Like the saying “You gotta be in it to win it,” many construction firm owners submit many bids for local jobs to be in it.
But to thrive and survive, you need to do more than just be in the bidding process. Your firm must be able to submit bids that have a reasonable chance of approval. And your firm must win often enough to thrive.
There’s no foolproof method for developing and submitting winning bids. Still, by following some basic principles, you can improve your chances.
Bidding is an art, not a science. Usually, the bidding process is reserved for the general contractor, but the architect and others might participate.
Although contracts may be awarded to the lowest bidder, the process often involves more than just cost. It also may involve the qualifications of the firm making the bid. Having an excellent reputation for quality and timely work may be just as important, if not more so, than offering the lowest price.
Use of Construction Bid Software
To help develop more successful bids, your firm might consider using some of the many bidding software programs available. Typically this software is used as part of the cost estimation and budgeting process. You also may subscribe to a database of construction costs, updated monthly. Although your firm may choose to maintain its own database to better reflect local pricing.
Materials and labor costs are critical parts of the equation. The software defines the materials and labor hours for a particular project and then calculates the job cost from the database. All you need to do is find a job defined in the database and the software does the “grunt work.” This reduces the possibility of leaving out some costs.
The software also lets you compare final job costs to the initial bid and fine tune your final bid by, for example, inserting lower or higher costs for materials and labor.
Construction bid software is relatively inexpensive. The exact price depends on the features. Usually, the programs are designed to work with Excel spreadsheets, although some are stand-alone.
Among the multiple benefits of this software are that it:
- Helps general contractors keep track of financial data on a daily or even hourly basis,
- Stores budget information in one location for easy access, and
- Reduces to near zero the chances for errors in mathematical computations that can often crop from the human factor.
Five Steps of Bidding
Once you have acquired estimating software and become proficient at using it, you’ll be better equipped to submit bids. Although the process may vary, partly because of regional differences, there are essentially five important steps.
1. Assess the location and conditions of the job you’re bidding on. Notably, you must learn to say “no” to jobs that don’t make sense for your firm for such reasons as distance, extreme heat or cold or hazardous conditions. To be financially successful, you must know when to walk way from jobs where you’ll almost certainly lose money.
2. Itemize the materials that will be needed. Normally, you should figure on a 10% to 15% add-on for waste and service charges. If you acquire the materials yourself, it will likely cut into your profit margin, but it may be necessary to secure the job.
3. Compare the work with jobs your firm has previously completed. This is where experienced construction firms gain an edge. For those just starting out, it’s inevitable that you will bid too high or too low for some jobs. Chalk it up to inexperience and learn from it. Over time, you should be able to work more expeditiously and efficiently, which will make it easier to estimate the time and costs required to complete a job.
4. Multiply your hourly rate by the hours estimated for the job and add the cost of materials. Tack on a percentage for overhead expenses such as insurance, licensing and transportation. Determine if your result makes sense from a client’s perspective. If your instincts tell you that the final number needs adjustment, take another look.
5. Submit the bid along with a detailed schedule. Most important, the client will want a firm completion date.
Bidding can mean the difference between a successful business and going under. By using the latest software and other tools at your disposal, you can position your firm for the optimal opportunities.