Fine-tuning your bidding process can help you win more construction jobs
Construction work comes in many forms, from bathroom remodeling to pool construction—and it’s just as important to know about pool construction bids as it is honing your knowledge of bathroom remodeling bids. It can be as simple as replacing a loose roof shingle or as complex as building a mansion. But there is always a bidding process involved. Project owners or homeowners start the bidding process, and smaller projects sometimes go to one-bid contractors.
If you have larger project proposals, bids go out to one or multiple construction firms, depending on the complexity and size of the structure.
A construction bid is a proposal that comes from a building project owner and goes to general contractors or development companies looking for work.
There are also bids within bids. Contractors look for subcontractors to take on specific tasks, such as electrical, plumbing, roofing, or even landscaping for upcoming projects.
Learning how to bid on jobs is a must for any contractor. Getting more work through construction proposals will help you grow your company and develop a pipeline of referrals for future business opportunities.
Whether you want to learn more about the different types of bidding or how to create a winning proposal, we're breaking it all down here.
There are several types of construction bidding, depending on the project and the building owner’s process.
The design-bid-build method starts with the designer, draftsperson, architect, and structural engineer creating the initial building plans and soliciting bids using those blueprints.
Most residential, commercial, and government construction bids use the design-bid-build model. It's the most easily understood process for those involved and can yield the lowest prices for the owner.
Another construction bid method is bid-build. The owner solicits proposals for the entire construction process, from rough drawings to occupancy. This process can lead to better project delivery, including faster execution, fewer change orders, reduced administrative burdens, lower costs, and fewer disputes that result in litigation.
How do construction firms win the bid-build part of the process? Determining factors can include expertise, timing, and price. The quality of the proposal is also important.
Let’s explore how to successfully bid on construction jobs for three different types of project owners, and why each one is beneficial for business.
The first step in bidding on residential construction projects is to know where they are. Homeowners often send out requests to a predetermined list of construction companies near them. Others may place them online using a web-based bid-posting website. Homeowners are often told to accept three to four to determine the right builder for their project.
There are five steps in the bidding process for residential homes:
1) Bid delivery: The owner solicits bids on a home construction project. They supply interested contractors with relevant plans and specifications.
2) Review and research: This is when construction firms review the details and research the project’s scope.
3) Complete proposal: Contractors review the project documents, contact any needed subcontractors, and crunch the numbers.
4) Winner chosen: After receiving all qualified bids, the client chooses the winning contractor.
5) Contract signed: The homeowner and contractor collaborate to confirm all details and execute a signed contract.
Contractors need patience and skill to navigate the many aspects of a potential project. Winning proposals offer a combination of detailed specifications and low costs for labor, materials, and equipment. Some project managers consider factors such as previous positive partnerships or expertise in a specific area of construction.
You’ll need to balance your company’s experience and resources to determine if a bid is out of reach. Taking on too much project responsibility can backfire with delays, lower profits, and a tainted reputation. You can submit proposals on smaller projects and increase the size slowly. Securing contracts by size should correspond with the growth of your company.
Using lead generation services like Angi is a great way to win new business. Angi’s “bidders” are homeowners actively looking for skilled and reputable contractors to tackle home improvement and repair projects. This differs from a proposal request from a home builder or company looking for an entire home construction project.
Larger construction companies have the size and skill to take on bigger projects like commercial bids. These are projects for building offices, manufacturing plants, medical centers, fast food buildings, and retail shopping centers. Their size and complexity rule out many contractors.
Commercial bids often feature subcontractors as part of the overall project. Newer contractors may find these opportunities are a great way to become familiar with construction project bidding.
Commercial contractors look for specialists in various parts of construction, including:
Carpentry and floor work
Roofing, siding, and sheet metal work
Concrete work
Special trade contractors (glass and glazing, excavation, demolition, steel erection, and more)
Factoring the size and scope of a commercial project is important to determine a bid because costs for materials are higher. For example, commercial buildings use steel and concrete rather than the wood used on homes with more complicated plumbing, electrical systems, and utilities to consider when estimating.
There are also more stakeholders in a commercial project, with banks, lawyers, architects, and code and safety (such as OSHA) enforcement officers potentially on-site to check progress. Meetings will increase in length and frequency. You might need to employ more project managers.
Larger buildings have a likelihood of complex codes and regulations attached to commercial construction. Commercial projects face federal, state, and local municipalities that monitor construction. The paperwork also increases due to more complex building and construction codes and environmental laws.
Government or “public” construction can be lucrative for construction firms. Public projects totaled $328 billion in 2019 with one-third coming from federal contracts and the rest from state and local projects.
How are government construction bids different from residential or commercial? Public projects are advertised using a “Request for Proposal” in local publications and websites. Contractors must submit a sealed application. The governmental agency opens the proposals and votes for the winner.
Cost is usually the determining factor in public construction projects. There are more requirements for government contracts including bonds, prevailing wages, and meetings that may differ from commercial construction projects.
There are also government programs that encourage or reward participation by Small Business Enterprises (SBE), Women Business Enterprises (WBE), Small Disadvantaged Businesses (SDB), Women-Owned Small Businesses (WOSB), and Veteran-Owned Small Businesses (VOSB).
There are several methods for project owners to determine the winning bid. The three most common procedures are:
In this method, bids are posted for contractors to submit a proposal. The owner compares proposals using the design-bid-build process. All contractors use the same plans and criteria to prepare their plan. Project owners simply pick the proposal with the lowest price.
Two-step bidding includes a first-round review of the contractor’s skills and experience. They study the backgrounds and reputation of the first-round winners. Project owners narrow the finalist list to those who meet the technical qualifications. These “qualified bids” battle in a second round of decision-making.
Negotiated bids take the finalist list and negotiate. They analyze projected costs, objectives, schedules, and other details to get more data to base their decision. This method uses the added criteria as a factor rather than price as a determining factor.
Bidding on construction projects takes skill and practice. The larger the project, the more exacting project owners are in their details and specifications.
Here's how you can nail the project every time.
Construction companies should become familiar with the rival companies in the area. Keeping tabs on the competition and tracking their projects can help you determine when and where to bid.
Your competition may have specific qualifications for a particular project. Consider adding more expertise to your proposal or finding gaps in your competition's services to overshadow rival firms.
As noted earlier, construction bids can be time-consuming and offer a negligible return on investment. Prevent this by reviewing and considering each one before starting the proposal.
This is especially true when bidding on projects that go beyond the scope of your experience. Narrowing your bids to those that favor your skill-set will increase your chances of winning the bid.
Some projects have an extended payment date, such as 180 days or longer. If you are borrowing money to do the project and make payroll, factor the cost of this money in your bid. A large payout in six months might end up providing little to no profit or worse, a loss.
Contractors can maximize their chances of winning the bid by identifying and engaging key stakeholders of the project. Research the organization and carefully study the bid for top decision-makers.
Prepare a list of questions to introduce yourself and establish a connection. Owners and executives are more likely to work with those they trust.
Preparing a detailed proposal is a great first start in winning bids. Adding relevant highlights of your skills and experience can distinguish your company from others.
You can include testimonials, letters of recommendation, project photos, customer reviews, or awards received to boost your profile.
Bidders expect to see a well-prepared and detailed proposal.
You can win more construction projects using:
Breakdowns of equipment and material costs
Timelines and project management outlines of deliverables
Case studies to show experience and past project work.
Adding as much detail as possible can answer questions before the second round. It also creates a level of trust that they're looking for with their potential construction partner.
Technology has become a powerful tool in construction, and computers play an important role in managing projects.
Some of the technology you can use to bid on construction jobs includes:
We often learn more from our mistakes than from our successes. Establishing a review process to analyze objections will make for better proposals in the future. If you can review the winning bids, study them in comparison to your proposal. It may point out areas of improvement in your bidding or even quality of work.
Construction bid software to input and analyze proposal data
Charts and graphs to show projected costs and outcomes
Data analytics to deliver more detailed summaries of intended project deliverables
Project software to help you manage multiple projects at the same time
Project software that gives the client continuous access to the status of the progress and whether it is ahead of schedule, on schedule, or running behind
We often learn more from our mistakes than from our successes. Establishing a review process to analyze objections will make for better proposals in the future. If you can review the winning bids, study them in comparison to your proposal. It may point out areas of improvement in your bidding or even quality of work.
New construction project bidders can analyze their successes and factor those types of projects into their business plans. The construction industry is constantly changing due to market forces and technology. Staying on top of those fluctuations and moving to where demand is greatest can diversify opportunities and develop a niche.
Learning how to bid on construction jobs takes time and patience. Even skilled and experienced contractors lose projects. Your success-to-failure ratio will improve once you’ve developed a system and modified your proposals based on previous experience.
Looking for more leads? Angi Pro is one of the easiest and most effective ways to showcase your work and find new home construction and renovation clients. Expand your construction job opportunities by signing up for Angi pro today.
