Article Read TimeWhether you’re a general contractor or a subcontractor who is just starting out, understanding how the construction bidding process works is vital to your company’s success. A construction bid is required for most projects, and is a preliminary step before your client signs a construction contract with your business. But what’s involved in a construction bid, should you try to be the lowest bid, and how do you find construction bid opportunities? In this article, we’ll cover all of these questions, so that you can learn how the process works for the average construction contractor, or to check that you’re taking full advantage of the process to maximize the number of bids your company can win, keeping your team of construction manager professionals hopping.
Construction bidding is the process of providing a potential client with a proposal summarizing how you will undertake or, in the case of a general contractor, manage the undertaking of a prospective construction project. This proposal provides the potential client with an introduction to your construction services, even if they’re not familiar with how the construction industry functions as a whole.
But why do you have to provide a bid document to a prospective client? Why do you have to bid on construction jobs? Bidding on a project provides your clients with proof that you are the right construction company for the job and that you understand how the construction industry works. It provides you with a place to show off your contractor’s qualifications. It provides you with a forum to demonstrate why the lowest price bid is not necessarily the best choice for their project.
Now that you understand the importance of the bidding process, what’s involved in it? Let’s dig in to find out how a project goes from finding interested parties through a construction bidding website or other options for finding out about a new project, how to develop a list of material costs as part of your competitive bid to submit, how bids are selected by interested parties, how project contracts are created from bids, and how these factors impact your project delivery methods.
When an interested party wants something built, they solicit bids. This can be as simple as wanting new flooring in a room and having a couple of contractors tell a homeowner how much it will cost for what quality of materials, to complex multi-party commercial construction projects requiring a general contractor as part of the overall construction management system. In anything but the simplest example, bids are solicited through a construction bidding website, word-of-mouth through construction associations, or by contacting local construction companies. With United States federal agencies, the bid solicitation may be bid through their website, publication in various newspapers or magazines, or similar approaches. The bid package available to contractors may include specifications, requirements, contract type, delivery method, any bonding or insurance requirements for contractors, details on past projects, and qualifications.
Once you’ve gathered the information, put together your construction document for that specific project. However, for many interested parties, one sign of a responsible bidder isn’t having the lowest bid, but one that protects the interests of the construction company as well. If a construction company fails partway through the project, it causes problems with finishing the project without going over budget. To submit your bid, gather the details required by the bid document. If you want to add a small amount of relevant information, such as having awards for roofing for a roofing contract, include it in a general resume for your company in the bid package. Don’t forget to include a proper profit margin for the business, as many contracts run over the initial estimate.
With specific end date construction projects, the owner will often go with the best bid for the project. However, for local, state, and federal government projects, it’s often required that the lowest price bid be accepted, regardless of the company’s reputation, though this may not be true in other parts of North America. As a responsible bidder, you’ll need to walk a fine line between these two points. Though commercial construction projects often select the prime contractor by lowest bid, they’ll take into account the company’s reputation. If they have experience with a company that does not deliver on time, to specs, or who causes problems , they’ll go with a better contractor even if the cost is higher, because they know that they’ll end up paying less in the end.
Once the winning bid is selected, it’s time for a construction contract to be written. This type of construction document is strongly based on the winning bid, but will often include more specific dates, hold-harmless agreements, penalties, and other legal documentation that determines who will be responsible for what on the job site. This document also provides details about partial-completion deadlines, requirements to have specific crew makeup, and list specific ways that subcontractors are handled to ensure the delivery happens in a timely, cost-effective manner.
Though not technically part of the bidding process, the type of project delivery used is often included so that the contractor bidding on the project understands how things will move forward. Project delivery includes a variety of methods used to move the project along, including how bids are solicited and how many companies are involved. Design-build uses a single organization to both design and build the project, while a design-bid-build method will have separate parties designing and building the structure. Other options you may see include construction manager at risk and integrated project delivery, which have their own benefits and drawbacks.
The average contractor will only win 10-20% of their bids, so bidding projects often in the understanding that the majority won’t be won is an important part of a construction company. Providing bids that can be put together quickly, accurately, and in quantity are a vital part of success. For that reason, many construction companies, especially small business contractors, may choose to outsource bidding due to time, cost, or available resources.
Another approach that is especially true when working with architects is to bid high, then negotiate your price down. Many architectural firms will ask for a discount, so having an additional level of profit margin for negotiation is a sound tactic that many prime contractors use when bidding to architectural firms.
One of the top ways to win bids is by building relationships with vendors so that they know that they can rely on you when they need to have a job bid. Because the bidding process can take between 3-6 months, having open communications with vendors increases the chances that you’ll have the winning bid.
Public, or competitive bidding, is when a project is able to be bid on by interested parties. Instead of individually calling multiple contractors, the owner will put out a request for submissions or request for bids. This allows any interested party to bid on a project, and is the primary bid process used by most commercial construction projects and government construction.
Similarly, government projects often require competitive bidding on government contracts. These contracts will often require particular equipment, materials, specifications, and standards that must be used on the project due to public funding from tax income. As the world’s largest employer of contractors, government contracts can be very lucrative, but may also have drawbacks. They pay well, provide flexibility around contracts, and provide regular, timely payment. However, they also require a lot of paperwork, strict regulations, and government oversight. They also have a slightly different framework for submission, with design acquisition, construction acquisition, and performance/payment bonds being required. National Capital’s team understands what equipment is DOT approved for our territories and can help you cut through the red tape and legalese in government contracts.
By comparison, private projects are not open to the public, but will often receive bids from contractors contacted by the owner. Because it doesn’t use public funding, the owner is responsible for funding the project. However, these projects also often have higher profit margins and terms. Getting onto call lists for these types of projects requires some amount of marketing, word-of-mouth referrals, and getting a reputation for excellence in the industry.
In many situations, government construction jobs provide a range of minority business enterprise opportunities, as many government contracts specify that a specific amount of money must be spent
on MBEs or that a particular project will go to MBEs. As an example, the state of Maryland recently increased its policy to ensure 20% of all dollars in a bid will go to MBEs, making it easier for minority contractors and companies to be included and even prioritized in the bidding process. National Capital has worked with and consulted with MBEs for many years, providing them with the tools and expertise they need to get the job done, serving as a strong resource for the community.
As a solid provider of construction safety equipment for private, public, and government contractors, National Capital has a strong reputation of excellence in the greater Washington D.C. area. We can supply all the needed equipment for your project or can supply you with a quote for your bidding process. Please feel free to reach out today with any questions, to get a quote, or for more information on our comprehensive construction support services.
