Construction bids are critical to winning more work, so it pays to have a solid understanding of what they entail and what you can do to improve your bidding performance.
In this comprehensive guide, we’ll cover everything you need to know about construction bids. Use these links to jump to the relevant section:
- Why Aren’t My Construction Bids Working?
- What is the Construction Bidding Process?
- Key Components of the Bidding Process
- How to Bid for Construction Jobs
- Construction Bidding Tips
- Create a Winning Construction Bid
- Top Bid Selection Criteria
- Following up on Construction Bids
- Why You Didn’t Win That Bid
- Further Your Reading with our Collection of eBooks
- Even More Great Information on Bidding Technology
You have the skills, the right team in place, and the commitment to getting the job done right every time—so where is the work? If your construction proposals are falling short or simply missing the mark, then you won’t win as much work as you would like. An assessment of the bidding and proposal process can help you refine your approach and raise the probability that you can successfully compete for the best projects and clients.
When a general contractor has a project to deliver, they will split it up into packages, such as drywall, plumbing, or mechanics, and invite subcontractors to bid on specific parts of the job defined by these specialties.
Since a general contractor often contracts out these key project elements, understanding the construction bidding process is important for all involved. For owners and general contractors, the construction bidding process allows them to find the best possible team for the job at the most competitive rate available. On the bidding end, being able to craft a compelling and accurate bid improves the likelihood that you’ll have plenty of work flowing in and keeps your best talent moving from one compelling project to the next.
As a bidder, the information revealed by the owner or general contractor in the invitation stage allows you to accurately assess the job and come up with a bid. It also ensures you can target the right types of jobs and clients. Not every invitation will be a good match for your brand, and not every job is worth the time it takes to craft a winning proposal. The goal for bidders is to identify which projects are worth the time, then craft a compelling, accurate, and detailed proposal that ups your odds of winning and gets your brand the attention it deserves.
Now that we have an overview of what bidding is all about, let’s take a closer look at the steps involved in the process.
1. Bid Solicitation
Bidding kicks off at the solicitation stage, where the owner seeks proposals (sometimes referred to as tenders) for a job.
At this stage, contractors are requested to submit a proposal or tender. This can come in the form of an invitation sent to contractors containing all the details about the job.
Some owners put together bid packages and send them to pre-qualified bidders or list them on bidding websites. These packages include the scope of work and aim to give bidders the info they need to create accurate proposals.
General contractors often have to outsource parts of the project to third parties. This process is known as subcontracting. For instance, if a project calls for specialized jobs like plumbing, electrical, etc., the general contractor would assign those areas to subcontractors who are focused on those specific components.
During these instances, the general contractor would still work with the owner and is responsible for overseeing the execution of the project.
3. Bid Submission
Bid submission is exactly what it sounds like: this is the part where the contractors submits their proposal or tender for review. As for what’s included in the bid, these tenders and proposals usually contain:
- The general contractor’s information
- Summary of the project and info on what services will provided
- Proposed budget
- Timeline and schedules
- Scope of work
- Terms and conditions
It’s also important to note that some owners provide bidding templates and forms. In these cases, contractors must follow the prescribed format.
4. Bid Selection
This is the part of the process where the owner evaluates the bids they received and selects the best one for the job. At this stage, they review all submissions, compare the tenders, and move forward with the one they think is best.
Owners factor different things into their selection process. For obvious reasons, cost is an important consideration for them. In many cases, owners also look at the contractor’s track record, experience, and project portfolio.
Owners may assign scores to their bidding criteria and opt for the bid with the most favorable score.
5. Contract negotiation and formation
Once the owner selects a bid, they’ll move on to the contract negotiation and formation stage. Here, the owner and contractors would come up with an agreement and produce a formal document outlining the terms of the project.
Construction contracts come in different forms, including:
- Cost-Plus Contract, where contractors are compensated for all construction-related expenses.
- Design-Build Contract, which handles design and construction costs at the same time.
- Guaranteed Maximum Price Contract, which stipulates a maximum and capped amount of what the owner will pay the contractor.
- Incentive Construction Contract, where the owner releases agreed-upon payments once specific milestones are met.
- Integrated Project Delivery Contract, which involves multiple parties—the owner, builder, and design firm.
- Lump-Sum Contract, wherein the contractor agrees to deliver the project at a preset price.
- Time and Materials Contract, which stipulates an agreed-upon price based on profit rate, materials, and time spent on the project.
- Unit Price Contract, where the owner pays the contractor based on the units at agreed-upon rates.
6. Project Delivery Selection
The owner and contractor will also agree on a project delivery method. Depending on what the project entails, the team may decide to choose one of the following:
- Design-Bid-Build (DBB), which follows a traditional sequential process. With DBB, the architect designs a project before the bidding stage starts. Once a bid is selected, the team will move on to the building stage.
- Design-Build (DB), where the design and contruction of the project are handled by one firm. Some consider DB as a more straightforward delivery method. However, owners may have less input in design and construction management.
- Construction Management at Risk (CMR) brings in a construction manager who serves as a constultant to the owner. This person serves as a consultant to the owner. They manage the subcontractors and take on the responsibilities (and risks) of meeting milestones and completing the project at the promised price.
- Multi-Prime (MP) divides the project into three phases: design, engineering, and construction. With MP, there are separate contracts with the stakeholder at different project stages. This means the owner has separate agreements with GCs, trade contractors, etc.
- Integrated Project Delivery (IPD) emphasizes teamwork and shared liability. This delivery method puts the owner, designer, and general contractor under one contract and spreads responsbilites, risks, and rewards across all parties.
Your bid proposal is kind of like a resume or a job application; it will make a first impression on the client, let them know how qualified you are, and even give them an idea of what to expect when they work with you. If your first impression, or bid, is intriguing to the client, you’ll move to the interview stage, dramatically increasing the odds you’ll be hired for the job.
You’ll find bid invitations in a variety of places. When you receive an invitation to bid, simply download the application package and review it carefully to gain a firm understanding of what the job is, what skills the owner desires, and any preferences or specifications they have for the job. This is also the time to make sure the package is truly complete and that the owner or contractor has a realistic idea of what the project will cost and how long it will take.
During the review process, you can eliminate packages that are not complete, not realistic, and don’t match your business size or your particular skill set. Applying for everything is a waste of your time—and so is applying for jobs that are not an ideal match for your skills, unless you have a compelling reason to do so. Every bid you craft will take time, so use those hours wisely and focus on projects that are appealing, realistic, and ultimately winnable.
Tip #1: Be More Productive
Let’s face it, the more productive your team is, the larger your profit margin. After losing a highly competitive bidding process, many contractors will assume they lost the bid because other contractors were bidding “below cost.” But were they? The fact remains that at least 40% of companies don’t understand or track their costs, and if you’re losing more construction bids than you’re winning, you should ask yourself if you truly understand the costs of executing a project. More importantly, you should ask yourself if you could execute your projects more cost-effectively.
Many construction experts will rightly recommend that you focus on your estimating process rather than on costs. But the best way to bid more competitively is not just to track costs so you can provide more accurate estimates—it’s to improve your overall productivity. Tools like BuildingConnected’s Bid Board Pro can help you improve productivity throughout preconstruction.
Tip #2: Be There First
One of the easiest ways you can win more bids (and one of the most underrated strategies) is to work ahead of your competition. It’s difficult to win a bid against 10 or 30 competitors, but what about 3? The more bids an owner or general contractor receives, the greater likelihood you’ll lose the bid.
It’s hard to believe, but winning a bid doesn’t mean you have to be a math wiz. By using construction bidding marketplaces and networks to find jobs and projects before your competition becomes aware of them, you can be there first and increase the probability that you’ll win the bid.
These online tools will not only help you find new jobs to bid on, but will also allow you to create a company profile that will be included in bid searches. In a perfect world, you’d never have to bid at all. Jobs would just fall into your lap. We obviously don’t live in a perfect world, but wouldn’t it be nice to have project owners chasing you rather than you chasing them?
Tip #3: Be on the Right Bid List
Just because a job exists doesn’t mean you should bid for it. One of the worst mistakes many contractors make when submitting construction bids is to bid on every job they find. In this sense, a highly effective bidding strategy is to reduce the number of proposals you submit. While it’s tempting to assume that competitive bidding is a volume game, i.e., the more you put in, the more you’ll get out, in many cases it’s actually the opposite.
By narrowing your list of bidding opportunities, you’ll be able to improve the quality of your bids and select bid opportunities with a higher probability of success.
How to Find the Right Bids
So, how do you find the right bidding opportunities? Start by building your network. Connect with folks in your market and cultivate strong relationships over time. That way, when someone in your network comes across an opportunity, you’ll be top of mind.
It also helps to tap into bidding websites that contain databases of jobs you could bid on. These sites enable you to filter and sort projects so you can find opportunities that are a good fit for your firm.
Some of the top bidding websites include:
How to Pick the Right Projects to Bid On
So what is the “right” bid list? The right bid list is one that’s right for your company. But here are some points to consider the next time you bid on a project:
- Bid on your niche. This means you should figure out what you’re best at and bid only on those jobs. You can’t be good at everything, but you can be great at something. Are you better at commercial or industrial projects? Are you better at smaller or larger projects? Whatever it is, take a moment to think about what your team has been successful at in the past—those projects you completed that resulted in repeat business—and then bid only on those types of projects.
- Stop bidding on projects you can’t win. There are some projects that you can’t win no matter how much energy and effort you put into your proposal. If the project calls for a certain specialization you lack, don’t assume that a low bid will overcompensate for that deficiency. It won’t, and you’ll only succeed in wasting your time, effort, and money on a futile endeavor. Likewise, don’t bid on projects located where you don’t typically work or don’t have a sufficient workforce to fulfill the job requirements.
- Don’t bid on projects you’re unlikely to win. Many factors can increase the likelihood you won’t win a bid, but one of the most obvious is how competitive the bidding process is. Are you bidding against 3 or 30 competitors? Take the time to find out and make a decision to bid only on jobs with fewer than 5 competitors. Don’t just track your bid-hit ratio. Track it by customer, project type, location, and competitors and develop benchmarks. By evaluating your track record against the entire landscape, you can start making a calculated decision to bid only when you have the greatest likelihood of success.
Tip #4: Be More Valuable
When a company has an undifferentiated brand or no real competitive advantage over other companies, their product or service becomes a commodity. Nobody wins a commodity game; it’s a game where everyone has to slash their prices (and ultimately their profit margins) to win a bid. In this respect, the “winner” of a price war is the contractor who gets the job because they end up bidding so low they lose their profit margin. In contrast, when you have a differentiated brand, you can start demanding a “price premium.” A price premium is the amount or percentage your price exceeds the average price charged in the marketplace for those goods and services.
A few attributes you can focus on to start selling value rather than price are expertise, quality control, customization, and responsiveness. When thinking specifically about the construction industry, your customers can, and often do, value these attributes more than price:
- Expertise and experience — Do you and your team have the most skills and experience when it comes to the type of project you’re bidding on?
- Quality and size of the team — Do you have a highly skilled team and the right amount of resources to complete a particular project?
- Customer service and support — Does your team provide an extra level of customer service and support?
- Salesmanship — Do you have the ability to really “sell” the value your team brings to the table in your meetings, pitches, or bids?
- Reputation — Are you known in the industry for excellence in a particular type of project?
- Financial security — Is your company financially secure? Do you have better payment terms or need less cash?
By differentiating your brand via one or more of the above attributes you’ll be able to wind more construction bids even when you’re not the lowest bidder. In fact, your bids will actually be more competitive when you’re demanding a price premium. And by bidding higher, you’ll increase your profit margin and your bottom line.
Every detail matters when bidding for a contract—and in today’s hypercompetitive construction industry, it takes more than just the best price to truly stand out. The more comprehensive, professional, and accurate your proposal is, the more likely you are to create a great first impression with general contractors, reduce back-and-forth, and ultimately win the job.
That’s why we created this bid submission checklist. Using our PDF checklist, you can quickly review your proposal to ensure no important details (e.g. certifications, addenda, due dates) slip through the cracks. Print it out, keep it at your desk, and bid more confidently!
When putting together a bid, it definitely helps to familiarize yourself with the criteria that owners use to select proposals. Consider the following:
Cost — All owners want to maximize their profits, which is why pricing is an important consideration. Owners looking to get the most bang for their buck many put significant weight on how much a project would cost them.
Capabilities and experience — Beyond price, owners also consider how qualified a contractor is. They may look at your previous projects and examine your expertise to determine whether or not you’re a good fit for the job.
Reputation — Owners want to minimize their risk as much as possible, so they’re more inclined to go with contractors with a solid reputation. A contractor with a proven track record, great reviews, and stellar references is much more likely to win a job compared to someone who doesn’t have a strong rep.
Safety — Still on the topic of minimizing risk, no owner wants to have a safety crisis on their hands. As such, most evaluate the safety practices of the GCs their considering. Ensure your safety compliance ducks are in a row and be prepared to answer questions on how you keep the jobsite safe.
The bid submission stage doesn’t stop when you submit your proposal. Developing a follow-up process helps you unlock both short- and long-term benefits.
1. Improve your relationships with general contractors
When you take ownership of the follow-up process, you prove to owners (or general contractors if you’re a subcontractor) that you’re easy to work with, a good communicator, and on top of your game. Construction pros want to work with contractors and subcontractors who make their lives easier, so it’s a great way to differentiate yourself in a competitive environment.
2. Increase hit rates by getting feedback to make revisions
It’s unlikely that an owner or general contractor will reach out themselves to give you feedback on a bid or let you know what you need to do to make it more competitive. However, when you follow up and ask if they’ve gotten a chance to review your proposal, it also gives you the opportunity to ask if they’d like you to make any revisions. Again, these guys are busy, so take the initiative to ensure your proposal hits all the right marks.
Even if you discover someone else already won the job, they may be willing to provide feedback that helps you win the next one. The more information you can get after each proposal, the more focused and strategic you’ll become over time.
3. Spend your time bidding on jobs you’re more likely to win
If you keep submitting and not hearing back, it might be time to re-evaluate whether bidding for that contractor’s jobs should be a priority for your team.
This is where follow-ups can come in handy. If you continually follow up with someone and still never hear anything back, it’s probably not worth it to bid on their projects in the future. Moving forward, you can refocus your efforts on owners and general contractors that will truly respect your time.
Keep in mind that everyoneis different. First, develop a baseline follow-up process for those you haven’t worked with before (e.g. an email two days after the submitted proposal, a phone call a week after). Sync those tasks to your calendar to ensure you don’t forget to reach out. Then, after you learn each person’scommunication preferences, tailor your follow-ups for their future projects.
No one wants to lose out on a bid, but it’s bound to happen in reality. Here, we’ll discuss 10 of the most common reasons why construction bids are lost. In turn, keeping these losing strategies in mind will help you create your winning proposal plan for future bids.
1. You didn’t understand the scope of work
One of the primary reasons for failing to win construction bids is that you didn’t understand the scope of work. According to Business Dictionary, a scope of work is “the division of work to be performed under a contract or subcontract in the completion of a project, typically broken out into specific tasks with deadlines.”
Sadly, if you fail to fully grasp the scope of work set in the request for proposal (RFP), then you’ll have a hard time setting the right tasks or deadlines and therefore have basically no chance to compile a winning construction proposal. Make sure you read the scope of work carefully. If there’s an aspect that doesn’t make sense or you need more information, come back with any clarifying questions as long as there’s enough of an opportunity to submit before the proposal deadline.
2. The price wasn’t right
If you can’t seem to win construction bid attempts, the price may represent at least part of the problem. Your clients won’t be happy if you misquote prices, overcharge, or underbid. Even bidding less than you’re worth is a problem, because it can lead the evaluation team to wonder about your level of expertise.
Remember that quoting both too high and too low is a red flag. While you can’t possibly predict what your competitors will quote down to the dollar, the best tactic is to worry less about under or overbidding.
3. You didn’t explicitly explain your cost
When looking over a bid today, the evaluation team might experience a moment of sticker shock when looking at the price. That’s not to say construction costs are unreasonable or deal-breaking, or that you can’t charge what you’re worth. Your only job: explain your costs explicitly, line by line, and show how hiring you will provide the value they are looking for in a project.
4. You didn’t showcase your experience
Many companies write stellar proposals, then forget to back them up with proof. Always remember to include relevant past projects when submitting bids and proposals. After all, you’ve done great work, so don’t forget to show it.
5. Your references weren’t up to par
References matter, and not just for college applications. Provide the right and relevant references to showcase your performance and track record. It’s better to use fewer references than sacrifice their quality. If you had a rocky relationship on a project, it’s better to leave it off, because it truly can be the determining factor in whether you win or lose.
6. Your safety record isn’t ideal
A good safety record means less risk and fewer costs, both of which clients care about. If your safety record is faulty, you aren’t likely to be the winning bid.
If you’re concerned about your safety record, it’s time to institute a new approach. You need to create a culture where safety is prioritized, and that means crafting a careful safety plan and educating your employees on the best means of adhering to the standards. For example, here are seven simple steps employees can take to improve safety today. If this is a problem, it’s the first one you should tackle–both for your chances to win construction bids and for your company’s general wellbeing in the future.
7. You were missing documents and information
If you want to win construction bid attempts, it’s critical you complete your proposal and bid to the letter. Even one small missing section or document could immediately disqualify you. Ensure you submit everything that is requested. You should double, triple, even quadruple check every part of the document before you submit your proposal.
8. You didn’t read the RFP thoroughly
If you didn’t read the RFP thoroughly, you’re in bad shape. The RFP will ask for very specific information, and it’s best to follow instructions exactly. Don’t deviate from them at all, and adhere to any requirements on page count and specifics for submission. This shows you’re a professional and that you respect your client’s needs and preferences upfront.
9. You were late in submitting
Even one minute matters when submitting a bid. If you can’t follow a simple deadline right at the outset, why should a client trust you to adhere to the years-long timeline with budgetary consequences? Before you submit your construction proposal, leave plenty of time to submit to navigate bidding systems that could be manually burdensome and slow. Bottom line: If you want to win construction bid attempts, stick to the deadline.
10. You don’t use the right tools
Using the right tools and equipment on a project matters to its success. In your proposal or interview, you might specifically state digital tools you will be using or have used on previous projects—but are they the right ones? An owner might have had experience using specific software and technology tools in prior projects and might be looking for them. Do your research and keep up to date on the latest innovations in the industry and can showcase their value in the proposal.
Bid Like a Winner
It’s time to stop bidding to survive, and start bidding to win. Running a business can be a lot like gambling, and the odds (or competition) can often seem stacked against you where lowering your bid feels like your safest option.
But with the right tools and a solid strategy to position your company as a serious player in the market, you can start to increase your odds of winning more projects—without undervaluing your service. In a matter of no time, you’ll spend less time bidding and more time winning jobs since you’ll have the right tactics and tools in place to effectively evaluate the right opportunities and ultimately create proposals that set your company apart.
Want to maximize the value of your digital bid management solutions? Download our eBook, “3 Keys to a Better Bidding Process” to learn how.
Ready to improve your bidding process? We’ve outlined three of the top tips from our new guide, “10 Tips to Win More Bids.” Each tip will help subcontractors fine-tune their bidding process and win more of the right bids.
In this guide, we break down the many benefits of going digital for construction bidding, plus three categories specialty contractors should focus on to successfully adopt a digital bidding solution.
- How to prove the value of investing in bidding software to leadership
- The best strategies to tackle internal opposition to technology
- How a streamlined bidding process will help you win more of the right projects
Plus, get insights from our survey of over 1,000 preconstruction professionals!