A contractor gets hold of different projects by bidding. The builders get customers through a bid. Bidding is not always easy. To win a bid, there are a few guidelines that one should follow — firstly, cost estimates of your project should be accurate and secondly, you need to compare the bid with other contractors. It is a highly competitive environment. If you want to even out your ratio of construction bidding, then you have to understand the process first.
A thin line of difference between an estimate and a bid
These two terms may be interchangeably used but their meanings are somewhat different. Estimate means the contractor’s material cost which includes the labour charges and whereas a bid is a total amount that is charged on a customer. A bid is generally non-negotiable. It is a firm price that is charged to the customer. And the profit that you will earn from a bid, can be calculated by the difference between the amount of the estimate to the amount of the bid.
A key consideration in Construction bidding is the price of the bid. The customer will always choose a bid that is the lowest. In some cases, the quality of the end product is more important than the price of the bid. Thus, once a bid is confirmed, the contractor will be provided with a document of specifications. This instruction by the owner to the contractor is called, making a Request for proposal or Request to tender. On the other hand, sometimes a bid is taken from a subcontractor. So once a contractor gets hold of a bid, they start to work on it. After it is done they are submitted to the owners who then review each bid and a winner is chosen. Once the owner chooses the winning bid, construction will take place.
Decisions that influence your construction bids
When a contractor makes a bid on a construction project, they have to cater to the requirements of the owner. The decisions that an owner has to make, reflect on the shape of the construction projects. Thus, the following elements on which a decision is made are The delivery method of the project, the method to procure, and lastly a model for the contract.
A project to get delivered may follow different methods of bidding — design building, through a construction manager, an integrated project, and so on.
The next step is to procure- it is through this method that the services are attained. It may include the best value, negotiations, source, and low bid.
And lastly, you will need to create a contract model. An owner lays down the specifications around which construction needs to be done. It may be done on charges above the maximum price guaranteed or at a fixed price. Sometimes, a contractor may also take it in lease.
These decisions in turn will decide the overall cost, responsibility and profit of the construction project.
Types of Construction Bidding
There are two types of projects on which construction bidding takes place- a commercial project and a residential project
The above-mentioned points are more relevant to commercial projects. But for a residential project, there are several different types of project -
Projects that involve renovation and remodelling to their exiting home structure. Then we have projects that are custom made. Sometimes a builder might remodel the house to sell it at a much higher price. There also exist construction companies that build apartments, and multiple homes at a large site.
A tip to note: always make sure to convey all your requirements in person. This will the contractor help to understand better and fulfill your demands.
Bid opportunities offered by public projects
Public undertakings at all levels offer opportunities for construction bidding. In the case of these projects, contractors find them attractive as they include some mega projects — which are generally very profitable for them. Another cause of attraction is that the cost of building these projects doesn’t fluctuate over the years until construction is completed.
Many a time, public undertakings, Request for Information to get knowledge about their construction project from the contractor. Secondly, public undertakings also ask for the interest of the bidders.
Tips to win construction bidding
To win construction bidding, you have to make sure the bid is accurate. This means the overall cost which includes labour, resources and materials used in the project has to be checked properly. If required, make a checklist of all the materials used. This will help you to calculate your cost. Once it is done, you can formulate a profitable bid for your customer. Secondly, you need to bid on projects that are in your area of expertise. Third, do not fall prey to overhead budget. And lastly, the bid which offers the best quality. Always, find the right project to bid on and work on few contractors but make sure they are all worth it.
Therefore, construction bidding is not a cakewalk. It requires time and precision. Scrutinise the cost, budget and plan out your expenditure well, before bidding on a project. If one follows all the steps, one will be able to understand the process and the knowledge behind construction bidding. A contractor’s goal and objective are to balance the ratio of bidding.
Challenges to construction bidding
Almost all contractors face the problem of not finding a proper bid package to bid on. Even if they do, they find it is difficult to write a winning proposal.
Secondly, the most common mistake of all is biding on the wrong project which results in losses. Third, is when they are unable to cater to the RFP requirements. Lastly, sometimes the general contractor can not find a suitable subcontractor to give out the projects.
Thus, some of the ways to improve your overall understanding of construction bidding are mentioned above. If one follows these points they will be able to calculate their bid more profitably.