Guide to Construction Bidding

Guide to Construction Bidding

Construction bidding is what creates and drives the entire industry. Without a bidding process, there wouldn’t be a way for contractors to compete for their fair chance at profitable contracts. In addition to creating a competitive marketplace, the bidding process is also the mechanism that allows for thorough planning and ensures accountability — especially when dealing with government contracts.

Though all contractors understand the importance of construction bidding in helping them win lucrative contracts, the process itself is complex. It can sometimes leave even the most seasoned industry veterans overwhelmed.

This guide to construction bidding will help contractors uncover the best places to find projects to bid on, get prepared for the bidding process for construction projects and discover some of the top tools for developing thorough estimates. Finally, we’ll explain some of the key considerations all contractors should look at before bidding on their next project.

Locating Construction Projects

Finding projects to bid on and winning those bids is critical to any general contractor’s business, whether they serve the residential, commercial or industrial market. But how do contractors stay in the know about what projects are coming up for bid?

For well-established companies, coming across bid opportunities is expected. Experienced and well-connected contractors are typically sent bidding invitations directly through their network of existing clients and contract partners. Unfortunately, for newer contractors, it can be challenging to find construction projects to bid on, let alone actually win. That’s why it’s important to know which construction bid sources to keep your eye on.

Today, contractors have access to platforms that publish open bids. The project owner simply goes online, uploads their project details and requirements and makes the contract open for bid. Interested contractors can compete for these contracts and may be awarded the project based on their submission.

Here are some of the places to find construction projects to bid on:

  • Governmentbids.com: A database of active federal, state and local government construction projects, GovernmentBids.com is a subscription platform you can use to search current bids in your area. Even though you do have to pay to use the platform, it’s an excellent comprehensive resource to have. Its search function allows you to comb through thousands of projects and find the types you’re looking for.

  • FedBizOpps.gov: Similar to GovernmentBids.com, Federal Business Opportunities is a national database of existing government bids. Not all of them are construction projects, but because FedBizOpps.gov has a search tool, you can refine the listings to retrieve only the specific types of construction projects you’re looking for. Unlike Governmentbids.com, FedBizOpps.gov is free to use.

  • Construction.com:Also known as Dodge Data & Analytics, Construction.com is one of the world’s leading construction resources. Using Construction.com, contractors can stay in the know about current projects up for bid. With a range of small local projects and large multi-year contracts, this comprehensive database is a vital tool that contractors can use to support their business. You can find a range of public and private projects on Construction.com. They also offer premium services for helping you manage your bids and network with project owners, suppliers and architects.

  • BidClerk.com:If you’re looking to be notified whenever a project matching certain criteria comes up for bid, then BidClerk.com is the tool for you. BidClerk.com is more than a search tool. It also allows you to set certain project parameters, save the search and then be alerted every time a project you’re interested in hits the market. This functionality also gives you a competitive edge in being the first to find out about new opportunities. Available bids listed on BidClerk.com describe complete project details, including plans, specs, addendums and other aspects of the project.

  • CMDGroup.com:Construction Market Data is a leading commercial project bidding platform that claims to have a database of over 800,000 active construction projects. It allows contractors to browse bids by state, project type or industry sector. For example, if you are an experienced hotel construction contractor, you can use CMDGroup.com to search active hotel projects in your state. With their CMD Leads function, their platform will send you project leads it has identified as suitable business opportunities for your company. CMD’s platform also conducts analyses to show you how competitive you are in the marketplace.

  • ConstructionWire.com:ConstructionWire.com is another searchable project database that can match you with new construction projects that meet your specific criteria. It also collects data and information on the industry’s leading companies or project owners that are driving new construction projects. Using ConstructionWire.com, you can search existing projects by either public or private sectors or by project type, such as civic facilities, hospitals, hotels or multi-family residential.

  • Contractor or developer websites: A final source that contractors can use to find bids is the corporate websites of contractors or developers in their areas. Usually, these companies will list current jobs and projects that are open for bid. So whether you’re a subcontractor or a general contractor, you can visit these company websites to scout upcoming and current projects that may be a great business opportunity for you.

Even though you may find there are lots of construction projects available to bid on, it’s important not to be tempted by the sheer volume of opportunity. It’s critical for contractors to know their strengths and stick to bids they’re capable of fulfilling. You don’t want to get caught in the trap of taking on contracts that are out of your scope or are too costly to perform. Many contractors end up losing money on projects by taking on work they weren’t prepared for.

To avoid getting caught in bids you’re unprepared for, it’s crucial to have a solid understanding of the construction bidding process and what’s required with each project.

The Construction Bidding Process

Construction bidding, whether it’s in the private or public sector, follows a certain process for receiving, evaluating and selecting bids. Since government projects are highly regulated, their bidding process will be much more formal and cumbersome. Expect a lot of paperwork and a lengthy evaluation step. Typically, private projects try to move as quickly as possible through the bidding process, though this isn’t always the case.

In general, here are the four steps you can expect as part of the construction bidding process:

1. Bid Solicitation

Bid solicitation is the initial bid request step. It’s what happens when the project owner publishes their project details and opens it up for bid acceptance. Bid solicitation takes many forms:

  • Request for Information (RFI): When the project owner is not yet ready to proceed with a bidding process, they may send out an initial RFI to contractors and vendors. RFIs help the project owner define their project details more specifically and gather fundamental information about how contractors can help. If you respond to an RFI, it doesn’t necessarily mean you will be selected at the end of the formal bidding process. Many project owners use this step to shortlist their future bidders.

  • Request for Proposal (RFP): Bid solicitation may involve sending out an RFP or an Invitation for Bid (IFB) directly to a few select contractors or openly on a public platform. An RFP is a formal and rigorous bid solicitation form, and it often has strict deadlines and other requirements that contractors must follow. Project owners use the RFP process to gather information from each bidder on how they would complete the project and how much it would cost.

  • Request for Tender (RFT): Similar to the RFP process, RFT is quite a structured and formal process. However, unlike with the RFP, the RFT project is already clearly defined, and bidders won’t necessarily be proposing how they would complete a project. Instead, contractors who respond to RFTs outline detailed costs and other factors specific to the project.

2. Bid Submission

Bid submission is when the contractor submits their response to the RFP or RFT or other formal bid format. Typically in a bid submission, the contractor will include pertinent information such as:

  • Company details like the company name, contact information and business license.

  • Their portfolio and qualifications like past projects and experience in managing similar projects. Contractors should use this opportunity to demonstrate their track record of successful project management, such as their ability to stay on time and on budget.

  • Their project plan and a proposal as to how they will go about managing the project, including the procurement of labor, materials, equipment and other services.

  • Cost estimates that clearly outline all expected costs involved in the project, such as overhead and contingency, as well as the contractor’s fee of profit margin. Knowing how to estimate construction costs properly is critical to submitting a winning bid.

Your bid submission is the single most important document that you need to win projects. It’s what the project owner uses to evaluate your qualifications and assess the value you’ll bring to the project. It’s also what they use to compare you to your competitors. Your bid submission should be as thorough and as professional as possible to give you a competitive edge.

3. Bid Selection

Once you’ve submitted your bid, there’s nothing more you can do. The process now moves into the bid selection step, which happens after the deadline closes and all bids have been submitted. During the selection step, project owners will evaluate each bid and make their choice.

During bid selection, project owners look primarily at these two factors:

  • Price:All government contracts automatically go to the lowest bidder. This is to remain financially accountable and to not show any favoritism to certain companies looking for higher profit margins. However, in the private sector, bids will certainly be evaluated on cost, but it may not be the primary deciding factor. Private companies typically look at value vs. cost.

  • Qualifications: It’s incredibly important for contractors to have the full range of qualifications needed to deliver the project. Project management is a diverse field of work, requiring excellent communication, budgeting, planning, organizing and leadership skills. A contractor who demonstrates excellent skills and abilities at the most reasonable cost will likely win out.

4. Contract Formation

Once the project owner has selected the winning bidder, the next step is to establish a contract between the two parties. Depending on the project type and whether it’s a public or private project, there may be room for negotiation between the owner and the contractor.

Factors to negotiate on might include timeline and milestone delivery, as well as materials and costs. At this point, the parties can also negotiate terms related to when and how often the project owner will make payments. Once both parties agree upon the contract, they sign it (with legal counsel), and the project can get underway.

Construction Bidding Software and Tools

Construction cost estimating is a complex calculation, and the bigger the project, the more detailed your costs need to be. If you were to come up with a list of costs on your own, you’d be sure to miss something, which is why a contingency fund is so important.

But relying on a back-up budget isn’t always a surefire way of preventing cost overrun and obtaining an accurate bid price. It’s much safer to rely on software and tools that will help you address all potential costs so that you can come up with an accurate estimate. When you do win your construction bid, you’ll be much more confident in your calculations, and at the end of the project, you’ll walk away with the margins you projected.

With today’s technology, you have countless options for construction estimating software and tools, making it easier than ever to submit competitive bids. These software programs range in functions and capabilities from small-business to enterprise-level needs, and many programs are designed specifically for certain types of contractors, such as general building, HVAC, plumbing or other specialties.

Here are some of the helpful functions you’ll find in various construction estimating tools and software:

  • Up-to-date cost database: Many online tools and programs keep databases of construction material and labor costs. These costs get updated regularly as market conditions change. Because of this, you always have a current cost projection for your materials and labor that you can factor into your estimate.

  • What-if analysis:Construction bidding software allows you to enter various scenarios into the program to generate corresponding costs. For example, you can see how a change in the project completion date would impact your costs. This what-if analysis feature helps you to budget the project more accurately by planning for potential events.

  • Visual estimating: One helpful feature that these construction bidding software programs offer is the ability to visually select one part of the physical project. This allows you to go section by section throughout the building or project and estimate your costs accordingly. Being able to account for costs visually can be helpful in thoroughly assessing the project estimate.

  • Templates: As you start to use your software more and more, you can build templates. Using templates allows you to plug in pre-programmed costs of projects you commonly take on.

  • Proposal generator: Comprehensive construction bidding software will perform the most important function of the entire estimating process — generating the final proposal for you. The software will take all the costs you’ve estimated and present them in a final professional bid proposal that you can submit directly.

Depending on the software, you might also get other helpful features like contact management, project calendars and subcontractor management. You’ll find a range of prices and service levels, but generally, most software programs and tools are billed at a monthly or annual rate.

Considerations for Construction Project Bidding

When preparing a bid for a construction project, it’s critical to understand the core elements that shape how a construction project will unfold. These different influences must be factored into your final bid for it to have the best chance of being selected. The project owner assesses these factors and evaluates how the project will proceed. They also use these factors to determine the level of risk involved in proceeding with one bidder over another. The better bidders understand the factors that influence a project owner’s decision, the better their chance of successful bidding.

When preparing a construction project bid, it’s important to consider these four keys bid influences.

1. Delivery Method

The delivery method is how the project moves from its initial concept to its completion. Different delivery methods require different contract types as each one defines how the contractor and the project owner will work together. The delivery method greatly determines a contractor’s costs because each one sets out a different level of involvement the contractor will take on.

Here are the main types of construction delivery methods:

  • Design-Bid-Build (DBB): This is the most common delivery method used in construction. In the DBB delivery method, the owner contracts with the designer first and then the contractor separately, meaning the contractor doesn’t need to factor in design costs.

  • Design-Build (DB): In the Design-Build delivery method, the process is broken down into two phases, where the contractor is responsible for overseeing the initial design as well as the build.

  • Construction Management at Risk (CMR): Similar to the DBB method, the CMR method has three distinct phases — design, bid and build. However, the CMR will work with the designer and consult with the owner. As such, they determine a more comprehensive cost estimate that will include partial design and consulting work.

  • Integrated Project Delivery (IPD):The most collaborative approach to construction delivery, the IPD method involves the owner, contractor and designer working together as one entity. They structure the contract to incentivize all parties to work equally together in obtaining the project goals.

2. Procurement Method

The procurement method is how the project owner decides which bid to select. It’s important for the bidder to understand how the owner will make their decision because it will affect how they estimate their project. Here are some examples of how a project owner may procure a project:

  • Lowest bid: The owner will automatically select the lowest bid entered, despite qualifications or value.

  • Best value: The bidder with the best compromise between price and qualifications wins.

  • Qualifications: Regardless of price, the owner will select whoever is best qualified for the job.

  • Negotiated: After bidders have been shortlisted, the project owner will negotiate with each one to obtain the final contract.

  • Sole source: There is only one known expert or supplier available and, therefore, there is no competitive bidding process to undergo.

3. Contract Type

Before considering your bid on a project, you must look at what the owner has in mind for their preferred contract type. The contract type sets out how you will be paid. Here are the most common types of construction contracts:

  • Cost-plus: The owner covers the entire cost of the project and pays a percentage of that cost to the contractor as their management fee.

  • Lump-sum: The owner provides an initial one lump-sum payment at a fixed price that the contractor then uses to finance the project.

  • Guaranteed maximum price: The owner sets out a maximum price they will pay for the project, and the contractor must budget the costs and their profit to fit within that price.

  • Time and materials: The contractor agrees to cover the cost of materials and be reimbursed by the owner for these costs plus the amount of time they worked.

4. Project Costs

Factoring in a complete and comprehensive list of project costs is vital to coming up with an accurate bid. Project costs to consider include direct costs like labor, equipment and materials, as well as indirect costs like professional fees, permits and services. Direct costs are usually the most obvious items to factor into an estimate, but they are highly variable. The best way to keep your project costs under control is to make them as predictable as possible.

One example of keeping your costs predictable is by renting your equipment. With equipment rentals, you have much better control over project costs and can formulate accurate estimates. Your rental supplier will give you a fixed quote for your rental term. It will include site delivery and pick-up fees, maintenance and service costs, as well as the equipment rental itself.

Whether you need to price out earthmoving equipment for a commercial building project or roadwork equipment for a highway construction project, you can easily factor in your equipment costs when you rent your machines for each project.

Maximize Your Construction Bid With Cat® Rental Equipment

Bidding on construction projects is no easy task. With costs as unpredictable as ever and the marketplace becoming more and more competitive, contractors need reliable partners to help them control costs and deliver their projects on-time and on-budget.

Partnering with The Cat® Rental Store is the easy choice for getting accurate equipment cost quotes and winning your next bid. By renting your equipment, you’re always guaranteed a fixed price, making project-estimating that much smoother.

For an accurate and honest equipment rental quote, contact The Cat Rental Store today. Call us at 1-800-RENT-CAT or contact us online.

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