Construction Bidding Requirements: A Guide To The Process

As a contractor or subcontractor, the success of your business relies on the number of contracts you win. Before you win any contract, you must first participate in construction bids. Construction bidding is the process of submitting proposals to managers, owners, or other contractors to construct a structure or manage its construction process.

Understanding the bidding process will help you prepare bids that stand a chance to win in the highly competitive construction industry. Read on to find out how you can go about the construction bidding process and the key requirements that should be fulfilled.

How to Bid on Construction Jobs: Five Steps of the Bidding Process

Your journey to winning construction projects starts with successful construction bidding. The construction bidding process involves several key steps explained below.

Bid Solicitation

This is the first stage and involves the project owner issuing a request for proposal (RFP), invitation to bid package (ITB), or request for quote or qualifications (RFQ). The bid solicitation stage is when the project owner makes the bid documents available to contractors.

The bidding documents typically include details such as project cost, contract type, construction specifications, bonding and insurance requirements, project requirements, and project delivery method.

The bid solicitation process may also involve the project owner or their representative asking for additional information about the contractors that are applying, such as examples of similar projects and their qualifications.

Contractors should pay attention to all details in the bidding documents. The bid solicitation stage is where you get to scrutinize all project requirements. This is where you get to decide if the project is the right fit for your business, or you should skip it and look at other open bids or tenders.

Bid Submission

The bid submission stage involves contractors submitting their bids to project owners or managers. The documents submitted include information about the contractor's business, project timeline and costs, and any critical information solicited in the bid solicitation stage.

General contractors may also solicit their own bids, RFIs, or proposals from subcontractors that they need to subcontract or hire to complete specific stages of the job. This means that the general contractor will have to combine subcontractor proposals or bids as they prepare their own bid to submit to the project manager or owner.

Bid submission is a critical construction bidding process and must contain an accurate estimate of overheads, labor, equipment, materials, and profit margin. Remember, pricing is a key determinant in the selection process for specific types of contracts. This is the stage that precedes bid selection and contract formation.

You may also be required, although this does not apply to all contract types, to submit a bid bond during the bid submission stage. The bid bond gives the property owner a guarantee that the contractor will complete the project according to their bid.

Bid Selection

Government and private projects adopt almost the same approaches in the bid selection process, but there are a few differences. For example, whereas government regulations require that the bid with the lowest price wins, that's not always the case with private projects. Private property owners will go a step further to thoroughly scrutinize the qualifications of the general contractors bidding, equipment costs, project delivery method, safety record, and insurance.

The bid evaluation criteria is the key determinant in the selection process. As a contractor, meeting all requirements stipulated in the solicitation stage increases your chances of meeting all criteria and ultimately winning.

Contract Formation

Getting at this stage means that you won the bid. Congratulations. A construction contract is now formed. The contract type is largely determined by the project owner. However, contractors can still negotiate terms of the contract and the pricing structure.

Take time to review the contract before signing it. Once the contract is signed, there is little or no room for negotiations. Technically, the construction bidding process ends with contract formation and you're now supposed to deliver the project based on the requirements and terms in the contract.

Project Delivery

This is the project execution stage where the contractor sources all required materials, mobilizes resources, and begins the construction process. The success of the project and delivery will play an important role in your future bids. Project managers will look at your most recently completed projects before they can trust you with their projects.

The property owner determines the project delivery method. Some of the common project delivery methods include design-bid-build, design-build, construction manager at risk, and integrated project delivery.

The overall construction bidding process is determined by the project delivery method. Specifically, the methods will determine how bids are solicited and submitted. For instance, design-bid-build solicit bids from contractors based on project designs from separate contractors or firms.

The design-build method contracts a single firm for design and construction. The delivery method also influences the contract negotiations.

What Are the  Different Types of Construction Bids?

Bids and tenders are synonymous in construction bidding. During the construction bidding process, the project owner will choose a tendering method. The four main tendering methods they can choose from include open tendering, negotiated tendering, selective tendering, and serial tendering.

Open Tendering

This method allows anyone to submit bids on the project in an open and transparent manner. This is the method used by governments when soliciting contractors for public projects. Through open tendering, there is high competition for the bids which ultimately drives the prices down.

Negotiated Tendering

This method allows the property owner to identify a single construction company or contractor to complete the project. Essentially, the contractor does not necessarily participate in construction bidding because they are hand-picked. Once picked, the contractor negotiates contract terms with the project owner. Negotiated tendering is reserved for highly specialized projects.

Selective Tendering

Open tendering is very competitive, negotiated tendering is not. Selective tendering comes in between the two. Selective tendering method involves inviting a small number of predetermined contractors to participate in the bid process.

Serial Tendering

The serial tendering method is used when a property owner is soliciting bids for several or a series of similar projects over a period of time. Take an estate or housing developer as an example. The developer may plan to build hundreds of residential properties over a four-year-period. Through serial tendering, the developer can avoid the problem of repeatedly soliciting bids for similar housing projects.

Project Delivery Methods

We have already discussed the project delivery stage in the construction bidding process. We also mentioned the main delivery methods. Let's explore more on these methods.

Design-Bid-Build

The design-bid-build delivery method requires the owner to first hire an architect to come up with project designs. Once the designs are complete, the owner or manager then solicits bids from contractors. Contractors submit their bids and the winner is tasked with the responsibility of completing the construction project based on the design.

Design-Build

The design-build construction method enables the project owner or manager to give the construction and designing contract to the same firm or contractor. This means that the single price on the quote covers for both the design and construction project.

Construction Manager at Risk

This method transfers all responsibilities to the construction manager. As a manager, you promise to deliver the project at a maximum guaranteed price.

You are required to provide GMP -- Guaranteed Maximum Price -- when the design stage is 60% to 90% complete. This consists of subcontractor costs, construction and pre-construction services, and contingencies. Ensure the actual project costs do not exceed the GMP.

Integrated Project Delivery

This approach allows parties to come together and create a single and inclusive IPD -- integrated project delivery -- team. The three main parties to IPD contracts are owners, lead designer or architect, and lead builder or general contractor. Other parties that may be included in the IPD project include electrical contractor, mechanical contractor, structural engineer, electrical engineer, and concrete contractor.

The IPD method integrates systems, practices, people, and business structures to harness the insights and talents of all participants to increase value to the owner, maximize efficiency, and reduce waste.

Contract Model

All terms that pertain to construction projects should be stipulated in the contract forms. Only when all parties involved, mainly the owner and contractor, agree to the terms and conditions should the contract be formed and signed. Let's have a look at some of the common types of construction contracts.

Lump-sum Contracts

This is one of the most popular contract types in the construction industry. Lump-sum contracts are also known as fixed price contracts. This is because a fixed price bid is agreed upon for the whole scope of work. During the bidding process, contractors quote a single price -- instead of submitting different micro bids.

Time and Materials Contracts

This contract type is chosen when the construction projects must be defined precisely. Contractors are compensated based on the cost of items utilized or by the hour. It may take more time recording numbers than performing the actual job, making construction management difficult.

Cost Plus Contracts

The cost-plus construction contract model allows the contractor to be paid for all project costs incurred during implementation, along with a profit. The profit is a predetermined percentage of the total project costs. This is a more flexible contract compared to the time and materials contracts.

Unit Price Contracts

This model divides the project into measured contracts. These measured contracts are known as units. The construction unit database is used by contractors to price the work units. The contractor then delivers cost estimates for each work unit -- not for the whole project.

Guaranteed Maximum Price Contracts

The contract terms stipulate the maximum contract price for the entire project -- price is set by the owner. In case there are any additional expenses, they are borne by the contractor.

4 Mistakes to Avoid in the Bidding Process

Unless you are handpicked by a company to complete a project, all bidding processes are competitive. You have to stand out to win the bid. Some mistakes may ruin your chances of winning a bid in the construction industry. As you submit what in your mind you may consider to be a competitive bid, remember to avoid the mistakes below.

Missing Important Details in the Bid Package

You may come across a lucrative tender which has a tight deadline, and only peruse the documents instead of thoroughly digging into the project specifications. As a result, you may miss some key construction bidding requirements in the documents. You can avoid this mistake by establishing a mechanism of thoroughly reviewing each bid solicitation.

Mismatch

You should only bid on projects that fit the qualifications and experience of your construction company. Just because you are a general contractor does not mean that you should bid on everything.

Remember, poor performance will taint your reputation in the industry. In addition, if you undertake a project you have no expertise in, you and your construction managers will have a steep learning curve in the course of implementation and the learning process may eat into your profits and time.

Not Evaluating the Site

It is unwise to submit a construction bid before visiting the site. If you do not visit the site, you may overlook key aspects of the execution process such as equipment that will be needed and transport cost. It is also important to have a face-to-face chat with the general contractor or manager of the site and create a relationship even before you submit your construction bid.

Inaccurate Cost Estimate

The whole essence of winning and delivering the project is to get a profit. This might be impossible to achieve if you have wrong estimates of the costs. Wrong estimates can also make your bid noncompetitive.

You should develop a system that helps you come up with estimates that make your bids competitive yet profitable. A good construction bidding software should help you in coming up with good estimates. This construction bidding software will also help you avoid some of the other mistakes mentioned above.

Submitting Successful Bids Every Time

Presenting a winning bid takes a lot of initiative. In addition to avoiding the mistakes we have highlighted above, the tips below can help increase your chances.

Review Bid Documents

Start by carefully reviewing the RFP documents. Understand all requirements and only proceed if you believe your company can deliver the project based on the requirements and timelines. If you cannot meet the project specifications, it is not worth your time to prepare any bids.

Present Your Qualifications

You are bidding against some notable contractors in the industry. However, your qualifications and experience can set you apart and join a small clique that you compete with.

Property owners are looking for capable contractors who can deliver quality work within a specific time-frame. Your experience and qualifications are a guarantee of good construction management and delivery within the provided deadline. You should also explain your approach in executing the project.

Address Risks and any Concerns

Your proposal should address concerns that your potential client may have with regard to your ability to complete the project successfully. For example, you should outline potential obstacles you may face when implementing the project.

Easy to Understand

Make sure that your proposal is easy to read and understand. A winning bid is well-written and uses language that is easy to understand. Furthermore, the bid should be organized in a logical format that is easy to follow. Supporting documentation or information should also be included.

Conclusion

Landing a new tender is not rocket science. Preparing and submitting a convincing bid is all that it takes. However, remember that you have many competitors out there bidding for the same construction project. This is why you need reliable tools that can boost your chances of winning while saving you time. Sign up with Downtobid to streamline your construction bid invitation process.