Everything You Need to Know about the Construction Bidding Process
My first experience working for a major construction company was an internship in the estimating department. I was handed a box of colored pencils, an 11x17 pad of math paper and a roll of full-sized drawings. The assignment was to color up the concrete foundations on the drawings while calculating the area and volume of each.
After which, we would enter the values into a DOS estimating program to formulate a bid. If you don’t know what DOS is, look it up quick, I am obviously dating myself.
While a lot has changed in how we color up, takeoff and build estimates in construction, much of what I learned from that first year remains the same. So, if you are new to construction, or simply to the preconstruction side of a project, here are a few things to help get you started.
What is the Construction Bidding Process?
The bidding process, also known as the preconstruction phase, is a structured, time-consuming and often intense part of the overall capital project cycle. The goal is to submit a complete proposal to a client (be it owner or upstream contractor) that fulfills the requirements of their desired project.
While that may seem simple in principle, putting together a complete bid is equal parts science and guesswork with a bit of fortune telling sprinkled in. In other words, construction bid management has become much more than just coloring up a few drawings and putting together a price.
Different Types of Construction Bids
To truly appreciate the nuance that goes into each bid, first we need to understand the different types of construction bids that may be requested of us. While you may be thinking that will take a while, really there are four main types that most owners rely on. Those are open bidding, negotiated bidding (my personal favorite), selection bidding and serial bidding. Believe it or not, you’ll find most of these bidding types fairly self-explanatory.
Open Bidding
Take open bidding, which simply means that the bid is open to anyone and everyone for submission. Typically, this is a favorite in the government, or publicly funded, project space as a way to create both competition and equal opportunity for the project.
While this generally works well to drive overall prices down and allow rising companies to participate, it may take more time to analyze submissions and ultimately award the project.
Negotiated Bidding
Again, as the name suggests, negotiated bidding is a type in which the owner selects the contractor up front and then negotiates the contract with them throughout the preconstruction phase. While some may see this as anti-competitive, it tends to be heavily utilized on large, complex or specialty projects that require a unique set of skills.
This happened to be my personal favorite as it seemed to be the most collaborative form of bidding. Working hand in hand with the owner, more often than not negotiated bidding led to a very competitive price on a really incredible project. A win/win for all involved.
Selection Bidding
In many cases, owners will land somewhere in the middle of open and negotiated bidding, and that’s where selection bidding comes into play. A mixture of the two, selection bidding is a type of bid where the owner selects a smaller group of contractors through an invitation. There is a bit of pre-qualification up front, if you will, as the contractors are invited based on their ability to achieve project success.
Selection bidding is a great way to increase competition while maintaining the simplicity of evaluation as the bids are collected. With each contractor being qualified ahead of time, the process of making a selection is less strenuous.
Serial Bidding
The final type of bidding to review is that of serial bidding, a type in which the owner requests pricing for a series of projects over a specified period of time. An example might be a large office park campus with several like buildings developed over a multi-year period.
Again, the evaluation process is considered easier as the need for new bids on each building is removed. However, the ability for other contractors to compete for new work as the campus progresses is limited.
Phases of the Construction Bidding Process
Once you understand what type of bid you will be submitting, the next step is to build out the overall proposal. To do that, it helps to understand the typical phases of a bid and what is important to accomplish in each.
Pre-Bid Phase
Believe it or not, a great amount of research and business development goes into the pre-bid phase of a project. Regardless of which type of bid the owner selects, many contractors have entire teams dedicated to knowing what projects may be coming in the future for your area. Let’s face it, the ultimate goal is to be on the selection or negotiated bid list, at a bare minimum.
However, keeping tabs on owners and their projects isn’t the only important piece of the pre-bid phase. When possible, early conversations with downstream contractors and suppliers would be very beneficial. The larger and more complex a project becomes, the more collaborative we must be, and therefore engaging trade partners early and often will help to improve the quality of bids received in the next phase.
Bid Preparation Phase
The bid preparation phase is where the real work happens, often taking weeks or months to complete. The owner will typically line out their desired schedule for bid preparation leading up to the submission, but a contractor builds their own internal plan to get through the work of creating a proposal. It is vital to spend ample time reviewing the bid invitation, documents and specifications to build out the proper plan of attack.
Then, as we began this discussion, the most difficult task will be to accurately quantify and price the project per the documentation. This could be any combination of detailed takeoff and labor pricing for work you will complete yourself coupled with the quotes of subcontractors and vendors to fill in the gaps.
Questions may arise about the requirements that you’ve received, and forms such as RFIs will be used to gather answers. If enough clarification is required, you may even receive an addendum or two, causing updates to your set of drawings.
Rounding out the pricing will be the development of an overall schedule in accordance with the owner’s requirements as well as the necessary project management and indirect costs to support each operation. Add in a profit margin, and you should have a complete price.
Many bid requests will also ask contractors to provide qualifications and experience within their proposal. While many see this as added work, this additional step goes a long way in helping the owner make the most educated selection for their project. Make sure to treat this request with the importance that it deserves.
Bid Submission Phase
Once your proposal is complete, it is time to submit your bid. A well organized, easy to follow proposal is extremely important. Taking the time for a final, thorough review of the bid invitation requirements can make or break your submission. The last thing you want is to have your bid thrown out due to confusion or misunderstanding.
Depending on the bid type, the overall process of submitting may look a little different. For negotiated and selective bids, the owner will collect proposals and review privately with an intent to respond by a certain date. Open bidding, however, tends to also mean open reading of the submissions. The owner will likely collect bids up to a certain moment and then proceed to immediately open and read off each submission for complete transparency.
Post-Bid Phase
Regardless of how and when the owner responds to your submission, there is plenty of work to get moving on in the post-bid phase. Collecting and organizing the detailed takeoffs, quotes and pricing information while you await word will give you a head start on project kickoff.
Ideally though, the real work of the post-bid phase is contract negotiation. Upon selection, the owner will work with your team to draft a contract, negotiate terms and get the project moving. That leads to an entirely different discussion around the types of contracts an owner may select, but we’ll leave that for another day.
Tools and Technology in Bidding
While there is no doubt that construction bidding takes a lot of industry knowledge and expertise, there are still several ways that technology today can streamline the process.
For example, that full-size set of paper drawings I was handed on my first day is no longer the norm. Document management is a foundational element of project management software, ensuring that every member of the bid team is working from the same information. This also digitizes the RFI process and notifications around updated information, such as the addendums mentioned earlier, by automating document revision.
Another way to build efficiency into the process is through the solicitation of subcontractor or vendor pricing. Integrating this process into both the document management and cost management aspects of project management software allows your team to send out complete solicitation requests and route responses to the appropriate location.
The fewer steps that require you to manually re-enter data the better quality bid you create. In the end, this also simplifies the transition of a bid into a project.
Streamline your Construction Bidding Process with Kahua
If you’re reading about these added efficiencies with a colored pencil in hand and a roll of paper beside you, it might be time to look into a fully integrated project management system for your next bid. At Kahua, we have purpose-built a suite of out-of-the-box applications to simplify your bidding process. From there, our platform as a service (PaaS) foundation empowers companies to move beyond the idea of one-size-fits-all technology and take ownership of their processes.
Like I said before, construction bidding is part science and part art. Why not leverage the Kahua platform, which is built to handle the science so that you can focus your industry expertise on the art of winning more bids?
