When a general contractor has a construction project to deliver, the team will split it into different trades, such as mechanics, plumbing, or labor, and invite subcontractors to bid on a specific trade defined by these specialties. Since a contractor often outsource these key project elements when managing construction, having a deep understanding of the construction bidding process is critical for all involved in the project. This bidding process allows owners and general contractors to find the best possible subcontractor for the job and the most competitive rate available for a specific trade. On the bidders’ side, creating an accurate and irresistible bid boosts the likelihood that you will have plenty of jobs to take in and keeps your workers moving from one great project to the next.
As a bidder, the project details and information revealed in the general contractor’s invitation stage, or sometimes the owner, allows you to assess the job and come up with a compelling bid. More than that, it also gives the opportunity to target the right types of clients and jobs. Not every invitation is a fitting one for your company, and not every job is worth the time and effort in creating a proposal. After all, time is the most critical resource in the construction industry. The bidders’ goal is to identify which projects are worth the time, then craft a winning proposal, and get your company the jobs it deserves.
How the Construction Bidding Process Works
Your bid proposal is like a resume for a job application— it will establish the client’s first impression, let them know your credentials and experience in the industry, and even give them a brief idea of what to expect. If they eventually pick you to work with them. If your first impression— or bid— is interesting to the client or the project manager, you’ll move to the interview phase, increasing your chances of getting hired for the job.
Top 4 Bidding Tips You Can Incorporate in Your Business
Tip #1: Expand Your Construction Network and Connections
One of the most underrated ways to secure a bid (and one of the most straightforward strategies) is to be one step ahead of your competition. We know it’s challenging to bid against 20 or 50 competitors, but how about 5? As a general rule, the more bids an owner or a general contractor receives, the fewer chances you’ll get the bid. Now the question is, how can you work ahead of your competitor brands? A top proven way of securing a proposal is using construction bidding networks and marketplaces before your competitors are made aware of them, increasing the likelihood of getting chosen. These online and remote construction tools will help you find new clients to bid on and be a good opportunity for you to create a company profile and branding that will be included in the pool of bid searches.
Tip #2: Quality Over Quantity
Just because there’s a job opportunity doesn’t mean you should bid for it. One of the most common and worse mistakes contractors may make when presenting their construction bids is to bid on every job they find unintentionally. Like we have mentioned earlier, an effective bidding strategy is to cut down on the number of proposals you submit. While it’s tempting to believe that competitive bidding is a game of quantity, it’s the contrast in many cases. By narrowing down your bidding options, you’ll be able to improve the quality of your bidding proposals and select bid choices with a higher probability of success.
Which brings us to the question— what is the “right” bid proposal? The right bid proposal is one that is right for your company, your style of project management for construction operations, and its branding. Below, we have listed points to consider on your next bidding:
- Bid on your specialization
This pertains to figuring out what you are best and having a good understanding of what you’re not and bidding only on the jobs that lean more on your strengths. You can’t be good at everything, especially in the expansive world of construction, but you can be great at something. Are you better at industrial or commercial construction projects? Do you handle smaller or larger projects better? Whatever your answer may be, take a moment and evaluate what your team has been successful at in the past-the completed projects you had that resulted in repeated business— and then focus on bidding on those same types of projects.
- Stop bidding on projects you can’t win.
You have to accept one simple hard fact: there will be projects you won’t be able to win, no matter how much time and effort you exerted in crafting the bidding proposal. If a project requires a particular specialization that you lack, never assume that your low bid will compensate for the deficiencies. It won’t, and you will only be successful in wasting your time on a bid that is already a losing one from the get-go. Similarly, don’t bid on projects located in places you are not accustomed to or projects where you don’t have a sufficient workforce.
- Don’t bid on projects you’re unlikely to win.
Many various factors can contribute to losing a certain project bid, but one of the most obvious is how competitive exactly a bidding process is. Are you bidding against 5 or 20 competitors? Take the time to find out and make a commitment to bid only on jobs with fewer than five competitors. Don’t focus on tracking just your bid-hit ratio. Track it by the client, project type and location, and competitors. After you have outlined these details, develop a benchmark that your company will use. By continually analyzing and evaluating your track record against the entire group, you can begin making the calculated decision only to bid when you have a high probability of success.
Tip #3: Increase Your Company Value
In every industry, when a company has no distinctive brand or no real competitive advantages compared to its other competitors, its service or product becomes a commodity. In a commodity game, there is always no real winner, for everyone is just aiming to cut their prices (sometimes even their profit margins) for the sake of winning a bid. Ultimately, the winner of a price war is the contractor willing enough to bid their lowest possible price at the expense of their profit margin. Contrarily, if you have a unique brand, you can start demanding a premium price from the get-go. A premium price is an amount or a certain percentage of your cost exceeds the average price charged in the market for your goods or services.
Below are some of the few qualities you can focus on to increase your value as a company. In the construction industry, the clients indeed can, and usually do, value these qualities more than price:
Experience and expertise:
Do you and your team possess the necessary skills and experience when it comes to the kind of project you’re bidding on?
Quality of workforce:
It is not about the quantity but the quality of your labor. Do you have a highly skilled team, systematic construction crew management, and the right amount of resources to finish a particular project?
Customer service and care:
Do you and your team provide an extra level of customer support and care?
Do you obtain the ability to sell the value that your company brings to the tables in your meeting with the clients, sales pitches, or project bids?
Are you known and regarded in the construction industry in a particular type of project?
Is your company secured financially? Do you have better payment methods than your competitors in the business?
By diversifying your brand through one or more of these distinct qualities, you’ll be able to wind more project bids even if you are not the lowest bidder. In fact, your construction bids will be more competitive when you’re asking for a premium price for your goods or services. You can invest in various construction tools available in the market also to streamline your operations. Ultimately, bidding higher also translates to increased profit margin and your bottom line.
Tip #4: Be Productive. After All, There Is No Substitute for Hard Work
It is common knowledge in construction that the more productive a team is, the larger their profit margin. Most contractors who lost in a highly competitive hiring process assumes that the contractors who won were bidding “below cost.” A recent study finding reveals that at least 40% of companies still don’t understand or track their costs and expenses. If you’re losing more bids than you’re winning, it’s time to ask yourself if you genuinely understand managing construction projects’ costing methods. More importantly, you should ask yourself with complete honest if you could execute your projects more cost-effectively.
Believe that the Next Construction Project Bid Is Yours
Now is the time to stop bidding just for the sake of it and start bidding for the sole goal of winning. The construction business would often feel like a competition where it would think that the odds are against you and forces you to lower your bed as a means of a safety net. However, with the right construction tools, you can increase your chances of winning without decreasing your quality throughout the project management operations.
Bid as if the project is already yours, and see what happens.