Putting together a winning bid proposal, or even a competitive one, takes knowledge and skill. It’s a bit more complicated than just putting some numbers together and hoping for the best.
Good bid preparation requires a lot of time and effort and involves everything from reading and fully understanding the plans and specifications to accurately estimating costs for labor, materials and equipment.
Making even the smallest mistake can mean the difference between submitting a winning bid and missing out on a coveted and profitable project. We’ve put together our top 10 tips for submitting better bids.
Select the Right Projects to Bid
You don’t have to bid on every job you come across. Winning jobs your company can’t adequately perform can be just as costly as not winning them. Remember, it is never too late to abandon a bid you are working on. For example, let’s say you have purchased plans, attended the pre-bid meeting, done your takeoffs and started taking subcontractor pricing.
Once you start crunching the numbers you realize that your company won’t make a reasonable profit if you were to win the contract. The best thing to do is dump it and move on to the next project.
If at any time during your bid preparation you realize that your company cannot adequately handle the scope and requirements of the project, you need to make the smart business decision to walk away from the bid. Finding the right balance between bidding and winning enough jobs can be difficult.
On the one hand, you don’t want to bid and win so much work that you can’t properly manage and complete the projects you’ve been awarded. You also don’t want too little work that you aren’t making any money and your workers aren’t staying busy. Selecting the right work to bid is vital to maintaining a profitable business.
Visit the Site and Attend Pre-Bid Meetings
Having a good understanding of the existing site conditions can eliminate problems down the line should you be awarded a project. Unique site conditions like limited accessibility or a location that would require additional costs on items like transportation, equipment, material storage and labor could exist. Failing to visit the site would leave you unaware that these conditions exist and that additional costs need to be factored into your bid which would cut into your profitability.
Many times a pre-bid meeting will be held at the construction site or a site visit will be held directly following a pre-bid meeting. Pre-bid meetings are held to in order for the project team to answer questions regarding plans and specifications, site conditions and specific project details.
Failing to attend a pre-bid meeting means you miss out on the best opportunity to get clarification on the requirements of the project. It could be the only chance you get to walk around the site and get a better understanding of exactly what you will be dealing with. If the pre-bid meeting is mandatory, failing to attend would result in not being able to even bid on the project.
When preparing a bid proposal you want to have as much information as possible in order to submit a competitive bid and refusing to attend a pre-bid meeting or a site visit will put you at a severe disadvantage.
When preparing a bid you need to do your due diligence to ensure that you have all the pertinent information, that the information is accurate and that you have a complete understanding of this information. This means fully reviewing the plans and specifications to determine everything required to bid the project and complete the work.
This includes knowing everything from what bonds are required to whether or not there are participation goals for minority business enterprises (MBEs) or if material substitutions are allowed in the bid. If you are unsure of any aspect of the project when preparing your bid, you need to seek clarification the architect, owner or owner’s representative.
Be aware that there are typically cut-off dates in place for questions to be submitted. This allows for any changes to the plans or specifications to be made and for any addenda to be issued to the bidders.
If you are unclear on any aspect of the project the onus is on you to get clarification. Making assumptions is no way to submit a winning bid. If you aren’t able to get your questions answered to your satisfaction, you might want to reconsider bidding the project.
Perform Accurate Takeoffs and Measurements
Take the time to fully review the plans and specifications to determine accurate measurements and takeoffs. This will result in correct construction costs when calculating your bid. Takeoff software can ensure that correct measurements are obtained in order to submit an accurate bid.
Inaccurate measurements will cause you to miscalculate the amount of building materials and labor needed to complete the job which in turn will lead to either over- or underestimating your construction costs. Using the right units of measure is also important when calculating your bid. Using square feet when you should have used square yards or vice versa can drastically affect your estimated costs.
Make sure that you are taking measurements from the right place. Often the plans will instruct you not to scale the drawings or direct you to use the written or calculated dimensions provided in the specifications. This often occurs when electronic documents are used because enlarging or shrinking the size of a drawing to in order to print them can result in the scale being incorrect. If there is ever any doubt as to where to take your measurements from you should contact the architect for clarification.
Avoid Arithmetic Errors
Errors with your math can have a devastating impact on your bid. Arithmetic errors can result in your bid being under or over the actual cost of completing the job. Manual calculations can easily result in arithmetic errors. Always use a calculator or some type of construction bid software to ensure that your calculations are accurate.
If you are using bid software or a calculator errors can typically be attributed to not inputting your numbers correctly. If you are using a spreadsheet like Excel to calculate costs, check that your formulas are correct.
Always double-check your math to make sure that all you numbers and calculations are correct. This is another one of those instances where having another set of eyes to look over your figures and calculation can help prevent costly mistakes.
Evaluate Subcontractors & Subcontractor Pricing
Getting subcontractor pricing can be complicated. You want competitive prices from your subcontractors but you also want some assurance that they can perform the work required. This is true whether it is a subcontractor you are using for the first time or one that you have worked with for years.
One solution is to set up a prequalification process for subcontractors who wish to work with you. This allows you to have a better understanding of the type of work they are capable of performing by evaluating their quality and performance on past projects.
At a minimum, you should get bids from at least three different companies for each trade you will need to subcontract out work for to ensure you are getting competitive prices. Carefully review and evaluate every subcontractor bid to make sure that the prices quoted are complete and accurate.
When requesting bids from subcontractors, clearly define the scope of work that the subcontractor is expected to perform. Failing to do this can result in unnecessary costs being added to your bid from an overlap of work being bid by both you and your subcontractor.
Identify and Manage Risks
Every construction project comes with its own unique set of risks. Identifying and managing risks is probably the most overlooked aspect of preparing a bid. Once you’ve identified the potential risks, you need to analyze and evaluate each one individually so that they can be properly managed and mitigated.
Take into account the probability of each identified risk and the impact it can have on the project. A low probability risk with a low impact might be easy to mitigate, but a high probability risk with a high impact that you can’t effectively manage could be detrimental to the profitability of the project. Identifying and evaluating possible risks associated with a project when preparing a bid will make you better prepared to handle a situation when something goes wrong.
Accurately estimating labor costs can be one of the most difficult aspects to preparing your bid. To determine your labor costs you have to factor in hourly wage rates with the number of man-hours a specific task will take to complete. You also have to take into account the productivity and experience of your workers.
Employee turnover, absences and injuries can all affect your actual labor costs. More experienced workers may be able to complete tasks quickly which would reduce the number of man-hours needed, but you will have to pay a higher rate for their services. Workers with less experience will require more man-hours to complete a job but you can pay those workers a lower wage.
Wage rates can vary greatly from state to state and even from county to county. It is important to understand what, if any, wage rates apply to the project you are bidding in order to incorporate those rates into calculating your labor costs.
Wage rate determination is required on all federal government construction projects as mandated by the Davis-Bacon Act. Wage rates are determined by the location of the project and the type of construction being performed.
Many states also have prevailing wage laws for public construction projects. Always check the current prevailing wage rates where the construction is taking place so you can accurately determine your labor costs. When determining your labor costs remember to factor any projected overtime needs as the wage rates for overtime hours worked can be as much as double the prevailing wage rate.
Materials and Equipment Costs
Costs for building materials and supplies can change rapidly and can vary greatly in different parts of the country. If specialty materials are required that you aren’t familiar with you shouldn’t assume that the cost is comparable to similar items. Your best bet is to call around to local suppliers to get up-to-date costs for materials and delivery.
You also need to make sure that the building materials and supplies required in the specifications are clearly defined so your pricing is correct. If you are uncertain of the materials being requested in the specifications you should always get clarification from the architect, owner or owner’s representative.
When putting a bid together you need to make sure that you have all the necessary equipment needed to perform the work. This may mean you have to rent or purchase additional equipment. Even if your company owns all the equipment needed you need to make sure that it isn’t already allocated for use at another jobsite and that no major maintenance or repairs are scheduled that would take the equipment offline for an extended amount of time.
Make sure that the equipment is in good working order and operating at peak performance which might otherwise cause delays in your construction schedule. Equipment that isn’t optimally performing can increase the time it takes to complete certain tasks. Unexpectedly having to rent additional equipment or face delays can negatively affect the bottom line on a project. Remember to factor in fuel costs to operate the machinery and to transport the equipment to the jobsite.
Incomplete Bid Forms and Documents
Failing to fully complete the bid form and submit all required documents is a surefire way to get what might otherwise be a winning bid rejected. Required documents and paperwork can be anything from bid bonds to acknowledging receipt of any addenda.
A good way to ensure that you have all the required paperwork for your bid is to use a checklist as you prepare your bid and then go back and double-check to make sure that everything is included. It never hurts to get another set of eyes to look over the bid proposal to make sure nothing has been forgotten before you submit your bid.
There are a few other requirements that go along with preparing your bid that can get your bid rejected if you don’t comply with them or simply overlook them. The first is to get prequalified to bid a project when it is required. The second is to attend all mandatory pre-bid meeting and site visits. The third and most important of these is submitting your bid by the due date and time. All of these requirements will be clearly stated in the bid.
Construction Bid Proposal: Not an Easy Task
Preparing a construction bid proposal is no easy task. A competitive and winning bid proposal requires a lot of time and attention to detail. Making mistakes can lead to submitting a lot of overpriced, uncompetitive bids or worse a lot of underpriced bids that you win but make no profit on.
The key to winning more bids is being able to accurately estimate all costs required to complete the job while factoring in a reasonable profit for you company.