PRO FI T M AT T E R S | By Larry Stewart
Digital Makeover of Job Costing Enables Competitive Bidding M
ohawk Valley Materials is a woman-owned business with strength in site clearing and forestry that is now aggressively pursuing its ambition to double its revenue by getting to know its business at a new level of detail. What had been a $10 million company working on federal and state site jobs in its home of New York and a couple of neighboring states has spread nationwide and is now chasing heavy civil and infrastructure projects. “We’re everywhere from California to the East Coast, and do most of our revenue on federal contracts for DoD (Department of Defense) funded work on military installations, national forests and a lot of Army Corps of Engineer work,” says Fred Brooks, chief of operations at Mohawk Valley. “The owners of the company are very open to embracing technology and growing our technology along with the business.” Brooks has been driving technology into company practices. “When I got here, like a lot of small companies, we were doing everything with paper and pencil and Excel spreadsheets, and there wasn’t a whole lot of granular detail that went into putting estimates together,” he comments. “With my background as an operations manager, I need detail. I want to make sure that when we bid a job, we have the proper costs in there for equipment and labor and materials and all the backend stuff, the overhead, profit, taxes and fuel.” Up to that point, bidding primarily federal contracts as a woman-owned small business limited the competition and left a bit of room in margins to accommodate imprecise project
accounting. But Mohawk Valley lost much of that cushion when it started bidding less-specialized work in new markets against larger local contractors. “We found ourselves not winning as much work,” says Brooks. “About June or July of last year, we had burned through all of our backlog. We were having a great year, and then we kind of hit a wall because we hadn’t won anymore contracts.” Coincidentally, the team was working hard to integrate B2W’s software suites in strategic segments of the company’s business to feed the B2W Estimate platform. Brooks very quickly issued the first bids using the software. “We started seeing that we were a lot more competitive with contractors who were operating in their home markets,” he says. “Coming from New York, we know little about, say, the Texas market. We’re competing against local contractors that know the market, know the labor and know the margins. Through B2W Estimate, we’re able to hone in on our actual costs and put proper margins in there and compete against local contractors.”
EQUIPMENT WAS AN ISSUE The new business insight quickly started revising Mohawk Valley’s understanding of individual cost elements that make up their bids. “We recognized that equipment was, by far, our biggest issue,” says Brooks. “In the forestry market, it’s mostly specialized equipment that you can’t rent, so we were able to just name our price. Once we got into the civil side of things, there’s an infinite number of companies out there who already
38 EQUIPMEN T TODAY | June 2021
Mohawk Valley Materials
A better understanding of individual cost elements that make up bids is enabling Mohawk Valley Materials to expand nationwide.
Mohawk Valley Materials started as a New York woman-owned business doing federal and state contract work with more specialized equipment. do it or can just go rent a dozer, loader, excavator and do it themselves. “We knew what the payments were on our equipment, but there was no calculation of actual ownership and operating rate for individual pieces of equipment,” he adds. So, Mohawk Valley chose to take on B2W Maintain, as well as take a close look at its equipment fleet. “We calculated precisely what our ownership and operating rates were — including repairs, maintenance, fuel, wear parts, etc. — and then loaded those into B2W Estimate,” says Brooks. Much of the company’s problem had been not capturing the full cost of the equipment in the rates it was using to price construction work. “A lot of costs were being thrown into an overhead bucket and not really tracked at the job level. So the job may look like it’s doing well, but our overhead rate was really, really high,” Brooks explains. Fuel invoices, repair and maintenance invoices and financing installments for under
utilized machines had simply been paid and their costs accrued to overhead instead of showing up in project ledgers. The company didn’t have an efficient way to track actual equipment costs or utilization, so project managers had been making equipment decisions based on rates that were very different from the company’s actual costs. Doing the accounting to implement B2W made a big difference. “We calculated actual operating costs for each piece of equipment and started adding them into our bids and tracking that cost at a project level,” says Brooks. “Now, we have project engineers and project managers monitoring fuel usage and the cost of repairs and maintenance, whereas before, our project cost reports were basically just labor and materials.” Most machine repairs were due to lack of maintenance because there was no system or manager driving a preventive maintenance program. Mohawk Valley hired an equipment manager and he and Brooks input the OEM preventive
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maintenance programs for each piece of equipment into B2W Maintain. They get notifications every day of routine maintenance to be performed. “Right now, we’re at 81% planned and preventive maintenance vs. 19% unplanned, and it was the exact opposite when we first started tracking this — pretty close to 80% unplanned repairs vs. 20% planned and preventive maintenance,” says Brooks.
MORE AND BETTER BIDDING The new rates Mohawk Valley began using were substantially lower than the rates that it had been using for bids. “That was probably the biggest factor that brought us onto the playing field in a lot of these different markets,” Brooks states. “Without B2W Estimate and the effort that we put into it, there’s no way we could have been that competitive, and we wouldn’t have been able to bid the job to begin with.” B2W Estimate allows Mohawk Valley to produce a lot more bids, with higher accuracy than before, at much lower
