Construction Bids: Mastering Construction Bidding

ProjectManager

Construction projects are won through the construction bidding process. In a nutshell, construction bidding involves a project owner who wants to build a construction project and contractors who are able to provide construction services.

Managing the construction bidding process and expanding your customer base without breaking the bottom line is a delicate art. Whether a seasoned construction professional or new to the business, there’s always more to learn about submitting a construction bid!

What Is a Construction Bid?

A construction bid is part of the process of submitting a proposal for a construction project. The construction bid shows potential customers that your organization is the right contractor for the job—meaning you’ll take on building and/or managing their building or structure.

In order to have an accurate forecast and competitive bid, you need tools to help estimate costs, time and other resources. ProjectManager is project management software that offers planning, scheduling and tracking tools to ensure you keep to your bid during construction management. Use our unlimited file storage to manage your construction bidding documents. Once your bid wins, you can start planning your construction projects with our Gantt charts, project calendars, kanban boards and more. Get started for free.

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What Is Construction Bidding?

Construction bidding describes the process of bid submission and approval between a construction company and its customer, but it can also describe how subcontractors get work from the contractor once a job has been taken.

A construction bid lives or dies on accuracy. Using blueprints, construction plans and material quantity takeoffs, the bidder must estimate a realistic cost (including a profit margin) to make the job viable.

Is a Construction Bid an Estimate?

While a bid is an estimate, they are not exactly the same thing. There’s no hard and fast rule, but most of the time when a contractor is talking about an estimate, they’re referring to the costs of materials and labor for their project. The construction bid is what’s sent to the customer as the final, fixed price for the entire job.

Regardless of the difference, estimates need to be accurate in order not to lose money if the bid is accepted.

Construction Bidding Checklist

Before we dive into the steps of the construction bidding process, it’s important to know the key elements of construction bidding. Whether you’re a project owner or a contractor, you’ll need to know about these elements.

There are several types of project delivery and procurement methods, as well as different types of construction contracts from which you can choose. Each has pros and cons depending on the specific requirements of your project, so you’ll need to evaluate which of them works best for you.

Here are the most popular methods and contracts for your construction bidding process.

Define Your Project Delivery Method

A project delivery method defines the responsibilities and risks assumed by both the project owner, construction managers and contractors when starting a construction project.

  1. Design Bid Build: This project delivery method consists of a design phase where a designer creates construction documents. Then those documents are released to contractors who will estimate the project costs and present a bid to the project owner. The project owner then will evaluate bids and select a contractor.
  2. Design-Build: An alternative method to design-bid-build in which the contractor assumes responsibility for the design and construction of the project.
  3. Construction Manager at Risk: In this method, the construction manager commits to delivering the construction project at a guaranteed maximum price (GMP).

Select a Construction Procurement Method

Here’s a brief explanation of the main responsibilities of the project owner and contractors under the two most popular construction procurement methods.

  1. General Contracting: The project owner hires a general contractor who will build the construction project. The contractor executes the construction work and might hire subcontractors to cover certain areas.
  2. Construction Management: The project owner hires multiple subcontractors for each type of construction work such as plumbing, electrical work or masonry. This requires a huge effort from the owner and is suggested for bigger construction firms.

Choose a Contract Model

The project owner and contractor must agree on a contract model to establish a legally binding agreement for the execution of the construction project. Here are some examples.

  1. Cost Plus Fee Contract: This construction contract requires contractors to report costs as they occur rather than deducting them from a budget. Then the project owner pays for the accumulated costs plus a fixed fee that’s agreed with the contractor before executing the project.
  2. Guaranteed Maximum Price (GMP) Contract: In a GMP contract, the contractor defines a guaranteed maximum price for the project owner. The contractor must commit to this price even at his own expense if costs exceed his construction estimates.
  3. Time and Material Contract: In a time and materials contract (t&m), the project owner pays an hourly rate for labor and purchases materials as needed by the contractor. It’s a good alternative when the project scope is uncertain and when close supervision is needed.

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Construction Bidding Steps

When involved in the construction bidding process, you should ideally have accurate estimates and a low bid. Many customers will only look at the bottom line and go with the lowest bidder. However, don’t bid yourself out of business.

Keeping that in mind, it’s best to follow these steps in the construction bidding process.

  1. Solicitation: Referred to as a request for proposal (RFP), this is when an owner puts out a request for bids for a project they want to execute. This means asking companies to bid with all of the materials listed in the previous section.
  2. Subcontract: The general contractor will solicit bids from subcontractors for parts of the project, though this can often wait until the contractor has won the bid.
  3. Submission: The proposal will have a deadline. Once the contractor has detailed the information required by the customer, they submit the bid prior to or on the deadline.
  4. Selection: There’s a period of time when the customer goes through all the submitted bids. They will then choose the one which best fits their needs, which will be the winner of the bid.
  5. Contract: Because of the details of the bid, it can be used by both parties as a legally binding contract once agreed upon. However, it’s more likely the customer and the winner of the bid will finalize the terms and conditions sketched out in the bid and create a legal contractual agreement they both sign.
  6. Project Begins: After all of this, the project will begin and follow the agreed-upon schedule and pricing of the bid.

 

What’s Included In a Construction Bid?

There’s no one-size-fits-all style to a construction bid, however, certain elements are required when submitting one. When making a construction bid, be sure to include the following:

  • Contact Information: This might seem obvious, but a bid will be discarded if there’s no contact information for the construction company that submits it or the potential customer to whom it’s addressed. The basic information is name, address, phone and/or email and a place for signatures, either to acknowledge receipt or agreement on the terms. Include the location of the construction project as well.
  • Scope: Next comes an overview of the project before getting into pricing details. Here, outline the scope of the project, the services provided, the schedule for the work, necessary materials and other features required to get the job done. This section should be detailed and include customer expectations, any subcontractors that will be hired, removal of trash, visitor rules, safety protocols and more.
  • Existing Conditions: This is where to describe the job site as it currently is after conducting a preliminary site assessment. List the conditions of the site as it stands now, what action will be taken to respond to these conditions and who will be responsible for what. Also, note how conditions discovered after the start of the project will be dealt with and who will decide on the scope and cost of any remediation.
  • Cost: Estimate the price for the entire project here. Break down the total cost into subsections, including labor and materials. Add a section on costs if the project goes over the scope to manage the customer’s expectations.
  • Terms of Payment: Detail the manner in which you’ll get paid for the job if selected by the customer. Most will not pay the total cost upfront, so decide what down payment you require and the frequency of installments for the balance. These payments can be tied to various milestones in the project, which should be identified.
  • Relevant Documentation: Because of the size of most construction projects, it’s critical to the bid that any and all sub-projects are identified, detailed and an owner who is responsible for them determined. This will help the customer know who is responsible for what when the project begins. It also defines who has legal authority when it comes to signing documents.
  • Schedule: The work schedule will be detailed here, from the start to the end and all milestones in-between. It’s a good idea to determine the extent to which you’re liable for any events that cause delays in the execution of the project. Those events could be inclement weather, delayed permits, etc. Block out the calendar, noting working days, vacation, supply lead time, zoning approval and other third-party processes that can impact the timeline.

How to Win a Construction Bid

The construction bidding process is highly competitive and there can be dozens of businesses vying for one job. How do you differentiate yourself and win the work without losing money in the process?

Know the Competition

It helps to know who else is bidding on the job. Know the competitors and what they’re doing. It’s helpful to network or join building trade groups to stay updated on what others in the construction industry are doing. When there’s a proposal, it doesn’t hurt to be the first one to bid, so keep an eye on marketplaces where bids are posted.

Be Judicious With Your Bidding

Although it helps to be the first to bid, it’s not ideal to bid on every job with a proposal. Spend time making the best proposal for the job while also ensuring it fits what your organization can accomplish at a profit. Cultivate a niche and look for work that will result in repeat business.

Build Relationships

Business is better executed on the foundation of a strong relationship, so strive to build relationships with people who are in a position to make decisions on awarding work to your company. Identify the individuals responsible for pulling the trigger on new work and develop trust with them.

Accentuate Your Strengths

When in the construction bidding process, don’t be bashful. Promote the qualities your business has that make it the right fit for the customer. Show off the team and be sure to let them know you have the experience necessary to do the job right. Sometimes value is more important than the price tag.

Take Your Time

Take your time when making the bid. Make sure to do the research and explain how you can give them the best return on their investment. If you know anyone who has worked for the customer in the past, talk to them to get an idea of what the customer wants.

ProjectManager & Construction Bids

ProjectManager is award-winning software used to organize plans that are productive and easy to share. Building your bid is akin to starting a project; you need to define a budget, manage resources, create a schedule and show it to your potential customer in the hopes that they accept your bid.

Lay Out Your Project on Gantt Charts

When you’ve done the due diligence and are ready to create a schedule, our online Gantt chart is there to organize all your tasks. Add a start and end date to each task and they populate a visual timeline that shows you the entire project on one page.

ProjectManager's Gantt chart with task info

Create Dependencies and Milestones

At this point, you can link all four types of task dependencies to avoid bottlenecks that can delay the execution phase of the project. Plus, set milestones as diamond icons on the timeline to mark when one phase ends and another begins. Milestones can also be used to mark any important dates you don’t want to slip through the cracks during the heat of the project.

dependencies and milestones on a Gantt chart

Unlimited File Storage for Documentation

Construction projects are complicated and involve lots of documentation. Our online tool has unlimited file storage that acts as a central hub for your project paperwork, making it easy to find when you need it. No more messy desks or cluttered email folders to search through. You can share the project with your customer and, if they accept your bid, they’ll be notified by email and in-app alerts on the project’s progress.

ProjectManager is an online tool that gives you live data for better decisions. Keep your customers updated with a real-time dashboard that automatically calculates project variance, costs and more and displays them in shareable graphs and charts. Plan, monitor and report on your construction project, while getting instant status updates from the job site. Try our software today with this free 30-day trial.

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