“They are buying the work,” Tony explained. “They bid the job below our cost, so I know they are not making money. Sooner or later, it is going to catch up with them and they will go out of business.”

“How many projects have they beaten you on, just this year?” I asked.

“More than you can count on both hands and one foot,” Tony replied.

“Tony, you can give me all the excuses you want. Their bid was lower than yours because they have a lower cost structure than you. Their bid was below your cost and there is still profit in the job for them. You have costs in your system that your customer doesn’t value, isn’t willing to pay for and it’s killing your edge in the marketplace.”

Tony’s face was sullen. He had expected me to agree with him. “Look, we have done our layoffs, reduced our inventories. We value engineer every project. What else are we supposed to do?”

“The answer is not some incremental, value engineering, corner cutting line item. You have to go back to fundamentals and look inside your systems, and how your systems handoff, and how your systems impact each other. There are likely three or four game changers, permanent game changers. Your competitor has already figured out some steps that you are unwilling or unable to take. That difference can be counted on both hands and one foot.”