One of the commonly heard terms these days is “big data.” A definition found in a recent Forbes.com article stated that big data is “a collection of data from traditional and digital sources inside and outside your company that represents a source for ongoing discovery and analysis.” Wikipedia calls big data “the term for a collection of data sets so large and complex that it becomes difficult to process using on-hand database management tools or traditional data
Tracking bid data may seem dull, but it can help drilling business owners make smarter decisions about which jobs to bid and which to pass on. Source: iStock
processing applications.” Now, most drilling contractors do not have a data set so big that we cannot process it with traditional tools. So, how is data important to us in the drilling industry? Let’s look at just one small set of data that is vitally important to how we run our business—bid results.
We constantly bid jobs to owners and consultants. Sometimes in a very formal setting with bids bonds and a public bid opening. Other times, drillers have a less formal process that is not public and, in many cases, we are informally bidding or negotiating projects. All of the bid information we use to develop pricing is data. Important pieces of the information can include:
Type of bid
Type of client
• End user
Type of well
• Potable/public supply
• Test well
The details above are just a few of the ways we can define bidding data. Other things to look at may include profit margin, type of rig, well material, depths, diameters, type of geology; the variables are too numerous to fully explore here. But why is this data important and how can we use it?
A couple of days ago, an associate of mine was bemoaning the fact that he lost “another” environmental job to a particular client. After he complained about not getting the work, we started to discuss his bid. Turns out that this was the third bid for the same consultant he had lost in the last several months. The first question I asked was, “how much did you lose the bid by?” Strangely, the contractor didn’t know. Why he didn’t know the bid results was even a bit stranger—he did not ask the client. The first thing we need to know in evaluating bid data is how much we lost (or won) the bid by. This is where we can start the analysis.
If you keep losing bids by 10 percent, you have a starting point. Fuel and materials should cost about the same for all contractors. So now you can look at the other main variable in the equation: time. Maybe you are figuring too much time for the crew to complete the work. Adjust by 10 percent downward and you will win the next bid. Simple, right?
There can be multiple variables for every bid, and the short list above did not include rig type, number of crew members on the project, time of the year the work may take place; the list can seem endless. So what do you do? Start by using the same format to determine costs for all bids. Keep this data consistent and break it into as many variables as you need to fully understand the bid.
Always ask the client about the spread of the numbers, even if you are the successful bidder. Record the data. You can use a simple spreadsheet, a third-party bidding program or maybe even your company’s CRM (customer relationship management) software program. Whatever you use, the data must be accurate and recorded. Then, after you have several months of data, you can start searching the variables to determine trends.
Let’s say you are an environmental driller and after six months you notice that you never get work from XYZ consulting firm. You can then start to dig deeper into the data. Maybe no matter what type of work, auger, rotary or casing hammer, you still never get work from that particular client. Looking more closely, even when you tried to “buy” a project at little or no margin, you still did not get the work. At this point, you have the information to determine if you wish to continue spending time bidding to that client.
The permutations can be endless. Never get publically bid, bonded work—why bother bidding? Losing all projects you bid with your CME-55 with a two-man crew. Why? Are you trying to make too much margin? Is the rig old and inefficient? The data gives you a starting point for decision making. Heck, look at your winning bids and the spread between you and you competitors. It is possible you are bidding too cheap and could squeeze a little more margin out of those projects.
After reading this, you are thinking, “Developing the system and recording and reviewing the data seems time consuming and expensive.” In one sense, you may be correct. Defining the variables and determining which method of tracking the data is best for you is time consuming. However, once the data is in your particular system, identifying trends can be relatively easy. Then, based on the trends, you
can make intelligent decisions regarding your bidding. Most contractors who utilize a system for bid data review have a better sense of how to bid work than drillers who just look at each bid as an individual event.