How to Bid on Commercial Construction Projects
Everything You Need to Know to Prepare a Bid on Construction Jobs
Construction bidding is the process in which a general contractor (and, sometimes, an architect) is selected to work on a construction project. In some cases, the only thing that matters in the construction bidding process is presenting the lowest price to the owner; in other cases, the contractor's qualifications are as important—if not more important—than having the lowest dollar amount. Knowing how to bid construction jobs can make the difference between success and bankruptcy for a construction contractor.
If a contractor does not know how to bid on construction jobs, they will have no chance of turning a profit.
Using Construction Bid Estimation Software
Construction bid software is used largely by general contractors as part of the cost estimation and budgeting processes when developing a bid for a new project. It was introduced the industry over two decades ago and has had a major impact on the industry. What was once a major issue of concern for all construction projects can now be done quickly and efficiently.
The main benefit of estimating software is the way it automates job costing. The software typically comes with a database of construction costs, updated monthly by subscription. Many builders will prefer to keep their own database for job costing so that the software will more accurately reflect local costs and price fluctuations in the market.
Simply having material and labor costs at hand makes the estimator’s job easier. Estimators can also use the software to define a job’s materials and labor hours. The software takes this definition and calculates the job cost from a database of labor and material costs. In this way, the estimator needs only to choose a job he has defined in the database, and the software does the rest. This minimizes the chance that some procedure or material will accidentally be left out of the equation.
Another benefit of estimating software is that it allows the builder to look at the final job costs and compare them with the initial bid. Bids can then be reviewed to see how they can be made more accurate. The estimator may decide to alter the definition of a particular job within the software database, calling for less of a material or fewer labor hours.
Construction bid software is not overly expensive, with most programs falling into a price range between $60 and $250, depending on the capabilities of the software. Most construction bid software is designed to work within Microsoft's Excel program, though some of them are stand-alone.
The benefits of construction bid software are substantial. Using software programs, general contractors are able to keep track of the financial status on a daily or hourly basis, and all budgetary information is stored in one easily accessible location. By contrast, when this work is done by an employee, financial updates are made far less frequently and there is much greater potential for mistakes when computations are done by hand.
Construction Bid Template or Bid Sheet
A construction bid template, or bid sheet, is the required document on which construction companies present their formal bid in their effort to win a project. In the traditional method of selecting a contractor, an architectural firm is hired by the property owner to develop a design for the building or project. Once that design is completed and approved by the client, the architect then puts the design out for bids. While the architect may want to know more information about a contractor than just their price, the price is the primary reason for the selection of most primary contractors.
In some cases, the bid is the only thing that is presented, and the lowest bid gets the project.
Design-Build Construction Bid Proposals
With the design-bid construction method, construction bid proposals cover more than just the price to build. The design-build method combines the architect and contractor as a unified team, where they present not only their price to build the project but also their architectural design. A design-build construction bid proposal contains an all-inclusive price for the cost of design and construction. Design-build supporters believe this method is more efficient and leads to lower costs than with a traditional bid structure.
Construction Manager At-Risk Bid Proposals
The construction manager at-risk (CM at-risk) method is another way construction project bids are submitted. Under the CM-at-risk method, the contractor and architect operate separately, but the contractor is involved in the process from the beginning and serves as liaison for the client in dealing with the architect.
CM at-risk bids are not blind, and the client can select whichever contractor he believes is best-suited to handle the project. The contractor's bid comes in the form of the guaranteed maximum price, which states the cost of pre-construction services and the construction process itself will not go over a certain total.
Online Construction Bid Systems
The Internet has significantly changed many aspects of the construction industry. Traditionally, companies bidding on a project had to send large amounts of paperwork to a potential client for consideration. Today, construction bids can be created and submitted online, finishing the bid process with the click of a mouse.
There are online databases that allow you to view, download, and print construction drawings in order to complete a bid proposal. A company must be registered and complete all the requirements to have access to a database. All information is shared among all contractors, and the notification regarding due dates and changes is sent via email. These systems provide support for:
- Selection of appropriate procurement and contracting strategies as well as the nomination of an appropriate principal in the contracts
- Preparation of tender documents and contracts based on standard forms
- Selection of contractors and consultants with proven performance records
- Effective management of contracts, including clause commentaries, sample letters, and checklists
- Maintenance of an effective performance management system through monitoring and reporting
- Resolution of contractual claims and disputes