The success of entire projects depends on successful bidding – bid too high, and your company won’t be considered for the job; bid too low, and the project can be doomed before it even gets started. It’s a lot of pressure, and in many cases, the contracting team only gets a few months to review the project before submitting a bid.
Construction bidding is the part of the process during which the owner asks contractors to create proposals for completing a construction project – the time the construction will take, the budget involved, and what terms the firm requires for completion.
Thankfully, there are ways of writing better bids. This article will discuss some of the key elements and best practices to consider when crafting a good construciont bid, some commonly overlooked project characteristics that can change bid estimates. We will also provide tips for creating a systematic process for creating consistently quality bids, including a construction bid proposal checklist.
Understanding the construction bidding process
Construction bids generally follow a set of steps that allow a competitive process to determine which general contractor will earn the chance to complete the project.
In a typical design-bid-build project, an owner and designer will have already completed a project design before the owner asks general contractors to submit bids. When the owner is ready to get started, the solicitation and estimation process will begin.
1. Solicitation
The potential client invites selected general contractors to submit construction bid proposals on the project and sends along information about its design and scope so that the contractor can understand the time, materials, and special costs that it will require.
2. Estimation
If the project looks like a good fit, the general contractor assesses the time, materials, and labor costs that the project requires. Contractors must do a lot of legwork before submitting cost estimates – without a thorough understanding of all the risks and nuances the project involves, they can’t reliably produce accurate estimates. After they’ve crunched all their numbers, contractors will add their profit expectations to come up with a project bid.
3. Bid submission
The contractor submits a full rundown of the project’s timeline and costs, information about the contractor’s business and experience, and a bid bond if required.
4. Bid selection
The owner assesses each contractor’s bid, as well as the contractor’s records on safety, expected project timeline, and experience on the applicable project type.
5. Award and contract formation
The owner selects a winning contractor, and the two begin drafting an agreement for the project to commence.
Once the owner and contractor agree on a contract and all its stipulations, project delivery begins.
Preparing a bid proposal
There’s a lot going on for a contractor during the competitive bidding process. First, the estimating team has to dive deep into the project information to get a good idea of the time each step will take. Coming up with accurate numbers should involve a number of key steps, including:
- Checking over data from past projects and using the true timeline and cost information the contractor has experienced to educate the bid
- Assessing site conditions and any potential complications that can increase project scope or take more time, like weather patterns, location complications like difficult access or neighboring residences that could restrict movement, and any assessments as to what might be lying beneath the soil on the job site.
- Estimation is the best time to find out any of these hiccups and prevent “unforeseen circumstances” that can take down construction projects.
- Submitting RFIs to subcontractors for better cost analysis
- Performing material takeoffs, which provide comprehensive information on the exact materials needed, how much is required, and what those materials will cost
- Calculating overhead and profit to include in the bid
Developing a winning bid strategy
Construction bidding is a sales pitch to a construction owner. Nail it by including both the required technical details and persuasive elements to convince an owner yours is the team for the job.
Define a unique selling proposition
The bid selection process isn’t just about price, although the bid amount is a critical consideration for owners. An owner seeks to work with a general contractor who will be easy to work with and successfully deliver a quality project.
A construction project proposal may be a contracting firm’s best chance to make a case for its selection.
Emphasize the construction business’ strengths, including extensive experience with the specific project type, stellar reputation, safety record, or the technology the company uses to achieve quality results with superior efficiency.
Setting competitive pricing
A long memory will go a long way in informing bids – recalling previously encountered scenarios from past projects allows estimators insight into real project costs and timelines. Luckily, construction management technology makes it easier to track and access information from construction projects to recall data more reliably and inform better bids.
- Project management software helps teams capture, organize, analyze, and store data for later use
- AI tools can help run project schedules and scenarios to predict outcomes and choose the best solutions
- Payment solutions like Truss integrate with accounting software to better track construction job costs from previous projects, which can be used to predict costs in future estimations.
- Contractors should also research what other contractors in the area are bidding for similar construction jobs, as location can significantly change costs.
Demonstrating professionalism
- Some construction owners will require bidders to use a construction bid proposal template so that all the bids come in the same format for easier comparison. If the owner provides a bid form, use it in the construction proposal.
- Create a bidding system to develop neat, organized bids that owners can easily understand.
- Fill out forms completely and correctly, and ask for clarification whenever necessary.
- Submit bids on time.
- Details may seem insignificant, but they indicate a lot about the professionalism a team brings to a project, including the level of organization and communication the construction company offers.
- Include information about any value-added services that come with working with the contractor. For instance, working with a payment platform like Truss streamlines the payment process, allowing owners to pay by credit card, ACH, or check. Truss also ensures subcontractors get paid quickly, reducing the risk of disputes or lien claims.
Crafting the Bid Proposal - Construction bid proposal checklist
A good construction proposal offers a competitive, neat, and detailed look at how a contracting firm will tackle an upcoming project. It also makes an argument for why it’s the best construction team for the job.
What to include in a good construction bid
- Details about contractor and client – full business name, address, and contact information like phone number and email address
- Project scope – include project details about exact project parameters, materials, labor, and equipment requirements
- Existing conditions – site characteristics that need amending before other project work can continue, suggestions on fixes, and who will be responsible for that portion of work
- Cost estimate and payment terms – a layout of the estimated cost of completing the project, along with a payment method and payment schedule
- Schedule – expectations for milestone, phase, and full project completion, along with a detailed description of liabilities and warranty information in the event of delays
How to write an executive summary
The executive summary is an overview of the bid proposal. It appears before the rest of the bid documents to introduce all the information that will follow. It can have a significant impact on the bid’s success.
- Start by recognizing any project challenges, then position the bidding company as the contractor to carry out a successful solution.
- Make it very clear that the bid considers all the nuances and factors that could impact the project and what the successful approach will entail.
- Include a direct and easily digestible budget and work schedule for the decision makers to compare with other bids, and explain anything that may deviate from the client’s expectations.
The executive summary should be a persuasive, high-level look at what the rest of the bid documents include.
Detailed scope and timeline
Outline the exact boundaries of the work the contracting business will perform.
Include a list of project deliverables and the expenses to complete them, including materials, labor, equipment, permits, and other costs. The scope of work lists expected project milestones, communications expectations, and timeline expectations.
Clearly defining project specifications will help determine who will be responsible for unplanned changes and avoid scope creep.
Define milestones and deliverables
Deliverables are defined as the project output – what the client will get when the contractor completes the work. List in precise detail what the project will entail.
Milestones break the project down into phases, with specific goals met to mark the completion of each one. Payments and timeline goals may be tied to each milestone.
Full budget breakdown and payment terms
Include the cost for the entire project budget, then break the cost into sections, such as materials, labor, equipment rentals, and overhead.
The way you break down the schedule may depend on the contract type or project owner requirements.
Detail the payment expectations – how much is due and when, as well as the preferred method of payment. With Truss, you can offer your clients a simple and flexible solution to pay invoices. Truss allows you to accept ACH and card payments online, for free.
Address risks and offer mitigation strategies
Every project involves some risk that things will go wrong. Protected historical or environmental properties can involve extra administrative work, bad weather can add to project timelines, and, in the case of public projects, political shifts can add constraints or change funding models to complete the project. Figure out which risks apply to the project at hand and propose mitigation strategies to overcome them.
Constructing bids is a skill
A construction bid is, in many cases, an introduction to a contracting company. Timeliness, thoroughness, professionalism, and attention to detail are all critical components representing how the firm will tackle the project. A well-presented project bid indicates how well the firm knows its stuff and how well it communicates with stakeholders.
Of course, presenting bids is a skill in itself and one that contractors may get better at with time. Continued learning and improvement can increase the odds of winning bids and making good connections within the construction industry.
