TECHNICAL PROPOSAL

 
Except in the case of mergers of already existing companies, all construction firms started out by doing building renovations, constructing houses, or small projects. Many times, this happened thanks to recommendations from family and friends. Usually, the partners are young, newly graduated engineers with a lot of courage and determination, but little or no experience.
 
I myself dreamed of being one of them, but I lacked "courage and determination." Becoming a father at twenty-six years old and having no wealthy relatives to provide support in case of need made that wish, that dream, remain just that: a dream. Lacking an entrepreneurial spirit, I now see that I did not make a mistake by not trying. Perhaps, if I had started a construction firm, I would have fallen into the same pit as most of these “gatinhas” (the nickname in Minas Gerais for small engineering firms) – that is, I would have gone bankrupt or simply shut down. And I would have condemned my wife and children to great hardship.
 
Besides the amateur and deficient management that these companies are often subjected to at the start, I believe small construction firms face a much greater risk than, for example, a newly opened pizzeria or a small auto parts shop or whatever else. This risk is related to determining the price of the project to be carried out. Although the term "construction industry" is used, there is nothing more unstandardized than the construction of any project. To begin with, there is the location (which can affect the freight cost of basic materials). Moreover, the existing subsoil determines which foundation is required. Then there is the absurd number of different materials needed, whether incorporated into the project or simply auxiliary during the construction processes. Not to mention payment delays, labor lawsuits, design changes, etc., etc., etc.
 
Even though this start is drier than washed sand, harder to read than walking barefoot on gravel, and tougher to get through than reinforced concrete, I warn anyone who has survived thus far that the text should improve a little.
 
Because the basic question that imposes itself on fresh entrepreneurs (it is good to clarify that all engineers are macho men. Even some women engineers) is: how to make money (or profit) by carrying out projects under contract? Repeating: what should be the price that properly satisfies both contractor and contractee?
 
If there is a bidding process, that’s when things really get complicated. From the first manager I reported to, I heard a statement I’ve never forgotten. In a conversation with a group of engineers, which I was part of, the man humorously said that a commercial proposal where nothing is forgotten will certainly lead a construction firm to lose the bid it participates in. And he repeated, smiling: “If you don’t forget something, you won’t win the project.” The explanation is simple: since no one wants to lose money, common sense dictates that a percentage for unforeseen costs be included as a precaution. If this "vaccine" is applied indiscriminately to the entire proposal, the likely result is losing the bid (from overdose).
 
The construction firm we worked for was an extremely ethical company and never participated in “arrangements” (between contractors) to predefine who would win the project, a practice extremely common in public works at that time and probably still today (does anyone remember the “Petrolão” scandal? Well, there it is).
 
Perhaps for this reason, this excellent company only worked on projects for industries and other private enterprises. By staying true to this philosophy, it remained a mid-sized company. In compensation, thanks to the care and interest of its founder in modern administrative practices and rigorous cost control, it served as a model for at least five new engineering firms founded by professionals who had belonged to its team of engineers.
 
Years later, already at another construction company, I heard from the company’s president, a calm and level-headed gentleman, the phrase: “I never lost money by not taking on a project.” Wise words. Why am I saying this? To talk about corruption, kickbacks, and other less-than-“Christian” practices. But since the road is long, let’s take it slowly.
 
In my opinion, when a proposal is prepared to carry out a specific project, the risk assumed is very high, greater than what normally exists in other economic sectors. And there are several reasons for this:
- During the bidding phase, the presented project may be incomplete, poorly detailed, or contain errors – and these often become the responsibility of the hired company;
- Except in very special and infrequent cases, no project is the same as another. Thus, the experiences and difficulties faced on the first project will be of little value for the second;
- Delays in receiving payments for already completed phases can, in some cases, even bankrupt a small or mid-sized construction company;
- In the case of public works, although “rare” (?), it is not surprising that kickbacks are paid to extortionists connected to project oversight (does anyone remember the “Petrolão” scandal? Well, there it is).
 
Around 1977, practically newly graduated, I heard the following story from the director of a small construction company: this company had won, through complete fairness and the lowest price, a small project in a city in Greater Belo Horizonte. Although strictly within the schedule, there was no way to receive payments for the already completed work on time. Complaining about the difficulty in receiving payments to a friend who owned another small construction company, this director was advised to seek out someone very senior in the Municipal Administration. The topic to discuss would be the agreement to pay a bribe of 2% of each received invoice, a sort of “commission”, so that the company could receive payments on time. After doing this, he never received late payments again. Detail: half of the extortion went to the mayor. The other part was distributed among some secretaries. Touching, isn’t it?
 
What can a small construction company do to keep its little boat floating in this stormy ocean? In this specific case, even risking losing the competition, what this businessman did was include this “commission” in every proposal he submitted for other bids in that municipality, consequently raising the final price. Edifying, isn’t it?
 
One of the most sophisticated and efficient techniques for manipulating project bids emerged in São Paulo in the late 1970s or early 1980s, apparently in an innocent and well-intentioned way. It was a strictly legal and indisputable procedure, but they say “the devil is in the details.” Hence...
 
In 1980, I was hired by a mid-to-large-sized company where I spent the best years of my professional life. This construction company had the characteristics of a family business: an extremely serious and competent president and some brothers with managerial roles who were more of a hindrance than a help, as they were constantly in conflict with another director – truly brilliant and highly competent but with a short temper and no patience for the mediocrity of his peers. Perhaps this is the secret behind his dismissal and the company’s collapse. But my subject is not boardroom fights. So, let’s move on.
 
Shortly after being hired, I was summoned to help prepare a proposal for a project in São Paulo. This bidding had three selection stages: documentation, technical proposal, and commercial proposal. This model was followed and then replicated across Brazil throughout the 1980s and the early 1990s, until the enactment of Law 8666 on June 21, 1993, which established “general rules on bidding and administrative contracts pertaining to public works, services, including advertising, purchases, disposals, and leases within the scope of the Union, States, Federal District, and Municipalities.” Until this law came into effect, the system worked marvelously well.
 
Unfortunately, I don’t know how it is today, as my departure from the company and the engineering field coincided with the implementation of this law. But there is the “Petrolão” scandal to show that the creativity of large contractors remains very efficient.
 
So, going back to formulating the proposal, I soon discovered that the offered price was the least important aspect. And the reason was simple: the bidding notice itself already contained the detailed estimate made by the contracting body. Any company wanting to participate in the competition was required to base its price within limits of plus or minus ten percent of the amount established in the notice. I imagine the subtle and tasty detail was the fact that this estimate was apparently sky-high. These pre-established conditions forced all bidders to offer the minimum limit, i.e., the price set by the authority minus ten percent. The only way to exclude someone at this stage was to find an error in their calculations, even a single cent higher than the minimum price. When that happened, the company would be placed last and deemed incompetent by its team.
 
Taking a brief look back, when this criterion was adopted, the project apparently already began with an overestimated price, as no one ever complained about it. Who prepared these estimates? Good question...
 
So, if most participating companies passed through the detailed examination of their documentation and technical certificates unscathed, and if everyone tied in the Commercial Proposal, offering the minimum price allowed by the tender, how could the tie be broken and the winning company chosen? Elementary, my dear intern: only with the help of the Technical Proposal. And what a help that was!
 
Going back to my first encounter with this situation (and the first time you never forget), I was tasked with helping to detail some execution method. But I was clumsy and inexperienced in this matter because, in addition to being a negligent student of engineering, I had never worked on this type of service. Even so, I began writing about what I didn’t understand. I wrote a page (with great effort) and showed it to my boss. He glanced at it and said it wasn’t detailed enough, that I needed to write more. In practice: “stuff it with more fluff.” To help, with an ironic smile, he handed me a massive stack of Xerox copies of an old proposal from another company.
 
That was an epiphany: that company had detailed every one of the planned construction stages almost at the molecular level. Furthermore, the original proposal contained photos illustrating each execution method, etc. That was the key to a winning technical proposal: quality, quality, quality. Do you want to know what I did? I copy-pasted the text I was writing, carefully changing words and phrases from the original. Such competence!
 
It was around this time that the company attempted to enter the select club of large construction firms that executed spectacular projects across the country. Following the path paved by the big players, for each new tender, personalized covers were prepared with the project details and the bidding entity, high-quality letterhead ordered specifically for each proposal, A4-sized photos, drawings, and countless executive plans, along with pages upon pages of typewritten details on the project’s step-by-step process.
 
In short: each technical proposal was a marvel and a crash course in engineering (and, of course, a lot of copying and imitation). Almost invariably, there was only one flaw: the company’s lobbyists could never manage to “coordinate with the Russians” beforehand. And the result was always the same: we finished in third, fourth, fifth place, never first.
 
And the reason was simple and the key to the story: the technical proposals of the various competitors were graded for each criterion, just like in samba school parades. The criteria included understanding the problem, proposed methodology, technical team, available equipment, supply plan, the curriculum of the indicated technical managers, organization of the construction site, and all sorts of requirements that ultimately turned into “gotchas” and were judged completely subjectively. Losing half a point—or even less—was enough to make the final score lower than that of the winner, who was, ultimately, the one “who had coordinated with the Russians.”
 
What was the explanation for this? The company I worked for didn’t have lobbyists with the connections and influence within public agencies that the large construction firms had. Moreover, it could never match the quality standard of the proposals that the major players were achieving. I heard that one of them, for a certain project, submitted an extremely detailed scale model (!) as part of its proposal. Others excelled in graphic presentation, with executive plans printed in color, etc. It was an uneven fight between the “first-tier schools” and the poor “access group.” Scoring like that became easy when someone already knew who should win this or that project.
 
Only the largest construction companies survived the successive economic crises and the shortage of major projects. Only the big ones and a few mid-sized firms that somehow managed to grow. Coincidentally, they’re the same ones caught in the Petrolão scandal’s net. OAS, for example, was an insignificant company known for the jokes its competitors made about its name. In the joke, “OAS” stood for Obras Arranjadas pelo Sogro (Projects Arranged by the Father-in-Law), as one of the company’s partners was the son-in-law of Antonio Carlos Magalhães, Toninho Malvadeza, the late Bahian politician. Queiroz Galvão was just a scrappy, highly competitive company from Pernambuco until it moved its headquarters to Rio de Janeiro.
 
The company I worked for closed its doors, as did several other mid-sized firms, during one of the many cyclical economic jolts the country endured. Those who survived and even grew must have discovered the secret path to success.
 
Well, if anyone expects to draw a moral from this story, I would say there’s no moral in amoral practices. Since I have no pretension of extracting any lesson from this, I’ll just leave a few disjointed sentences without common points as an epilogue (or epitaph) to this post:
 
The human species is a mistake of Nature
“For scant flour, my porridge comes first”
Only swift and severe punishments could reduce corruption (but never eliminate it)
“Either we all get rich, or morality is restored” (Sérgio Porto)
A nuclear war (or a giant asteroid strike) would be a good idea to end corruption (and all life on Earth)
I no longer have any hope that the world will ever be better than it is.
 
Maybe one day Ethics will be able to improve this idiotic country a little. Who knows?