Discover the magic of construction bidding solutions — your perfect companion in mastering the art of bidding construction jobs! Learn how to bid on construction jobs like a pro and stand out from the competition.
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What This Article Covers
What Is Construction Bidding?
Construction bidding is the process of submitting bid proposals to clients for managing projects. The proposal typically consists of cost estimates, takeoff details and scopes of work.
The client initiates the bidding process and solicits bids from different contractors. For contractors, winning bids provide an opportunity to secure new projects and expand their business. However, unsuccessful bidders may use the feedback from the bidding process to improve their proposals for future projects.
Key Steps
Bidding is a complex process. We’ve highlighted some critical steps you should follow while bidding on construction jobs.
Understand the Bidding Process
The bidding process can differ significantly between commercial and government projects. Commercial projects are typically private-sector initiatives, while government projects involve federal, state or local government agencies.
For most commercial projects, you can follow a standardized bidding process. It consists of six steps:
- Company owners send requests for proposal (RFPs) or invitations to bid.
- After evaluating the bid package, invite and assess subs for specific jobs.
- Create an estimate and, after thorough proofreading, submit your bid proposal.
- Engage in discussions about terms before finalizing the contract.
- Follow the agreed-upon project delivery method for successful project completion.
Bidding on federal construction projects requires a careful approach, including qualifications-based selection, source evaluation for “Best Value,” and adherence to the Miller Act for performance and payment bonds.
Find Bid Opportunities
Rely on reputable bid sources or platforms to ensure you bid on legitimate projects.
To find commercial projects:
- Research industry publications and websites.
- Network with architects, engineers and developers.
- Attend trade shows and events.
- Use online platforms like Construction Bid Source.
- Subscribe to industry newsletters.
- Connect with real estate brokers.
Access federal bid opportunities through the System for Award Management (SAM) portal. To access drawings and specifications, register on SAM.gov.
Evaluate Project Requirements
Clarify project requirements to avoid bid losses. Before submitting a proposal, ask these questions:
- Is it a commercial, industrial, residential or government project?
- Can I use the skills and knowledge gained from previous projects?
- Do we need additional skill sets to make the project a success?
- Do we need to spend a lot of time commuting?
Don’t bid on unprofitable projects. Learn to say “No” instead of wasting resources on submittals.
Analyze similar past projects to the one you’re bidding on. Review budgets, timelines, challenges and lessons learned to improve your bidding strategy.
Assess Job Site
Visit the job site to assess existing conditions, including topography, soil composition, drainage and environmental factors, to anticipate challenges, estimate costs accurately, and identify potential risks or constraints.
Ask For Clarification
Ask questions to clients to avoid misunderstandings and generate accurate bids. You can send them construction requests for information (RFIs) to record essential details. Remember, effective communication is the key to project success.
Research Industry Costs
Stay informed about labor, material, equipment and project-related expenses by researching prevailing market rates. Cross-reference multiple sources and verify data against market conditions and project requirements.
Get our Construction Bidding Software Requirements Template
Estimate Project Expenses
When bidding on construction jobs, there are several expenses you should estimate to ensure accurate cost calculations. These expenses include:
- Materials: Estimate costs for necessary materials like lumber, concrete, steel, plumbing fixtures, electrical components and finishing materials.
- Labor: Calculate expenses related to wages, benefits and payroll taxes for construction workers, supervisors and project managers.
- Equipment: Account for costs associated with renting or purchasing equipment such as excavators, cranes, scaffolding, power tools and specialized machinery.
- Subcontractors: Estimate fees for subcontractors’ services, including labor, materials, and any applicable markup or management fees.
- Permits: Include costs for obtaining building permits, inspection fees and other required regulatory expenses.
- Overhead: Consider costs like office rent, utilities, insurance, supplies, equipment maintenance and administrative salaries.
- Indirect: Account for additional project-related expenses such as site preparation, temporary utilities, security and site cleanup.
- Insurance: Estimate the cost of required insurance coverage, including general liability, workers’ compensation and builder’s risk insurance.
- Bonds and Licenses: Include costs associated with obtaining and maintaining any necessary bonds or licenses.
- Markup and Profit: Factor in an appropriate markup or profit margins to ensure financial viability and sustainability.
Cost estimation enables you to allocate resources, manage cash flow and make informed decisions regarding procurement, subcontracting and resource allocation throughout the project’s life cycle.
Hire Skilled Subcontractors
Pre-qualify subcontractors based on:
- Safety record
- Technical skills
- Quality of work
- Educational qualifications
- Compliance
- Bonding capabilities
- Reputation
- Ability to follow instructions
- Expertise
Interact with their team members to understand their working philosophy.
Determine Contract Type
Consider contract types such as cost-plus fee, guaranteed maximum price, fixed price, target price or unit price. Each option offers different advantages and considerations based on cost structure, risk allocation and project requirements.
Decide on Project Delivery Method
By selecting the most suitable project delivery method, you increase the likelihood of project success and client satisfaction.
Some common delivery methods include:
- Design-Bid-Build: This consists of three stages — design, bid and build. The client hires an architect, evaluates bids and awards the project to a contractor.
- Design-Build: The client replaces the architect with a contractor possessing design skills.
- Construction Manager at Risk (CMAR): The construction manager hired by the client manages the project from start to finish, hiring contractors and subs. The manager submits a guaranteed maximum price, bearing the risk if costs exceed it.
- Integrated Project Delivery: The client binds architects, contractors and subs by a single contract, promoting collaboration and improving efficiency.
Tailor your proposal to align with the specified delivery method mentioned in the bid package.
Understand Procurement Methods
To make informed bidding decisions, it’s vital to know clients’ procurement techniques. It’ll help you recruit the right subcontractors, acquire suitable materials, mitigate risks and save costs.
Some common procurement methods include:
- Best Value Source: Evaluated based on qualifications, performance and safety.
- Low Bid: Awarded to the lowest bidder; common in public projects.
- Negotiated: Based on past relationships with the client.
- Direct Select: Awarded to contractors managing the entire project.
You can use construction management platforms to track equipment and supplies, manage inventory and create a procurement management plan.
Proofread Your Proposal
Examining your bid proposal before submission ensures accuracy, completeness, compliance, competitiveness, clarity, risk mitigation, professionalism, and a positive reputation. It improves the chances of winning the construction job.
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Best Practices
We’ve highlighted some best practices you should follow to successfully bid on construction jobs:
Estimate Quickly
The construction industry is highly competitive, and clients often request bids from multiple contractors. By estimating quickly, you can submit your bid ahead of competitors, increasing the likelihood of securing projects early in the selection process.
Negotiate
Bid proposals aren’t the final budget; think of them as preliminary estimates. Architects may request discounts, so bid high and negotiate down.
Surprisingly, increasing your perceived value is more important than being the lowest bidder for commercial jobs.
Follow Up With Clients
Following up helps you seek clarification, address concerns and provide necessary updates. It showcases your professionalism and dedication to exceptional customer service.
Highlight Your Excellence
Highlighting excellence awards like the Contractor of the Year from Associated Builders and Contractors (ABC) reflect your capabilities and build trust in the eyes of your clients.
Testimonials breathe life into your submittal and build trust with potential clients. Include them in bid proposals to showcase your problem-solving abilities and add credibility.
Inquire about Customers’ Discovery Source
Delving into how customers find you can provide valuable insights for marketing optimization, ROI analysis, targeted marketing, competitive analysis, customer relationship building and efficient budget allocation.
Use Bidding Solutions
You can use construction bidding applications to quickly generate and submit bids. They provide customizable proposal templates, construction estimating tools, reporting modules and integration with construction management apps and takeoff systems.
Track Bid Results
You should track your bid-hit ratio to detect trends and create bidding strategies that help you win profitable jobs. You can implement BI tools to analyze similar patterns and make data-driven decisions.
Consider tracking vital metrics like:
- Conversion rate
- Geo-targeting
- Impression share
- Cost per conversion
- Click-through rate
- Cost per click
These metrics are vital for driving profitability and business growth.
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FAQs
What is the typical duration of the bid process?
The bidding process duration varies from a few weeks to several months, depending on project complexity, client requirements, bidder count and timeline.
What is a bid bond?
A bid bond is a contractor’s financial guarantee to the project owner. It protects the owner from potential losses during the bidding process.
What is the bid-hit ratio?
The bid-hit ratio is the ratio of the number of bids a contractor wins to the total number of bids submitted during a specific period.
What is the difference between estimating and bidding solutions?
Construction bidding software streamlines the bidding process, enhances collaboration with subcontractors and suppliers, and improves efficiency.
Estimating solutions assist in accurately calculating project costs, reducing errors and producing detailed quotes.
Read our article — Construction Estimating and Bidding: A Comprehensive Guide — to know more about their differences.
What is the difference between bid documents and contract documents?
The bid document serves to solicit bids from contractors and includes the request for proposal, an invitation to bid, project specifications and contract terms. It isn’t legally binding.
In contrast, the contract document formalizes the agreement with the selected contractor, outlining responsibilities, deliverables, payment terms, schedules, change order procedures and dispute resolution mechanisms. It’s legally binding.
How can I select the best bidding solution?
We’ve outlined the software selection process below to help you select a bidding application that best suits your business needs.
- Assess Your Needs: Conduct surveys and brainstorming sessions to determine your company’s needs. Use our construction bidding requirements checklist for informed decisions.
- Consider Software Pricing: Review your budget plans and allocate funds for a new application to avoid budget overshoots.
- Compare Vendors: Compare providers against your requirements and rank them accordingly. Use our free comparison matrix to compare multiple vendors simultaneously and generate scorecards.
- Negotiate: Negotiate terms and conditions with the vendor and seek legal counsel if needed.
- Seal the Contract: Prepare and sign the contract with the vendor and keep copies to avoid legal issues.
Read our construction bidding buyer’s guide for more guidance on selecting the right bidding software.
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Next Steps
Don’t fret over past mistakes. Use construction bidding platforms to create accurate bid proposals and win projects when bidding on construction jobs. Remember, producing a quality proposal is key to winning jobs.
You need to list your company’s requirements before investing in a solution. We know it can be challenging. Don’t worry. You can use our free decision platform to generate functional, technical and vendor qualification requirements. It also helps you create and send an RFI and RFP to providers.
If someone asked you how to bid on construction jobs, what tips would you give them? What bidding strategies do you use to win projects? Please let us know in the comments below.