Getting the job. It’s a tough task where too much optimism can cost dearly, too little can cost receiving the bid. If too many low bids occur, who’s responsible to the stockholders?
Because the construction industry works by a bidding system rather than a negotiated contract, errors can be difficult to remedy. Leaving out the painting number on a half-million foot office building costs dearly.
Computerization of the bid process has helped and hurt. The program will not allow forgotten inputs, but people tend to believe a computer generated number.
Quality control for bids is essential for survival, both for the estimator and the executives. The estimator calculates the bid, but the executive signs the contract.
The decision to sign the contract drives the scrutiny if money is lost. Directors and officers insurance protects the executive financially when stockholders seek redress in response to a catastrophic contract.
Getting fired is the lesser issue to being sued for incompetence or fraud. The directors and officers exposure boils down to one unfortunate fact. The covered position must make decisions in real time ahead of perfect knowledge; the claimant has the benefit of hindsight.
You can protect yourself by knowing your duties as a director or officer:
1. You must act in good faith and give prudent care in your decisions.
2. You are required to be loyal to the business.
3. Disclosure: you must disclose material facts to regulators, other board members, officers, creditors,
bondholders, stockholders, and other potential investors.
Implement a policy of redundant checks on all contracts, bids, offerings, scopes of work, payments, or any other routine agreements which can lull people into complacency. Routine hides defective work well.
Spot check bid numbers against industry averages, or have this capacity in the computer program. If you’ve been in the industry awhile, check your gut instinct against the line items in the bid. If they don’t make sense, recheck. Consider every contract your responsibility, otherwise they may come back to haunt you.
