A Guide to Construction Bidding Process (& Where to Find Bidding Opportunities)

The construction bidding process involves the submission of a construction bid or a tender to the project owner to undertake the construction of a new project. The bidding process sometimes calls for bids to manage a construction project. 

 

Construction bidding allows a general contractor or a construction manager to expand their businesses. On the project owner's part, various construction bids from prospective bidders allow getting the project done at the lowest bid or selecting a construction firm with an impeccable record of delivering construction services.

 

Sometimes a construction bid is also submitted to a general contractor or project manager. This is particularly true for complex projects where specialized professional services of various types of subcontractors are required.

 

What is construction bidding?

Construction bidding is a competitive process where a project owner receives proposals of work from potential general contractors, project managers, and EPC companies to either construct a structure or manage its construction. On some occasions, subcontractors also bid to pitch their specialized services to a general contractor who has been awarded a construction contract.

 

The bid documents help a project owner choose the right contractor for the project, be it a commercial construction project or a government project related to public works.

 

Three significant decisions influence construction bidding

The bid selection in a competitive bid depends upon three important factors. For a complex construction project, the owner determines the suitability of a winning bid on the following aspects:

 

Project delivery method

The project delivery method specifies the share of responsibilities and risks born by the various stakeholders of the project. Depending on the project delivery method, the project owner, construction managers, and general contractors have different risk appetites.

 

• Design Bid Build: This form of project delivery includes a design phase during which a designer produces construction documents. These materials are then distributed to contractors, who estimate the project's expenses and submit bids to the project owner. The project owner will then assess the proposals and choose a contractor.
• Design-Build: Design-build is an alternative to design-bid-build in which the contractor assumes design and construction responsibilities and the subsequent risks associated with those phases.
• CMR or CMAR (Construction Manager at Risk): This project delivery method necessitates the construction manager to assume the maximum risk and agrees to deliver the project at a maximum guaranteed price.

 

Procurement method

The procurement method identifies how construction services, including construction management, will be obtained. There are four procurement methods which are briefly outlined below:

 

• Best value source method (BVS): In this method, the project owner selects a contractor after assessing both pricing and track record. Some other parameters, such as qualifications, time management, and human resources, are also taken into account. Therefore, a contractor with a successful track record on earlier projects always has the upper hand in this method.
• Low bid method: As the name suggests, in this method selection of the contractor is based on the lowest competitive bid. This method is particularly used by government entities and public work.
• Direct selection or sole source method: This is a process that utilizes a single bidder to fulfil all project needs. This is another kind of non-competitive procurement that can be advantageous, particularly to EPC contractors or turnkey contractors.
• Negotiated method: In the method of negotiation, no formal advertising or RFP is followed. A contractor is selected based on the pricing and technical specifications, along with past goodwill and relationship with the project owner.

 

Also read: How to win more construction contracts?

 

Contract model

A contract binds the project owner and contractor in a legally enforceable agreement during the construction project's execution. The complete terms and conditions are written down in contract documents. The contract formation takes place only when all the parties agree to the terms and conditions specified in the bid document. Here are some of the various types of contracts followed in the construction industry.

 

• Lump-sum contracts: This is one of the most prevalent contracts in the construction industry. Mostly followed in EPC contracts, this contract is also known as a fixed price contract because a fixed price bid package is agreed upon for the entire scope of work and the terms and conditions are outlined accordingly. These contracts streamline the bidding process by allowing contractors to quote a single price rather than submit different micro bids. On some occasions, the project owner goes for an integrated project delivery method. This contract can offer a significant profit margin if the contractor can accomplish the project within the budget. However, a contractor must do a diligent and accurate cost estimation before bidding on the price.
• Time and materials contracts: These contracts are most effective when the scope of work must be precisely defined. Contractors are compensated by the hour or by the cost of items utilized. The time and effort required to keep track of the time and materials used on these contracts might make them difficult to manage.
• A complete construction job may necessitate spending more time recording numbers than performing the actual work. Due to the unpredictability of construction projects, the owner may spend more than anticipated because they must compensate the contractor for any alterations and unplanned expenses.
• Cost plus contracts: As per this contract, the contractor receives the payment for all the costs incurred during the execution, along with a profit percentage determined by the total project cost. The expenses during execution consist of both direct and indirect expenses to the contractor. Compared to time and materials contracts, this method is more flexible, and the chances of facing construction cost overruns are less.
• Unit price contracts: In unit pricing contracts, the project is divided into measurement contracts, often known as units. The contractor prices the work units using the construction unit database. Then he delivers cost estimates for the individual work units, not for the entire project. These contracts are well fit for recurring work. 
• Guaranteed maximum price contracts: This contract specifies a maximum contract price for the project for the owner. Any additional expenses beyond the maximum price are borne by the contractor. However, this contract also incentivizes cost reduction and timely work finishing.

 

9 Steps to the Construction Bidding Process

The construction bidding process is a series of steps that a construction company goes through in order to win a competitive bidding contract to build a project. The process typically involves the following steps:

 

1. Identifying potential projects: The construction company will research and identify potential projects to bid on, such as new construction, renovations, or additions to existing buildings.
2. Reviewing project plans and specifications: The company will carefully review the project plans and project specifications provided by the owner to understand the scope of work, any special requirements, and any potential challenges.
3. Submitting a pre-qualification questionnaire: Many owners require potential bidders to submit a pre-qualification questionnaire before the bid proposal, or bid invitation formally opens. This questionnaire is used to assess the contractor's experience, financial stability, and ability to complete the project.
4. Requesting clarification or additional information: If the company has any questions or concerns about the project plans or specifications, they can request clarification or additional information from the owner.
5. Submitting a bid: The company will then prepare the bidding documents and submit them as a formal bid to the owner. The bid primarily includes a detailed proposal for completing the project, a schedule for completing the work, and a breakdown of the costs associated with the project.
6. Evaluating bids: Once the bid submission is complete, the owner will review all of the bids received and evaluate them based on a variety of factors, such as the company's experience, the quality of their proposal, and the overall cost of the project.
7. Bid opening and awarding the contract: Once the owner has evaluated all of the bids, they will select the winning bid and award the contract to the winning bidder.
8. Negotiating the contract: The company and the owner will then work together to finalize the contract, including any final changes to the scope of work, project specifications, schedule, or budget.
9. Starting the project: Once the contract has been finalized, the construction company can begin the work of building the project according to the plans and specifications provided by the owner.

 

Also read: Tender and Bidding Process in Construction Projects

 

4 Mistakes to Avoid in the Bidding Process

As per popular findings, a bidder is likely to win only one out of every eleven bids, especially for projects related to public works. Submitting a bid in response to a bid solicitation requires a significant amount of expenses. Hence companies must reduce their bid-hit ratio by avoiding these typical bidding mistakes.

 

Not thoroughly reviewing the bid packet - It can be tempting to speed through the bid procedure in order to meet the deadline for proposal solicitation. To avoid errors, you must carefully check all the construction documentation in the bid package. You should have a mechanism for thoroughly reviewing each RFP. We recommend creating a checklist of typical items to search for in the project specs and drawings and having a team member double-check your work.

 

Bidding on a project out of the organization's expertise - You should only bid on construction projects if your organisation has little expertise and is more prone to make errors during the bid process. The construction procedure, assuming you be awarded the contract. Any new sort of building construction has a learning curve for construction estimators and your construction management team, which can eat into your profit and reputation if mistakes are made.

 

Not visiting the site before submitting a bid proposal - Each bidder must check the project site before preparing the bidding documents. If you do not visit the location, you may overlook the travel cost or specific equipment you will need to rent or purchase for this project. In addition, if you do not attend pre-bid meetings or visit the project site, you will miss out on face-to-face time with the general contractor, which can help you create a relationship. Occasionally, the RFP and bid documents require you to attend a pre-bid job walk.

 

Improper cost estimate - A wrong bid can reduce your profit margins or keep you out of the competition. If you do not have an estimating system in place, putting together, an estimate can be difficult and complicated. And you run the danger of making the same errors in future bids.

 

How to prepare a winning construction bid?

Carefully review the RFP documents: Before you start preparing your bid, it is important to carefully review the RFP documents and make sure you understand all of the requirements and evaluation criteria. This will help you ensure that your bid proposal includes all of the necessary information and meets all of the required standards.

 

Clearly outline your qualifications and approach: Your bid proposal should clearly outline your qualifications and experience as a contractor, as well as your approach to the project. This should include information about your project team, your proposed project schedule, and your proposed project budget.

 

Emphasize your strengths and competitive advantages: Your bid proposal should highlight your strengths and competitive advantages as a contractor. This could include your experience with similar projects, your proven track record of successful project completion, or your access to specialized equipment or technology.

 

Address any potential concerns or risks: Your bid proposal should also address any potential concerns or risks that the client or government agency may have about your ability to successfully complete the project. This could include addressing any potential challenges or obstacles you may face and outlining how you will overcome them.

 

Make sure your proposal is well-written and easy to understand: Finally, it is important to ensure that your bid proposal is well-written and easy to understand. This means using clear and concise language, organizing your proposal in a logical and easy-to-follow format, and including any necessary supporting documentation or information.

 

How to find the construction project to bid on?

One way to find construction projects to bid on is to regularly check the websites of various public agencies and government portals. You can also approach private organizations directly if you are interested in bidding for a private project. Many of these organizations will post RFPs for upcoming construction projects on their websites, and they may also include general information about obtaining the RFP and bid submission.

 

Another way to find construction bidding opportunities is to sign up for email alerts or newsletters from organizations that regularly issue RFPs for construction projects. These alerts can help you stay informed about new bidding opportunities as they become available, and they can provide valuable information about the RFP process and how to submit a successful bid proposal.

 

In addition, you can also reach out to other contractors in your area and ask if they know of any upcoming construction projects that may be open for bidding. Many contractors are part of professional organizations or trade associations that can provide valuable information about bidding opportunities in your area.

 

Finally, you can also use online platforms and databases like Global Projects & Tenders Tracker by Blackridge that provide information about construction bidding opportunities. Such platforms can help you search for RFPs by location, project type, and several other criteria. You can even get the contact information to approach various contractors and companies involved in the construction projects to directly submit your proposal.

 

 

Overall, finding construction bidding opportunities can require some effort and persistence, but it can also be a valuable way to grow your business and take on new construction projects. By regularly checking for RFPs and staying informed about new opportunities, you can increase your chances of winning a construction bidding opportunity and growing your business.

 

Conclusion

Winning a construction bidding opportunity can be a major boost for a contractor's business. It can provide a steady work stream and help the contractor build a reputation for successfully completing complex construction projects. It can also provide an opportunity for the contractor to work with new clients and build valuable relationships within the construction industry.