How to Bid on Commercial Construction Projects
Everything You Need to Know to Prepare a Bid on Construction Jobs
Many new contractors who are interested in the construction industry ask how to bid construction jobs. There is no set way to bid on construction projects, but coming up with the most accurate cost estimate and developing the lowest bid is a tried-and-true method.
Construction bidding is the process in which a general contractor (and, in some cases, the 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 makes 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 at 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 two decades ago, and it has made a major impact in a short period of time. 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 only needs 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 contrary to, far less frequently when the work was being done by an employee.
All budgetary information is stored in one location and is easily accessed, in contrast to it was manually placed in separate files. The likelihood of errors is also far less than it would be if the computations were 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. Without the construction bid template, the entire process in selecting a general contractor to take on the construction process would be changed and its legality questioned.
A construction bid template is required for any project, regardless of the building method used. 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 their price, the bottom line 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.
Traditional Construction Bid Proposals
A construction bid proposal is the basis on which many construction companies are hired to serve as the primary contractor on a project. Without a construction bid proposal, there would be no way to establish the overall cost of a project, which would throw the project and the contractor-client relationship into chaos.
Under 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 construction contract bids. While the architect may want to know more information about a contractor than their price, the bottom line cost is the primary reason for the selection of most 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 their architectural design as well. A design-build construction bid proposal includes an all-inclusive price, including the cost of design and construction. Design-build supporters believe this method is not only more efficient, but leads to lower costs as well.
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 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 development of the Internet over the past two decades has significantly changed many aspects of the construction industry. For more than a century, a company bidding on a project had to send large amounts of paperwork to a potential client for consideration; now, an online construction bid can be made, finishing the bid process with the click of a mouse.
There are multiple sites that allow you to view, download and print construction drawings in order to complete a bid proposal. A company must register and complete all the requirements to have access to this database. Then all information is shared among all contractors, and the notification regarding due dates and changes is sent through email systems.
These systems provide support for:
- Selection of appropriate procurement and contracting strategies, and 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.