A Guide to Construction Bidding

Construction bidding is how contractors find work. When a person or a company needs a job done, they will begin the process of bid solicitation by publishing construction requirements. Contractors, construction managers, and other interested parties can examine the project proposal and submit bids to the buyer to win the work. This might sound like a simple case where one could simply bid a lower rate than the competition, but the nature of construction projects doesn’t always make this a winning strategy.

Bidding on a construction job is more complex than simply submitting the lowest bid. Once a bid is awarded, it is in the form of a legally binding contract. This means that failure to perform the job in an adequate way may put you or your company into legal jeopardy. To submit a proper and winning bid you must evaluate the needs of the job, calculate your expenses, and decide whether you can meet the requirements of the project. Your bid must be competitive, comprehensive, and backed with the capability to actually do the job, or else you will be passed over for a competing contractor.

When you decide to bid on a construction project you will likely encounter one of the four following processes:

• Open Tendering - A client has an open request for bids and is advertising for help. Any contractor can bid on this proposal.
• Single-stage Selective Tendering - In this model, a client has selected contractors that they like, and is having them submit competing bids.
• Two-stage selective tendering - In this kind of bidding, a client selects several contractors and obtains quotes. Based on the quotes, the client will then ask selected contractors to create drawings before making a final decision.
• Selective Tendering for Design and Build - In this case, a client requests bids from multiple contractors, and asks them to submit their design and their pricing parameters in at the same time.

Never Under-Bid

The process of putting in a construction bid can be highly competitive. There is a common perception that projects, and especially government projects, are always awarded to the lowest bidder. While it is true that placing an inexpensive bid will help attract a buyer, cost is not always the most important factor. A winning bid will include more than just a low price.

Winning bids need to be detailed and comprehensive. The project manager or contractor should thoroughly review the project plans and specifications and use them to build accurate estimates for labor, material, and equipment costs. Bidding too low can be a significant mistake. Projects need what they need, and trying to cut corners or costs by shorting labor or sourcing shoddy materials will damage your reputation and your likelihood of being awarded further contracts. Tempting as it might be to bid a little low to outfox your competitors, underestimating costs can cause serious friction with customers. It can also cause delays or cost overruns during the project.

Bid Your Expertise

Sometimes, in the quest for work, contractors may be tempted to bid on projects outside of their expertise or experience. It may be tempting to put in a bid on a big, juicy project that’s a little bigger or more complex than you’re equipped for. After all, the money is good and the experience helps you grow your company, right?

While that may be true, it fails to address the risk you may put your company in. In fact, bidding on projects outside of your expertise or projects that you aren’t equipped to handle is likely to end in disaster. It will affect your crew, your company, and your reputation in bad ways that are hard to recover from. This principle also applies when you do your due diligence: if you discover that the project is not setting you up for success, it is okay to respectfully thank your client and walk away. It's better to miss out on that job than it is to get in over your head.

How to Successfully Bid on a Contract

Let’s get down to business: how can you successfully build a winning bid for a construction job?

Obviously we start by finding a bid. There are currently many bidding websites to make this process easier. Sites like Construction Bid Source, BidClerk, and Building Radar are just a few examples. You can also check jobs coming from state or federal procurement offices online, but be aware that government contracts can come with bureaucratic requirements, like certified payroll (Davis-Bacon Act).

Read the bid carefully and follow all instructions in the bid. If you can’t follow the instructions on the bid, the customer will immediately wonder whether you can follow instructions on the job. Take your time, carefully read the entire bid, and ensure you follow all instructions to the letter.

Double-check your accounting. After you construct your estimates for materials, personnel, and equipment, re-read and re-check your data. It is critical to submit an accurate bid. Ask for clarifications from the client as needed. Is something confusing in the bid’s wording, design, or requirements? Don’t be afraid to ask the client for clarification.

Keep your bid organized and logical. Your bid should be presented in a clean, organized, and logical way. While customers should be judging your bid based on its contents rather than its appearance, people are likely to prefer contractors whose bid proposals look highly professional.

Hire the best subcontractors. In any commercial enterprise we want to make as much money as possible. However, in construction, there are corners that should never be cut. Hiring high-quality, reliable subcontractors will help bolster your reputation.

Talk yourself up. At the end of the day, a bid is just a specialized, detailed sales pitch. Tell your clients why they should choose you. Have you earned awards or accolades? Do you hold special certifications? Do you have a place where customers can leave reviews, so you can share real customer feedback? These factors will help set you aside from the crowd, even if your bid is a little higher than the next guy’s.

Consider Bidding Software

The tech industry has developed many products that help construction companies and contractors generate high-quality, polished bids. Consider buying some bid management software to help you through the process.

Construction bidding can seem overwhelming or complicated. But as an experienced builder, you have tackled far more complicated tasks. If you can build an onramp, a house, a pool, or a patio, you can find and successfully compete for bids. Keep it simple, keep it honest, and keep it clean – and you’ll keep yourself in the green.