To get rewarded enough construction projects, it’s crucial to actively bid on construction jobs. This is an important process for keeping the pipelines busy and ensuring enough cash to fund operations and pay the team for the whole year.
Unfortunately, in an aggressive market of construction bidding, statistics show General Contractors only have an average of a 6:1 bid-hit ratio. For some, it can be as low as 35:1. This means that for every 35 bids, some General Contractors only get rewarded with one project.
Considering that construction firms can spend as much as $66,816 per person annually just for the precon and bidding process, a 35:1 bid-hit ratio can make it difficult to grow a stable and profitable construction business.
To grow a profitable construction firm, the key is to streamline the bidding process. The challenge is, it’s not always easy to bid on construction jobs.
General contractors could spend over three months and thousands of dollars in preparation with no guarantee of winning the bid. The process also requires multiple competencies such as:
Identifying the “right projects” with higher success potential
Awareness of market forces, necessary costs, and competitor prices
Optimal speed for bid completion to submit more bids annually
Strategic use of construction technology to streamline the pre-construction process
Ability to complete accurate quantity takeoffs in less time
In the U.S. alone, the construction industry is filled with over 70,000 contracting companies with a construction output of $1.9 trillion in 2019. Globally, it’s expected to reach $12.9 trillion USD in 2022.
Hence, to adapt to the rising competition, general contractor firms require effective strategies to streamline the construction bidding process. Read further to learn more.
Identify the Difference Between Bidding and Estimating
Bidding and estimating are two concepts that are used interchangeably. This is because, for smaller firms, the two processes are often done by one person. In reality, these are two different processes that require two different skill sets.
For example, to bid on construction jobs, the focus is placed on creating a proposal for a potential client to develop the construction of a structure. The goal of this process is to calculate the final price to charge the client. It involves making decisions on where to take the construction business next, and which projects to bid on for long-term profitability. It’s a strategic activity that requires strong leadership and decision-making skills.
In comparison, estimation is the process of forecasting the expenses of building the physical structure. The goal is to calculate the internal costs. It involves making decisions that center on preventing cost overruns and ensuring accurate estimations. It’s a tactical activity that requires a decisive attitude and strong managerial skills.
To win more bids and improve the bid-hit ratio, a general contractor must seamlessly navigate between the process of bidding, cost estimating, and then crafting the proposal. Being able to derive the required skills to accomplish each part of the process is crucial.
Find Construction Jobs To Bid On
Choosing Between Government and Private Projects
Before choosing the next construction project to bid on, it’s important to decide whether to work on government projects or private construction projects. Read further to learn about the difference between the two sectors.
Government projects - Any construction project under formal contract with any government authority, such as a state or city, is considered a government project. These projects are required by law to conduct open and competitive bids to prevent corruption, mismanagement of public funds, and drive competition with the public interest in mind.
Private projects - Private construction projects are commissioned and paid for by private institutions, and building owners. They are initiated and managed by any entity other than the city. Often, private construction projects conduct closed or no bids at all.
Observe the table below to weigh the pros and cons of the two.
Finding Government Construction Projects
Engage With the General Services Administration or (GSA) And Other Bidding Sites
The General Services Administration (GSA) provides workplaces through the construction and preservation of government buildings. Through its Public Buildings Service, the GSA procures design and construction services. Meanwhile, over 130 federal governments are listed on Federal Business Opportunities website. To view these Federal construction opportunities, General Contractors must first register with SAM.
System for Award Management (SAM) Registration
The System for Award Management or SAM is a site that manages all award procedures and federal acquisitions. To follow public construction opportunities, get registered in SAM, use the various functionalities of the site, and join the contract’s interested vendors list. Note that it might take a few weeks to gather the necessary information and activate the SAM registration.
Engage With the Procurement Office or Division of Purchasing
On a state level, to find bid opportunities, general contracting firms can visit the state's Division of Purchasing or Procurement Office. Simply sign up to be notified when construction bids are available.
Explore Free and Paid Bid Websites
Construction firms can also visit websites that list local, municipal and state construction opportunities such as:
Construction bidding sites are some of the fastest methods to find and bid on construction jobs. Simply create a free or paid account and set filters by location, and industry to find relevant construction bidding opportunities. Some of these bidding sites are:
Visit events or conferences to expand the firm’s professional circle. Join conferences, meetings, events, and seminars to establish new connections that might present new opportunities. Explore ways to help the new established connections to nurture the relationship.
Practice Strategic Cold Communication
Take the initiative to reach out to key decision-makers by sending an email, making a call or reaching out over LinkedIn. Secure an informal meeting to further learn about their company, projects and needs.
Nurturing the firm’s current professional circle enables the establishment of new working relationships through word of mouth and referrals.
Steps To Bid on Construction Jobs
The project owner sends out an Invitation for Bid (IFB) or Request for Proposals (RFP). The document lays out important details such as:
Project specifications, Plans and Drawings
Some project owners may also require more data on the prospective contractor’s company history through a Request for Qualifications (RFQs).
General contractors may outsource tasks like mechanical, electrical, and plumbing works to specialists called subcontractors. Depending on the contract terms of the project, the general contractor may seek bids or quotes from subcontractors before or after winning the bid. The quotes can come in the form of bid package including project drawings and specs.
Before requesting bids from subcontractors, clearly define the scope of services required to avoid unnecessary and overlapping costs. Before awarding the project, carefully evaluate their bids and ensure the prices are accurate.
This step includes projecting the total cost of the work needed to complete the construction project. It includes the cost of subcontractors, General Contractors, overhead and profit. Ensuring an accurate cost estimate should result in profits for all parties involved and prevent cost overruns in the progression of the project.
The process is as follows:
By interacting with other parties involved, such as the architect and project owner, familiarize with the project scope and timeline.
Carefully examine the blueprints, determine all materials required to complete the project and set a projected timeline for the project completion.
Identify the labor requirements and costs for the project by engaging with subcontractors and construction managers.
Present the cost estimates and the data supporting it in a clear and readable manner.
The bid submission should include the bidder’s relevant business information such as track record for completing projects on time and within budget. Ensure accurate takeoffs that offer the best quality at the most reasonable price.
Bid Review and Selection
At this stage, the project owner evaluates the bids and decide who to award the project. The selection process varies between government and private projects. For government construction projects, rules ensure that the lowest bidder gets awarded the project. The price becomes the primary criterion to prevent fraud or fund exploitations. For private projects, the owners still value price but it’s not the sole determining factor.
The final step in the bidding process is contract formation, which involves finalizing the legal grounds for the project. To mitigate risks and provide certainty, a legally binding and enforceable contract is created to execute the project within the limits of the bid proposal.
Things to Consider To Bid on Construction Jobs
Choose Profitable Projects
Putting together a winning proposal can require weeks to months of preparation and thousands of dollars in investment. That is why it’s important to invest these resources on projects with the following characteristics:
The project must position the construction firm in a higher winning potential
The project may result in repeat business and future projects
The project is within the construction firm’s expertise or niche
To choose projects wisely, review solicitations, and conditions meticulously. Assess if the construction firm has all the resources needed to undertake the project.
Identify the Project Delivery Method
Before submitting a bid on a project, first identify the delivery method used. The method used is often dictated by the project owner's budget, schedule, building design, and risk management process. Read further to learn more about each project delivery method:
Design-Bid-Build (DBB) - This is considered the traditional project delivery method wherein the project owner contracts with separate vendors for the design and construction of the project.
Design-Build (DB) - In this method, the design and construction services are delivered by a single entity called the design-build contractor.
Integrated Project Delivery - This method requires the involvement of all parties through all stages of design, manufacturing, and construction.
Construction Management at Risk (CMR) - In this method, the construction manager is required to fulfill the project within a Guaranteed Maximum Price or GMP.
Identify the Procurement Method
Once the contractor has assessed the project type, the next stage is to determine the procurement of construction services. Multiple factors affect the procurement method including project complexity and size. Read further to learn more about each procurement method.
Lowest bid - Usually found in government projects, this method is highly competitive with the lowest bidder automatically awarded the job.
Best Value - In this method, price is not a major factor in the bid selection. Instead, the job is awarded to the bidder with the specific performance qualifications required for the success of the project.
Negotiated - In this method, the project owner approaches a prospective contractor based on previous relationship or track record. Then, the two parties negotiate the final price and the terms of the contract.
Sole source - Under this method, only a single contractor provide the commodities or services required to fulfill the construction project because no other source is known.
Identify the Contract Model
When assessing construction projects, it’s important to evaluate which contract type gives the best return. The contract model determines the scope of the project and how payments will be distributed. Read further to learn more about each model:
Guaranteed Maximum Price (GMP) - Under this model, the contractor fits the project costs and profit within the maximum price specified by the project owner.
Lump Sum - In this contract type, the contractor must fulfill the project at a predetermined, set price.
Reimbursable - Under this contract model, the contractor is compensated for the actual costs they spend in carrying out the project, plus an additional fee.
Creating the Proposal
After a clear understanding of the bidding process, it's time to develop the proposal. Read further to learn how to craft a winning proposal:
Include the Critical Information - Include crucial information such as the overall project scope, timeline, payment terms, and breakdown of costs. Make sure to comply if there’s a specific order, time frame, and structure required for the proposal.
Review Past Awards - To identify the type of information the agency or project owner is looking for, review their past awards. Get a sense of the usual style and formatting, and use this information when crafting the proposal.
Personalize the Proposal - Instead of creating a general proposal, highlight how their needs and problems can be solved through the working relationship. Be specific about numbers, respond to their specific concerns and showcase past success in the area.
Showcase Understanding of the job - In the scope, demonstrate understanding of the project by crafting a complete summary of its every element. This includes needed materials, the number of workers, tools, and other resources.
Communicate Concerns or Potential Risks- Upon visiting the site, seeking clarification, and reviewing the RFP, communicate any concerns, potential risks or adjustments needed in the project.
Set an Accurate Timeline - Clients pay more each day a project is delayed. To increase the project owner’s confidence in the firm’s ability to meet deadlines, include an end-to-end schedule involving every stage of the construction process.
Accurate Cost Estimates - An inaccurate cost estimate is one of the leading causes of cost overruns and change orders. To ensure an accurate estimation of direct and indirect costs of materials, and labor, use AI-powered software such as Togal.AI.
Summarize the Critical Aspects of the Proposal - Because the project owners could evaluate hundreds of proposals, it’s critical to recap the most important aspects of the proposal, especially the estimate.
Submit Competitive Bids With Technology - Eliminate the extra overhead and thousands of dollars in pre-construction expenses by finishing takeoffs in seconds using Togal.AI. This AI estimating software enables General Contractors to become top-of-mind by submitting fast and competitive bids.
Submit the Proposal - After reviewing all the necessary information, proofreading, and branding the proposal, it’s ready to be submitted.
Monitor Success Rate - Continuously optimize the bidding process by tracking and evaluating which approach is working.
It’s crucial for firms to actively bid on construction jobs to maintain long-term stability and profitability. Unfortunately, statistics show that the construction industry is becoming more competitive with over 70,000 contracting companies in the U.S. alone in 2019.
Construction firms must consistently craft competitive proposals to win more bids. To achieve this, it’s important to execute the following process:
Familiarize the specific skills needed for bidding and estimating.
Choose between bidding on government construction projects and private construction projects.
Find construction projects by registering at bidding sites and expanding the firm’s professional circle.
Develop a deep understanding of the bidding process from solicitation to contract formation.
Filter solicitations and only choose profitable projects.
Assess the different factors that can impact the bidding process such as the project delivery method, procurement method, and contract model.
Create a winning and competitive proposal with the help of technology that enables accurate estimates and competitive pricing.