue, hopefully, you'll begin to see the difference. 

When pricing a job, the scope of work is not fixed. The contractor, service tech, or salesperson looks beyond the requested work and takes time to evaluate the entire system. Their role is to cure the causes of equipment failure and discover hidden defects.

Your findings and recommendations will differentiate you from your competition. Your solution reveals what your customers want and gives them valuable long-term results. 

Your price may be higher, but the value your customer receives is much better in the long run.

Sure, your price may be higher, but the value your customer receives is much better in the long run. Remember, it may be 15 years before your customer considers the performance of their HVAC system again.

Typical upgrades to an equipment changeout may include:

  • Using an air filter system with less pressure drop to increase system airflow and efficiency
  • Replacing restrictive sections of duct and fittings
  • Providing a needed outside air inlet.
  • Adding ducts into hot or cold rooms
  • Installing better registers and grilles to reduce noise. 

Remember, without your input and teaching to help customers understand problems with their systems, you'll leave them with a new box and the same old problems. 

Higher Margins Available When Pricing Jobs 

Custom work that you discover has no set price. Your ability to diagnose unseen problems and help your customer understand solutions your competition is unaware of creates value. When you bundle services that promise a complete solution, you further establish the value. Your proposal doesn't need to describe each test, adjustment, replacement, and equipment you plan to use. Focus on the outcome. 

Often, equipment replacement is a fixed-price commodity. How often do you receive a call asking for a bid on a three-ton 13 SEER outdoor unit on a hot day? 

Because you're different than others, you own the intellectual property of your solution. There's nothing wrong with keeping it confidential. You need to promise documentation that your outcome met your promises to the customer. 

Often, equipment replacement is a fixed-price commodity. How often do you receive a call asking for a bid on a three-ton 13 SEER outdoor unit on a hot day? 

Learn to think and act outside the box. Small and medium-sized companies have an unknown threat looming on the horizon. We're seeing many private equity groups buying up companies. One incentive for this group is greater buying power. If one
HVAC contractor purchases $60,000 in new equipment per year, it makes perfect sense for another contractor that purchases $6,000,000 per year to receive lower equipment price offers. 

So, a large company may be able to offer a lower equipment replacement price than a small company and remain highly profitable. In this circumstance, pricing jobs and increasing their scope of work may be the only viable financial option for a smaller company's survival. 

There are many differences between bidding and pricing a job. Hopefully, several ideas in this article will help you in your upcoming decisions. 

Rob "Doc" Falke serves the industry as president of National Comfort Institute, Inc., an HVAC-based training company and membership organization. You can contact Doc at ncilink.com/ContactMe or call him at 800-633-7058. Go to NCI's website at nationalcomfortinstitute.com for free information, articles, downloads, and current training opportunities

About the Author

Rob 'Doc' Falke | President

Rob “Doc” Falke serves the industry as president of National Comfort Institute an HVAC-based training company and membership organization. If you're an HVAC contractor or technician  interested in a building pressure measurement procedure, contact Doc at [email protected]  or call him at 800-633-7058. Go to NCI’s website at NationalComfortInstitute.com for free information, articles and downloads.