General contractors struggle with winning new construction projects and remaining competitive in an aggressive market. A winning proposal can be complicated and time-consuming to put together. The bottlenecks in the estimating process significantly delay the general contractor's ability to respond quickly to the owner's request for proposals. Removing the bottlenecks in the estimation process will allow the general contractor to reduce expenses while also winning more work.
This article includes the following:
- Learn how to win more construction work
- Reduce overhead expenses and increase time savings by leveraging new construction technology
- Respond to more proposals by increasing the efficiency of the pre-construction team
The Bidding Process
Step 1 - Owner Provides the Drawing Set
Initially, an owner invites construction companies to provide an estimate for construction with detailed instructions called the “Request for Proposal'' (RFP). The general contractor will review the plans to determine the scope of work. Construction RFPs will include the following:
1. General Information
This is basic information such as the clients name, tentative scope of work and budget.
2. Type of Contract
The type of contract that will govern the project will be provided. For example, the most widely used contract is from the American Institute of Architects (AIA).
3. Requirements Upon Submission
The proposal requirements and details for submission will be included.
Step 2 - Estimate of Project Cost
The most time-consuming part of the bidding process is when the general contractor sends the drawings out to the sub-contractors to submit their bids for the work. Each scope of work will need bids from at least 3 different sub-contractors. The estimator must coordinate between many trades and be proactive to ensure that the necessary bids are received. An estimator can spend weeks to months estimating the project costs with no certainty of winning the project.
Below are two parts of estimating project costs:
1. Material Takeoff
The estimator will evaluate the cost based on the size of the job and the raw materials needed to complete the project. This process takes an average of 7 days to complete depending on the size of the project.
2. Cost Estimation
An estimator must account for the cost of everything that will be needed for the project. The estimator will also apply a price to all materials that were accounted for on the takeoff. This process takes an average of 12 days.
Step 3 - Bidding
After the cost estimate is completed, the general contractor will submit their proposal. Account for the following when submitting a proposal:
1. The proposal is a reflection of the company.
The proposal should be professional and should be in line with the branding of the company.
2. All requirements are met.
Following the required formatting and requirements are necessary to present well in front of the owner and to respond according to their needs for the project. Formatting is important for the owner so that they can evaluate and compare all proposals most easily. If a company's proposal is not formatted according to their specifications, they may not take the extra effort to evaluate it.
3. Include all pertinent information.
Include documents that can justify the pricing presented. The owner can use these documents as a reference. Examples include previous projects, experience, case studies, track records, and management plans.
Step 4 - Project Awarded
After taking the time to evaluate all proposals, the owner will award the project to one general contractor. Influencing factors to the owners decision are as follows:
1. Estimated Costs
The lowest bidder does not always win the bid. Many factors contribute to the price provided and the owner must ensure the general contractor accounted for the entire scope of work without missing any details. The lowest bidders may be eliminated if they did not account for the entire scope and subsequently carry more risk.
2. Track Record
The owner will look at a general contractor's previous projects as an example of the work to be provided.
3. Experience on Similar Projects
Similar projects completed by a general contractor will provide examples for the owner and facilitate the evaluation of whether a general contractor can properly complete the scope of work.
The Bottleneck to Winning Projects
To ensure effective allocation of resources, below are the common bottlenecks of the bidding process:
Bottleneck #1- Bidding on the Wrong Projects
With months and thousands of dollars spent preparing a proposal, a general contractor must be selective on which projects they will respond to based on their likelihood for success.
Solution: Scrutinize RFP’s According to the Probability for Success
After reviewing the RFPand gaining an understanding of the scope of work, evaluate the following points:
- Is the scope of work manageable and in line with past projects
- Will the project yield an acceptable profit
It is important to be selective on which RFP’s to respond to as each response takes ample time and financial resources to prepare.
Bottleneck #2 - Failing to Meet the Requirements
Missing a requirement can be frustrating to project owners. Failing to properly read the RFP indicates to the owner that the general contractor does not have attention to detail. Important requirements include:
- Required list of documents to submit
- Pre-Construction meetings
Solution: Create a checklist of the requirements.
Include all documents needed including the company's prior track record. Check if there is a pre-qualification process or if pre-construction meetings are required.
Reading the RFP document and creating a checklist will ensure that crucial requirements are not missed.
Bottleneck #3 - Responding Late
While missing the deadline is a surefire way to get rejected, simply submitting a bid on time is not enough to win. The most important aspect is that the numbers are in range for the scope of work and what the owner is expecting.
Numerous other bidders will be competing for the same project. A company must strive to stand out and gain the attention of the project owner or decision maker.
It is important to submit on time without sacrificing the quality and accuracy of the proposal.
Solution: Use AI estimating software
Takeoffs can be done in seconds when leveraging modern technology and the latest software tools available on the market. Togal.AI is the fastest estimating takeoff software that leverages artificial intelligence to conduct takeoffs automatically. The tedious task of drawing polygons and counting objects is completely automated. Togal.AI facilitates the general contractor to be able to respond to more requests for proposals, faster than competitors.
Deep learning construction A.I. learns and improves each time a takeoff is done. The more a customer uses the software, the faster and more accurate it becomes.
Imagine cutting 98% off the takeoff processing time. Submitting an accurate proposal faster than competitors allows a company to stand out and appear more competent. Book a demo with Togal.AI by clicking here.
Bottleneck #4 - Not Submitting Enough Proposals
Winning is a numbers game - the more submissions, the higher the chance of winning.
Unfortunately, preparing bids could take weeks, even months. Spending thousands of dollars on manpower to submit proposals faster is not feasible. Often, employees are spread thin and overwhelmed with their existing workload.
Solution: Utilize automated software
Togal.AI facilitates the estimator to be able to do more with less. Tedious tasks are automated so that estimators solely need to make minor edits. Having the ability to respond to more proposals can transform a general contractor’s business.
Bottleneck 5 - Inaccuracy
Inaccurate estimates are the number one cause of cost overruns. Profits are gained or lost depending on the accuracy of the estimate. Too high of a bid can lose a project, too low can cause financial hardship or even bankruptcy.
Solution: Ensure accuracy of takeoffs and prepare contingency plans
Here are three steps to a more accurate estimate:
1. Conduct a site visit
By visiting the job site, unique conditions can be identified and additional costs can be allocated for challenging site logistics.
2. Ensure an accurate take-off
Manual take-offs are prone to human error. Togal.AI eliminates the laborious process and provides a more accurate takeoff.
3. Manage risks
- Every construction project has risks. High-risk projects should be a signal to abandon the bid. If choosing to proceed with a high risk project, create an estimate for contingencies. Identify how to mitigate risks and how costs may be impacted.
- Ensure trade partners being subcontracted are capable of performing their scope of work
- Account for all necessary insurance, fees, and shipping costs
Bottleneck #6 - Focusing on the Wrong Area
Most seasoned estimators will spend 40-60% of their time conducting take offs. While take offs are a necessary part of the process, there is little value being generated during the process. The value comes with scoping, value engineering and identifying the correct trade partners. Removing 40-60% of time wasted doing take offs can allow an estimator to focus on the tasks that provide most value.
Solution: Software that automates redundant tasks
Togal.AI will enable the estimator to focus on higher value tasks. With constant changes and complicated plans, estimators can become overwhelmed by their responsibilities. Utilizing Togal.AI will save the estimator hours of time, providing for a happier workplace and better employee retention.
Aside from bidding the wrong projects and not submitting requirements, the bidding process is incredibly time-consuming.
Spending weeks to months doing the estimation alone can be a laborious process. Estimators are paid $32.00/ hour on average equating to $66,816.00 per person annually with no guarantee of a return on investment.
Delays in submitting bids results in:
- Appearing less competent against other bidders
- Overwhelmed with the RFP’s to respond to
- Less proposals to submit in a year, less opportunities to win work
- More than $5,376 spent per estimator in a single proposal
Business costs will cover the pre-construction process. Spending more time bidding than necessary will cause inefficiencies and financial waste.
Togal.AI aims to facilitate the estimator and to make the construction industry more efficient. With Togal.AI, general contractors will be able to submit accurate proposals faster, win more projects, and increase profit margins. Book a demo here of Togal.AI today.