Bidding multi year contracts---Cost of Fuel

Ideas and discussions on how to best bid sweeping jobs.

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Patriot
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Joined: Fri Nov 04, 2005 12:49 am

Bidding multi year contracts---Cost of Fuel

Postby Patriot » Wed May 03, 2006 5:59 pm

I am in the process of bidding a multi-year contract.

Given the steep rise in fuel costs, and possibility that those costs will increase, what is the best way to address this when proposing a bid?

If I bid a job based on $3.00 a gallon and the price of gas is over 4.00 in the next year and even higher the years after, I am hurting.

How do you address this issue?

Thanks.

Tom_in_CA
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Postby Tom_in_CA » Tue May 09, 2006 8:55 am

Isn't there a way you can bid so that the bid is tied to an index, based on fuel costs? There are varying degrees of bureaucracy in bid proccesses. From 30 page public works bids (silly & lengthy boiler plate stuff that no one reads), to simple hand-shake-flat-bids. So I guess it would depend on what your bid allows.

This was a big factor in my area, for seal-coat guys, when..... many years ago, some of them had bids out to do seal-coat jobs, based on a certain price, per gallon, of the sealer. Weeks and months later, as those jobs started, the price shot up, and the contractor ended up taking a big loss. He couldn't raise his rates, because they'd already been bid. He solved this problem by making his future bids subject/indexed to the market cost of materials.

Another way I've heard of, is "surcharges", where, you have your flat hourly bid, or flat per-job price bid, and then there's an XX number of cents per hour that run over that, based on the spot market for your supplies, of whatever it is that's subject to change (fuel or whatever).

If all that fails, you just bid way high, and err on the side of safety. I've sometimes tried to tell customers they'll actually save money by letting us sweep by the hour, or by an index of materials or whatever, but they still insist on a flat rate (so that they can plug in into their budgets I suppose). So I bid high, to be on the side of safety, and it ends up costing them more. They apparently don't care, so........ :roll:


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