Dynamic Benchmarking Model [part 1]

Abandoning that spreadsheet your CFO created 15 years ago and hasn’t updated since.

We’ve split this post into two parts, because we know you’re busy.

Here’s a scenario we encounter all the time:

A general contractor believes they have a sophisticated pre-qualification workflow in place. There are many people involved across several departments, each offering their own opinion or conditional approval as an award is being considered. Eventually, after a scramble of last-minute emails and follow-ups, financial statements are collected from the subcontractor for a final evaluation. A new spreadsheet is opened and financial values are entered into a pre-built model. Somewhere at the bottom of this model a result is produced, more emails are sent, and a final decision is made. Finally, the spreadsheet is saved away in a local directory.

TradeTapp’s Unique Value: leveraging data dynamically

Of course, we see several ways to improve upon the many pitfalls of this scenario. We have already touched upon the value of collecting data via a web-based platform in a prior post, so let’s focus here on what happens after the data is received.

In the TradeTapp workflow, a subcontractor is able to electronically complete any prequal questionnaire and upload supporting documentation directly (this is advantageous over less secure methods such as email or fax). The application is received by the General Contractor who then completes the financial input into the platform. Once complete, the subcontractor’s financial health and safety performance are instantly benchmarked against all of their peers in the TradeTapp network. In other words, we apply a simple bell-curve model (customizable by our users) which returns a percentile rank rather than a score.

This analysis indicates a company’s relative performance in a given data set, such as region or trade classification, and we don’t stop there. Subsequently, we combine this output with all the other data collected through through the prequal process (backlog, project history, etc.) to create a complete company profile. The profile represents a comprehensive assessment of that subcontractor with which a general contractor can return to regularly, giving them the ability to watch trends build over time or view prior award scenarios. These are just a few unique benefits over spreadsheet analysis and how we’re comitted to bringing enhancement to the exisiting prequalification process.

• Benchmarking is more dynamic than spreadsheets

Jumping back once more to the scenario outlined above: for many of the firms we have met with in the beginning, their version of the spreadsheet evaluation model has been in use, without update, for 5, 10, or even 15 years in some cases. Using the same model, year after year, makes little sense. Logically, we know there are upswings and downswings in the marketplace during these same time intervals which impact financial health.

A simple case study from which we draw on is the impact of a recent market recession: take for example analyzing a subcontractor in 2010 during a market downswing (likely drawing on any excess available capital in order to perform projects at or below cost) and compare their financial state to present day. A model that is being used to measure financial health in 2010 surely needs to be updated to measure the same company in 2016, right? How should companies go about doing that? What is their go-to resource from which to rely? The answers are unclear.

As a result, rarely, if ever, are these sorts of updates taking place (in fact we’re yet to come across a company who says they do). Here’s where spreadsheet models fall short. In a down market, it’s not unreasonable for most companies on a bid list to show up with failing grades. Being able to parse out which subcontractors represent real risk from the ones that are simply a reflection of the marketplace can be nearly impossible using a static spreadsheet evaluation. Benchmarking provides an advantage for this problem. Using a comparative analysis approach, we can account for these ebbs and flows of the marketplace. Regardless of the state of the market, our output allows GC’s to understand the quality of the partners they’re choosing to work with — both within their own network and against the global TradeTapp network.

Benchmarking is core to our product, but it is just the beginning. In our next post we’ll discuss:

• Combining the qualitative with the quantitative
• Adding efficiency by highlighting only potential risks

If you’re interested in learning more about TradeTapp’s pricing, our progress, or just want to say hey please feel free to reach out to us at info@tradetapp.com.