We work with a biotech company in the Bay Area that recently spun off a subsidiary to merge with an East Coast company. Politics being what they were, the East Coast firm wanted to stick with their existing IT vendor. We had some calls and it seemed that their philosophy was compatible with ours, so I didn’t see any problem in working with them, but the management team of the parent asked me to put together a proposal for the Office 365 migration, so that they could compare it to the East Coast IT firm’s bid.

I’ve learned long ago that whenever you are estimating a project, you need to account for unforeseen contingencies. Nothing ever works out in the real world exactly according to your project plan. So typically, I will try to account for the worst case scenario, but submit a “not-to-exceed” proposal. This means that we only bill for the hours worked up to the total estimated amount. If everything goes smoothly, then the bill will be lower than estimated. But when unexpected problems inevitably emerge, we will have some leeway and will still be able to complete the project within budget.

The problem with this Office 365 project was that our East Coast competitor underbid us and so they were chosen to lead the project. Of course I was a bit miffed, since I thought I had provided a reasonable estimate and had taken the time to write up a basic project plan, but my competitor was using some third party automation service that would supposedly reduce much of the labor, so I didn’t complain much. I agreed to help out with the project to see how well this third party worked. Maybe I would learn something and adopt this tool for my other clients, enabling me to bid lower.

Warning signs immediately emerged. First of all, I never saw a project plan, so there were no checklists, timelines, or roles defined. It wasn’t exactly clear which steps our company would be doing and which steps our competitors would be doing. It seemed that a lot of work was being handed off to us. Which is fine, I wanted to help this client succeed, of course. But on the other hand, if our competitor won this bid by undercutting our costs, I was very skeptical that they had accounted for the cost of the hours we would be putting in when they submitted their estimate.

In the absence of a project plan, I don’t even know how they could have estimated our hours. Now I understand that sometimes it makes sense to underbid the cost of project as sort of a loss leader, so that you might lose money on the first project in order to secure future projects. But I would just “eat” that extra expense, I would never ask my competitor to help me complete the project that I underbid so that I wouldn’t have to lose money on the deal. And that’s what seemed to be happening here. Of course, at the end of the day, a post mortem of the project would reveal that the total cost was much higher than my competitor originally estimated, but frankly, not many small businesses take the time to do that sort of accounting if a project goes well.

Another reason that an IT provider might underbid a project is if they don’t have enough experience to predict that there will be unforeseen issues. There were other signs during this project that this might be the case. They were doing the cutover during business hours in order to get support from their third party vendor. I never like to interrupt mail flow during business hours. We always schedule cutovers to a new mail system after hours or over a weekend. If I need support, I generally go to Microsoft Partner support during the planning phase. We have never needed support during a cutover itself, but, if we did, Microsoft does offer emergency weekend and after hours support for partners.

So in this case, I determined that I was just dealing with an inexperienced engineer who underbid the project because he hadn’t been burned enough times to realize that projects rarely go exactly as planned. I decided to have mercy on this fellow, but I definitely made sure to tell the managers at the parent company to check the total cost of the project. Because I want to bid on future projects for them, and I feel confident that we can provide better outcomes than our less experienced competitors.