How To Bid On Construction Projects

Posted: October 15, 2018

Contractors often get work through the process of bidding. The bidding process can be competitive and tough, especially for those who are inexperienced with it. In this post, we provide an overview on how to bid on construction projects. If you’ve been losing your bids, we hope this post can help you to improve your win rate.

Understanding The Bidding Process

The construction industry operates almost entirely on a system of bids. Here is how the process works:

  • The project owner publishes a request for proposals or bids
  • Contractors submit bids
  • The project owner reviews bids against selection criteria
  • The project owner identifies the best candidate and awards the contract to the chosen bidder
  • A legally binding contract is signed
  • Work begins

The time and effort you devote to estimating costs and putting together an impressive bid package will have a big impact on your win rate. The average win rate for U.S. general contractors ranges from 4:1 to 6:1 for private construction projects and from 6:1 to 10:1 for public works projects.

Factors Under Consideration

In many cases, a project owner is simply looking for the lowest bidder, the one offering the lowest price.  But more often, project owners are looking for a combination of the lowest price and the most qualified bidder. So, unless you know that price is the only consideration, assume that your bid package or proposal must also demonstrate your technical skills and capacity to deliver quality results as well as offer a reasonable price.

Tips To Win More Construction Bids

Do you have any idea what your win rate is? Do you know how to improve it? While winning one contract out of every ten bids may not be impressive, the better you are at developing bids, the better your win rate will be. Here are some guidelines for submitting bids that are more likely to get you chosen for your next project:

  • Know what you’re bidding on. Read the project details and specifications carefully. Can you make enough of a profit to make the project worth bidding on?
  • Do your homework, which should include a visit to the jobsite to look for any problems that should be taken into account in estimating costs. Identify potential subcontractors if you think they’ll be needed.
  • Estimate costs as accurately and specifically as possible, breaking them down separately for each project component (plumbing, electrical, HVAC, dry walling, painting, etc.). Get cost estimates from any subcontractors you plan to use. Enter all cost information into a spreadsheet, so that you can easily recalculate as you develop and refine your cost estimates.
  • Errors in your cost estimates can wipe out your profit. Make sure that all measurements are correct and indicate the unit of measurement. Don’t forget “soft” or ancillary costs like permit fees, trash removal, and fuel costs. Identify any assumptions used in your calculations. Estimation software makes the task quicker, easier, and more accurate.
  • Use a bid proposal form. If the project owner provided a bid proposal form, use it, or follow a good template.
  • Draft a detailed and comprehensive section describing the scope of the work. This is where you’ll really demonstrate your qualifications and understanding of project requirements. Include anything that will help the project owner see that you know what you’re doing, such as photos or drawings.
  • Include a schedule of progress payments and a project timeline that will ensure you have the cash flow to carry you through to a successful completion.
  • Proofread the final draft to make sure there are no mistakes that could create doubts about your professionalism.

A detailed, attractive proposal that highlights your qualifications and understanding of the project owner’s needs will usually get the attention and consideration it deserves. If you want to be considered among the most “qualified” bidders, your proposal must reflect a commitment to quality. Consistently responding to the right requests with a quality proposal is likely to increase your construction bid win rate over time.

The Right Bonds Can Help

When considering how to bid on construction projects, it’s important to consider the type of project and its requirements. Certain types of bonds may be required in a project.

All public construction projects over $100,000, for instance, are required to include performance and payment bonds. These bonds are used to make sure that the contractor will perform their obligations and that all individuals working on or providing materials to the project will get paid. The bond is a commitment to quality, which will be a plus on any bid.

Additionally, when bidding on bonded jobs, bid bonds can be used to guarantee the accuracy of your bid. All public projects (state and federal) require a bid bond. Some residential and commercial projects require them as well. This type of bonds guarantees that the contract will be fulfilled at the bid price and under the conditions set out under the terms of the bid submitted. If the contract does not go forward as agreed, a claim may be levied against the bond.

Get Bonded Today

Contractor Surety Group is an underwriter / agency specializing in construction bonds for developers and all types of contractors. We have years of experience, and our agents are ready to help answer any questions you may have.

Apply online today to get the bonds you need and improve your chances of winning your next bid.