The construction business has been growing in the past few years, which can be a double-edged sword for professionals in the industry. With the boom of the construction business and buildings being built everywhere, there are still cases of companies filing for bankruptcy due to a lack of bids and being unable to win their current ones.
Creating and managing construction bids are more significant in the business than most professionals realize. There are no revenues when there are no projects. It’s difficult to win projects when there is too much competition. However, there are ways to step up your game and bid your way to success.
In this article, we’ll dive into the basics of the construction bidding process, where to look for potential bids, how you can win them, and more.
How Does the Construction Bidding Process Work?
The bidding process in construction involves multiple steps, checkpoints, and stages. The project owner, general contractors, and subcontractors participate in the bidding process.
Here is the bidding process breakdown in a nutshell:
- A project owner posts or sends construction bid invitations to multiple general contractors. This invitation will include information regarding the project, such as plans and specifications; attached is a request for proposal (RFP).
- Once a general contractor receives a request for proposal, it will request a quotation from subcontractors, suppliers, and laborers for the specified scope of work in the bid. This quotation can be in the form of a full bid package that consists of plans, specifications, addendums, and more.
- Subcontractors, suppliers, and laborers submit their final quotation to the general contractor.
- The general contractor uses the submitted quotations to make an estimate that, when consolidated, will become the final construction bid.
- General contractor submits the bid to the project owner, which will then be added to the list of bids for the specific construction project.
- The project owner reviews all the submitted bids, selects the winning bid – usually the lowest bidder – and awards the project to the corresponding general constructor.
How Can General Contractors Receive a Construction Bid Invite?
General contractors usually get on bid lists through recommendations and referrals to the project owner. Having a good reputation in the industry and being known for doing quality work will help give you a spot on a bid list, as well as having a good network and knowing the key decision-makers within the construction industry.
Once a general contractor is added to the bid list, the project owner sends a bid invitation or RFP to the contractors on the list. Creating a comprehensive, thorough, competitive bid is your way to stand out on a bid list.
What are the Key Elements of a Construction Bid?
Generally, the main element in a construction bid is the total cost needed to complete the project, which the owner visualizes. The bid is typically submitted with the total lump sum, depending on the structure of the contract. The lump sum includes the general contractor, subcontractor, profit, and overhead costs.
The bottom line is that everyone creating the bid must make money. Otherwise, there will be revenue for all parties. This makes bidding creation tricky, as subcontractors and suppliers have different costing parameters.
Going back to the basics, below are the key elements of a construction bid that you should consider:
- Engineering fees
- Machinery costs
- Supervision costs
- Drafting fees
- Mark up cost
- Subcontractors inclusions
- • Insurance
- • Storage
- • Transportation
However, be reminded of the other factors that can influence the bid selection, such as the construction crew management process, shorter project schedule, alternate products, and previous relationship of the project owner with the general contractor.
Where Should General Contractors Look For Projects to Bid On?
1. Construction Networking
Staying stuck behind your office desk is one of many ways to find jobs. Attending events or conferences in your local area can help grow your business circle and provide fresh opportunities that may have yet to be available if you had just stayed in your desk chair.
2. Cold Communication
Project owners and developers may only know about your company if you put yourself out there and try to build a professional connection. If you want to create these relationships, feel free to email, call, or reach out over LinkedIn to introduce your company and the services you can provide. Find project owners and developers and secure an informal meeting to learn more about their projects and needs.
3. Stay Online
Since project-sharing platforms and new projects can surface online at any time, you must always be online and up to date with online construction bid opportunities. Look for new developers’ websites and save them to your bookmark bar so you can check their websites regularly for new bid postings.
Additionally, know your competition by following them online. Check out their construction websites for project portfolios or case studies. This way, you can better weigh your bids.
4. Construction Bidding Websites
Construction bidding websites are some of the efficient ways to find construction jobs. These websites give you access to possible projects in your local area or area you want to bid on. Create an account and filter by location, type of project, and more to find your perfect construction bidding opportunity.
Save your favorite bidding websites, check them regularly, and set up alert notifications when a new construction project is posted. Most bidding websites even allow you to customize notifications for construction projects that fit your company well.
5. Word of Mouth
Lastly, word of mouth is one of the most traditional ways of finding bids. This ties into cold communication and networking; the relationships built from creating professional connections can open up new bid opportunities for your company.
How to Grow Your Chances of Winning Construction Bids?
Winning bids often leads to winning more bids. A reputable bid-hit ratio is a great way to build your company’s branding and win more bids. Basically, a bid-hit ratio is the win rate for construction projects you’ve bid on. It counts how many bids you’ve sent out versus how many bids you’ve won. 5 to 1 is the ideal bid-hit ratio for private projects, while 10 to 1 is for public projects.
The construction industry’s “open secret” is starting with an accurate cost estimate and submitting the lowest bid amount amongst your competitors; it is not always the right approach. The lowest bid doesn’t mean you’re bidding competitively. A good and winning bid focuses on the construction timeline, construction crew management, quality of the delivery of materials and services, and overall construction completion.
Below are some of the strategies on how you can increase your chances of winning bids:
1. Schedule Client Meetings
Meeting with the potential client before even submitting your bid is an effective way to get more information about their project needs and what they are looking for on that specific project. Schedule a meeting with them to get in and create a connection during the bidding process.
2. Be the First Bidder
Managing construction bids also means managing the submission timeline, as this is critical in the selection process. Bidding first gives your company to get leverage, emphasizes a statement, and sets the bar for other bidders that will submit. Optimizing your bidding strategy and process is essential to generating accurate, quick, and compelling bids.
3. Quality Over Quantity
It’s not true that the more is merrier regarding construction bids. Bidding on projects should be done strategically since quality is better than quantity. Being strategic means bidding on construction projects, and you think you have a big chance of winning. Bid on projects that fit your niche and align with your scope. If a project requires trades and specialties that you don’t have, don’t bid altogether.
When you bid only on projects that are a good fit for your company, it conserves administrative work and decreases the load that will need to be awarded if you win. You should also have a long-term mindset and focus on construction projects that will likely result to repeat business.
4. Do a Competitor Scan
Know your competition and the criteria they go for in their bids so you can adjust accordingly. This way, you can highlight and better present your company’s advantage. Describe in detail what qualifies your company’s bid that makes you the best fit for the project.
You can add your descriptive testimonials, past projects, and received certification and awards to strengthen your company’s credibility further.
In order to make accurate and winning bids, you need a reference of how your company operates in terms of project planning, execution, and delivery. Having a digital platform that stores all your past schedules, task management, and inventory will enable you to make construction bids that are not only realistic but also of quality.
Pro Crew Schedule is a construction management software that can help give you a new perspective on making bids and let you manage your current projects in the best way possible.