Construction Bidding: A Complete Guide

construction bidding: how to bid on construction projects and win

You have the best team with the suitable skill set and commitment to excellence- but why are your construction bids not working?

A good bidding strategy will increase your probability of landing the best projects and clients successfully. If your construction bids are hit or miss, you will not get as much work as you want. To come up with winning bids, you need to understand the construction process and refine your approach.

What we cover:

What is a construction bid 

A construction bid is a process where a contractor submits a detailed proposal for a building project. The purpose of a bid is to showcase to an owner or client that the contractor is the best firm to undertake the particular project. The winning bidder will then be responsible for executing the necessary work on the project specified in their bid.  

6 critical steps of the construction bidding process

The bidding process is like a job application or a resume. It gives an overview of your capabilities to complete the work. If your first impression is impeccable, you will likely move to the interview phase. 

As a contractor, you can find bid invitations from various sources.

The bidding process is highly regulated for government projects but can be less formal for private projects. However, it more or less follows the same procedure. The necessary steps are:

  • Bid Solicitation
  • Subcontracting
  • Bid Submission
  • Bid Selection
  • Contract Formation
  • Project Delivery

We will now discuss each of these points below.

1. Bid solicitation

This is where the project owner sends out a Request for Proposals (RFP) or an Invitation for Bid (IFB). For public projects, they are generally large and open invitations. This is when the project owner lays out the project requirements, specifies the contract type, and defines the delivery method.

The pricing heavily determines the awarding of the contract. However, the bid solicitation phase requires more information, such as the Request For Qualification. (RFQ). In retrospect, it is the method used to get as much information as necessary on the prospective contractors’ company history.

2. Subcontracting

General contractors often have to outsource parts of the project to third parties. This process is known as subcontracting. For instance, if a project calls for specialized jobs like plumbing, electrical, etc., the general contractor would assign those areas to subcontractors who are focused on those specific components. 

During these instances, the general contractor would still work with the owner and is responsible for overseeing the execution of the project.

3. Bid submission

The next step is the bid submission. This should include all the relevant company information. It has all the company’s previous projects, management plans, and track record for completing tasks on time. The bid should be as accurate as possible.

It should also include a cost estimate based on the bill of quantities and blueprints. You can arrive at accurate costs using estimation software. Other things to include are overheads, labor, equipment, and materials. The best reasonable price influences the winning bid. It is important to note that a bid differs from an estimate, as discussed later.

The bid submission needs to have a professional touch. It is the face of the company.

4. Bid selection

There are rules, especially in government projects, to ensure that the lowest bidder wins the contract. This rules out any fraud or biases in awarding the contract so that price is eventually the ultimate equalizer.

However, there is more leeway to consider other factors when choosing a winning bid on private projects. The price always acts as a tie-breaker when contractors have equal bids.

5. Contract negotiation and formation

Once the owner selects a bid, they’ll move on to the contract negotiation and formation stage. Here, the owner and contractors would come up with an agreement and produce a formal document outlining the terms of the project. 

Construction contracts come in different forms, including:

  • Cost-Plus Contract, where contractors are compensated for all construction-related expenses.
  • Design-Build Contract, which handles design and construction costs at the same time.
  • Guaranteed Maximum Price Contract, which stipulates a maximum and capped amount of what the owner will pay the contractor.
  • Incentive Construction Contract, where the owner releases agreed-upon payments once specific milestones are met. 
  • Integrated Project Delivery Contract, which involves multiple parties—the owner, builder, and design firm.
  • Lump-Sum Contract, wherein the contractor agrees to deliver the project at a preset price. 
  • Time and Materials Contract, which stipulates an agreed-upon price based on profit rate, materials, and time spent on the project. 
  • Unit Price Contract, where the owner pays the contractor based on the units at agreed-upon rates.

6. Project Delivery Selection

The owner and contractor will also agree on a project delivery method. Depending on what the project entails, the team may decide to choose one of the following:

  • Design-Bid-Build (DBB), which follows a traditional sequential process. With DBB, the architect designs a project before the bidding stage starts. Once a bid is selected, the team will move on to the building stage. 
  • Design-Build (DB), where the design and construction of the project are handled by one firm. Some consider DB as a more straightforward delivery method. However, owners may have less input in design and construction management. 
  • Construction Management at Risk (CMAR) brings in a construction manager who serves as a consultant to the owner. This person serves as a consultant to the owner. They manage the subcontractors and take on the responsibilities (and risks) of meeting milestones and completing the project at the promised price. 
  • Multi-Prime (MP) divides the project into three phases: design, engineering, and construction. With MP, there are separate contracts with the stakeholder at different project stages. This means the owner has separate agreements with GCs, trade contractors, etc. 
  • Integrated Project Delivery (IPD) emphasizes teamwork and shared liability. This delivery method puts the owner, designer, and general contractor under one contract and spreads responsibilities, risks, and rewards across all parties.

Construction bid submission checklist

Every detail matters when bidding for a contract—and in today’s hypercompetitive construction industry, it takes more than just the best price to truly stand out.

That’s why we created this bid submission checklist. Using our PDF checklist, you can quickly review your proposal to ensure no important details (e.g. certifications, addenda, due dates) slip through the cracks.

construction bid submission checklists

What happens before the construction bidding process?

Before bidding, a company must perform proper due diligence to see if a project is right for them. Do you have the capacity to handle the new contracts? Is your backlog too much for you to take up a new deal? These are some of the queries you need to answer before submitting a bid.

One of the most critical decisions is considering the method of delivery to be used on a project. The delivery method is determined using the budget, building design, and schedule. Each delivery method has its roles and responsibility obligations.

There are four significant kinds of delivery methods. These are:

Design-build (DB)

The contractor submits a contract covering both the project’s design and construction phases in the DB method. Here one cost covers both phases of the construction. The design-builder is held accountable for both aspects of the project.

Design-bid-build (DBB)

This is arguably the most common method, especially in non-residential government projects. The project owner hires a designer independently. The hiring is done by the contractor who manages the project. Once the designs are completed, the bids are submitted to the owner through the contractor for execution to start.

Integrated project delivery (IPD)

This is one of the new methods used, and the owner employs the architect, owner, and contractor together as a team. They share the risk equally.

Construction management at risk (CMAR)

This is an alternative to the DBB method, and it reduces costs. Here design and construction are handled by different entities. The construction manager is involved from project inception. The construction manager may assist in choosing an architect, and they will work together throughout the project’s design phase.

This approach is mainly employed in complex projects. Unlike other delivery methods, where the construction manager is chosen using the lowest price criteria, the construction manager is used based on qualifications and experience.

The owner’s important decisions when issuing a contract are the procurement method and the delivery type.

Types of construction bids

An effective tendering method ensures the right contractor is chosen and the ongoing relationship is mutually beneficial for both parties. Effective bids and tender management processes improve the quality of the finished product and manage the risks.

The increasing complexities of procurement routes led to the rise of different tender procurement methods. These are:

  • Open tendering
  • Selective tendering
  • Negotiated tendering
  • Serial tendering

Open tendering

This is the main tendering procedure used by both government and the private sector. It allows anyone to submit a tender for a construction project. It is the most competitive as it gives equal opportunity to applicants. It also provides opportunities for new emerging suppliers. It might need more time to evaluate the tenders as not all bidders might be suitable for the contract.

Selective tendering

In selective tendering, bidders are allowed to submit tenders by invitation. This is an opportunity for contractors to leverage their track record. Contractors are chosen based on their suitability to handle the size, scope, and nature of work. Clients have more confidence that their requirements will be met in selective tendering, but this excludes new entrants from tapping into the market.

Negotiated tendering

These tenders are used extensively from project commencement to dispute resolution. The owner negotiates with one contractor from beginning to project end. These tenders are helpful for highly specialist contracts or when the owner wants to extend the scope of work. There is better communication, and information flow since the contractor is a part of the project team.

Serial tendering

In serial tendering, the tenders are based on the work schedules of bills of quantities. The rates are used to value results over a given number of projects, and with time the procedure can be repeated for different projects.

Types of construction procurement

The procurement method is how construction services are obtained. Procurement methods are primarily grouped into four, as we will discuss below. They are:

The best value source method (BVS)

In the Best Value Source method, the contractor is awarded the contract based on price and past performance. Other indicators such as qualifications, time management, and staff robustness are also considered.

A contractor with a good reputation on his past projects can leverage his position using a track record of success to win. To win projects utilizing this method, a contractor must sacrifice his commercial construction profit margin and improve the bid-hit ratio. 

Low bid method

The low bid method selects competitive bids based on the procurement method’s lowest bid. Government and public construction entities use this method.

Direct select or sole source method

Direct selection is a single-source method that uses only one provider to satisfy all the project requirements. This method is also a non-competitive procurement method that can benefit contractors.

Negotiated method

In the negotiated method, the contractors are selected without any advertisement. A contractor is chosen and deals with the owner per the price and technical requirements. A contractor’s bid will likely be chosen as the selection criteria are based on goodwill and previous successful relationships. This is one of the best ways a contractor can win more jobs.

Top bid selection criteria

When putting together a bid, it definitely helps to familiarize yourself with the criteria that owners use to select proposals. Consider the following:

Cost

All owners want to maximize their profits, which is why pricing is an important consideration. Owners looking to get the most bang for their buck many put significant weight on how much a project would cost them.  

Capabilities and experience

Beyond price, owners also consider how qualified a contractor is. They may look at your previous projects and examine your expertise to determine whether or not you’re a good fit for the job.  

Reputation

Owners want to minimize their risk as much as possible, so they’re more inclined to go with contractors with a solid reputation. A contractor with a proven track record, great reviews, and stellar references is much more likely to win a job compared to someone who doesn’t have a strong rep. 

Safety

Still on the topic of minimizing risk, no owner wants to have a safety crisis on their hands. As such, most evaluate the safety practices of the GCs their considering. Ensure your safety compliance ducks are in a row and be prepared to answer questions on how you keep the jobsite safe.

Types of construction contracts

There are no two construction projects alike, which creates the need for diversified contract types to meet all the involved parties needs. Settling on the best contract type for a project manages risk and ensures the project sails as smoothly as possible. When choosing a contract type, one should assess the contract features, the kind of project, the contract’s troubles, and the benefits and drawbacks of the agreement. In construction, there are five primary types of contracts. These are:

  • Lump-sum contracts
  • Time and materials contracts
  • Cost Plus Contracts
  • Unit Price contracts
  • Guaranteed Maximum Price Contracts

Lump-sum contracts

These are the most common contracts, also referred to as fixed-price contracts. They outline one price for all the work to be done. These contracts simplify bidding for a contractor to quote a fee instead of submitting multiple bids. Finishing the project under budget also ensures high-profit margins. However, one should carry out proper cost estimations. Among the benefits of cost estimation is that it minimizes losses caused by miscalculations.

Time and materials contracts

These kinds of contracts best work when the scope of work is not correctly defined. Contractors are paid hourly or by the cost of materials used. These contracts can be challenging because tracking the time and materials can be time-consuming. Doing a thorough job can mean spending more time jotting down numbers than doing the work. Considering the unpredictability of construction projects, the owner can spend more than they planned since they have to pay the contractor for any changes and unexpected costs.

Cost plus contracts

In these contracts, the owner pays the contractor for all costs incurred plus a profit determined as a percentage of the total project price. The costs involved include both direct and indirect costs. These contracts are flexible, and miscalculations are not as devastating.

Unit price contracts

In unit price contracts, the project is divided into units known as measurement contracts. The contractor uses the construction unit database to price the work units. He then provides cost estimates of the work units, not for a project as a whole.

These contracts are outstanding, especially for projects which have repetitive work. 

Guaranteed maximum price contracts 

For these kinds of contracts, the owner has a maximum contract price for the project. Any costs beyond that are to be covered by the contractor. These contracts are a common feature in construction contracts with a few unknowns. These contracts incentivize savings and reduce costs, and contractors finish ahead of schedule.

Where to find construction jobs

Finding construction jobs is relatively straightforward if you are equipped with the right strategy. Municipalities and states also award construction jobs worth millions of dollars every year. To get reliable construction jobs, you need to find reliable clients, efficiently estimate the project costs, and convert the clients to lifetime clients. Below are some of the areas you can get construction jobs.

1. Sign up for construction bidding sites

The best way to start construction is by looking for contractors that are already open for bids. You can try out commercial project bidding sites such as Dodge Construction Central or BidCentral. Most of these bidding sites have a small subscription fee of anywhere between $75 and $150 a month. You can try out the free Building Connected site if you are on a budget.

If you are looking for residential projects, you can check out Home Advisor, which offers excellent services to residential contractors.

2. Sight up as a government contractor

The government is always embarking on new projects. Therefore, you can sign up as a government contractor either for your city, county, state, or federal government. These sites include USA.gov, GSA, BidNet, and Fed Biz Opps.

3. Utilize your networks

Most people win contracts by word of mouth. The more you put yourself out there, the more opportunities you will encounter. You can find these networks from the people you have worked with, professional associations, friends and family, and professional networking sites such as LinkedIn. Building a network takes time, but it is a sure way to build repeat customers.

8 tips to win construction bids

Winning more bids is what success in the construction industry is all about. But while keeping your costs low is important, there’s a thin line between being competitive and staying profitable. That’s why it’s a mistake to simply increase bidding volume, a potential waste of your time and money. The better way? Focus on winning more bids (with fewer proposals) following the eight proven tips below. By understanding the bidding process, knowing your competition, demonstrating your value and being selective about the projects you pursue, you’ll be in a good position to win more bids and close out jobs that turn a profit.

1. Bid early

Timing, as they say, is everything. It’s always a good idea to submit a bid ahead of the competition. Why? It’s simply a matter of math: the more proposals a project owner receives, the higher the probability yours won’t win. When you submit early, you may be one of three companies under consideration; later on, you could be competing with thirty. You don’t need special skills to find projects before your competition gets wind of them. As for finding projects to bid on, construction bidding networks and marketplaces are a useful way to learn about jobs before others can—and you can even include a company profile that is included in online bid searches.

2. Accurately estimate your costs 

Clients are never happy when you misquote, underquote or overcharge. Underbidding makes the evaluation team question your experience and expertise. Quoting too high usually means that your bid will be out of contention. The better way is to provide a line item cost estimate based on material takeoffs along with anticipated labor and supply costs. After proper cost estimating, review your profit margins. Your bid can be considered fair and reasonable if they fall within acceptable limits.

3. Bid on the right projects

Just because a job is available doesn’t mean you should bid on it, but it can be a tough decision for contractors actively seeking work. Consider every element carefully before submitting a bid; the wrong job can lead to frustration, profit erosion, and poor client relationships. Take your time to research each project type, location, and competitors, then develop your bidding benchmark. That will help you bid strategically and increase your chances of success.

4. Leverage your expertise

It’s often said that “you can’t be good at everything, but you can be good at something.” That’s certainly true of construction projects. Before you bid, think about past projects that were the most successful and which ones led to repeat business. When you stick to what you do best, you’re more likely to deliver a job on time and within budget. Concentrate your efforts on the projects that fit your company’s specific parameters and skip the rest.  

5. Understand the RFP

RFPs are very specific, and a thorough understanding of terms, scope, and other project details are essential to bidding success. Even a slight deviation from the request can be grounds for disqualification, so plan to adhere to the specified format and page count—a gesture of professionalism and respect that the project owner will appreciate. Bottom line: the RFP should not be so detailed that it hinders the contractor’s creativity and decision-making, but not so vague as to leave out critical information.

6. Differentiate your brand

When your company brand lacks presence and professionalism, you automatically lose any competitive advantage you might have had. On the other hand, if you have developed a distinctive and recognizable brand for your organization— one that includes characteristics such as quality control, responsiveness, customization, and expertise– you are less reliant on a simple cost-to-cost comparison and more likely to win the bid.

7. Nurture trust with decision-makers

Even if you make it to the final in-person interview with project owners and other decision-makers, if the stakeholders don’t feel that you are the right match, you’re unlikely to win the bid—even if your costs are competitive. And while it’s never wise to force a relationship, you can build trust with open and ongoing communication, indicating your willingness to discuss, collaborate, or even compromise to come to mutually agreeable solutions.

8. Don’t forget the details

Breaking down your bid helps project owners feel that you’re meeting their expectations. When you avoid giving a lump sum figure but instead specify labor, equipment, and material costs, you show your potential client that you are well-equipped to do the job. 

All prospective clients need to see an investment return, so be prepared with hard data that backs up your numbers. Historical data and case studies can provide helpful support.  

Following up on construction bids

The bid submission stage doesn’t stop when you submit your proposal. Developing a follow-up process helps you unlock both short- and long-term benefits. 

1. Improve your relationships with general contractors

When you take ownership of the follow-up process, you prove to owners (or general contractors if you’re a subcontractor) that you’re easy to work with, a good communicator, and on top of your game. Construction pros want to work with contractors and subcontractors who make their lives easier, so it’s a great way to differentiate yourself in a competitive environment.

2. Increase hit rates by getting feedback to make revisions

It’s unlikely that an owner or general contractor will reach out themselves to give you feedback on a bid or let you know what you need to do to make it more competitive. However, when you follow up and ask if they’ve gotten a chance to review your proposal, it also gives you the opportunity to ask if they’d like you to make any revisions. Again, these guys are busy, so take the initiative to ensure your proposal hits all the right marks.

Even if you discover someone else already won the job, they may be willing to provide feedback that helps you win the next one. The more information you can get after each proposal, the more focused and strategic you’ll become over time.

3. Spend your time bidding on jobs you’re more likely to win

If you keep submitting and not hearing back, it might be time to re-evaluate whether bidding for that contractor’s jobs should be a priority for your team.

This is where follow-ups can come in handy. If you continually follow up with someone and still never hear anything back, it’s probably not worth it to bid on their projects in the future. Moving forward, you can refocus your efforts on owners and general contractors that will truly respect your time.

Keep in mind that everyone is different. First, develop a baseline follow-up process for those you haven’t worked with before (e.g. an email two days after the submitted proposal, a phone call a week after). Sync those tasks to your calendar to ensure you don’t forget to reach out. Then, after you learn each person’s communication preferences, tailor your follow-ups for their future projects.

Why you didn’t win that bid

No one wants to lose out on a bid, but it’s bound to happen in reality. Here, we’ll discuss 10  of the most common reasons why construction bids are lost. In turn, keeping these losing strategies in mind will help you create your winning proposal plan for future bids.

1. You didn’t understand the scope of work

One of the primary reasons for failing to win construction bids is that you didn’t understand the scope of work. According to Business Dictionary, a scope of work is “the division of work to be performed under a contract or subcontract in the completion of a project, typically broken out into specific tasks with deadlines.”

Sadly, if you fail to fully grasp the scope of work set in the request for proposal (RFP), then you’ll have a hard time setting the right tasks or deadlines and therefore have basically no chance to compile a winning construction proposal. Make sure you read the scope of work carefully. If there’s an aspect that doesn’t make sense or you need more information, come back with any clarifying questions as long as there’s enough of an opportunity to submit before the proposal deadline. 

2. The price wasn’t right

If you can’t seem to win construction bid attempts, the price may represent at least part of the problem. Your clients won’t be happy if you misquote prices, overcharge, or underbid. Even bidding less than you’re worth is a problem, because it can lead the evaluation team to wonder about your level of expertise.

Remember that quoting both too high and too low is a red flag. While you can’t possibly predict what your competitors will quote down to the dollar, the best tactic is to worry less about under or overbidding.

3. You didn’t explicitly explain your cost

When looking over a bid today, the evaluation team might experience a moment of sticker shock when looking at the price. That’s not to say construction costs are unreasonable or deal-breaking, or that you can’t charge what you’re worth. Your only job: explain your costs explicitly, line by line, and show how hiring you will provide the value they are looking for in a project.

4. You didn’t showcase your experience

Many companies write stellar proposals, then forget to back them up with proof. Always remember to include relevant past projects when submitting bids and proposals. After all, you’ve done great work, so don’t forget to show it.

5. Your references weren’t up to par

References matter, and not just for college applications. Provide the right and relevant references to showcase your performance and track record. It’s better to use fewer references than sacrifice their quality. If you had a rocky relationship on a project, it’s better to leave it off, because it truly can be the determining factor in whether you win or lose.

6. Your safety record isn’t ideal

A good construction safety record means less risk and fewer costs, both of which clients care about. If your safety record is faulty, you aren’t likely to be the winning bid.

If you’re concerned about your safety record, it’s time to institute a new approach. You need to create a culture where safety is prioritized, and that means crafting a careful safety plan and educating your employees on the best means of adhering to the standards.

7. You were missing documents and information

If you want to win construction bid attempts, it’s critical you complete your proposal and bid to the letter. Even one small missing section or document could immediately disqualify you. Ensure you submit everything that is requested. You should double, triple, even quadruple check every part of the document before you submit your proposal.

8. You didn’t read the RFP thoroughly

If you didn’t read the RFP thoroughly, you’re in bad shape. The RFP will ask for very specific information, and it’s best to follow instructions exactly. Don’t deviate from them at all, and adhere to any requirements on page count and specifics for submission. This shows you’re a professional and that you respect your client’s needs and preferences upfront.

9. You were late in submitting

Even one minute matters when submitting a bid. If you can’t follow a simple deadline right at the outset, why should a client trust you to adhere to the years-long timeline with budgetary consequences? Before you submit your construction proposal, leave plenty of time to submit to navigate bidding systems that could be manually burdensome and slow. Bottom line: If you want to win construction bid attempts, stick to the deadline. 

10. You don’t use the right tools

Using the right tools and equipment on a project matters to its success. In your proposal or interview, you might specifically state digital tools you will be using or have used on previous projects—but are they the right ones? An owner might have had experience using specific bid management software and technology tools in prior projects and might be looking for them. Do your research and keep up to date on the latest innovations in the industry and can showcase their value in the proposal.

Frequently asked questions

How long should I spend on a proposal?

This is tentative and depends on the complexity and requirements of the contract.

Are there other evaluation criteria used apart from the ones in the specifications?

No, the panel can only use the evaluation criteria provided in the RFP.

Can I provide a credit letter as bid security?

In most cases, the law only allows for bonds in construction contracts. They may be in money orders or certified cashier’s checks.

How do I know the bid results?

After winning a bid, a call or email is sent to the address provided in the solicitation.

Can I be reimbursed for my proposal preparation expenses?

The proposal preparation process is costly, but you cannot be reimbursed for the costs.

If I have concerns regarding the fairness of the process, who should I contact? 

If you have fairness concerns, you can talk to the contact person in the tender document.

Bid Like a Winner

It’s time to stop bidding to survive, and start bidding to win. Running a business can be a lot like gambling, and the odds (or competition) can often seem stacked against you where lowering your bid feels like your safest option. 

But with the right tools and a solid strategy to position your company as a serious player in the market, you can start to increase your odds of winning more projects—without undervaluing your service. In a matter of no time, you’ll spend less time bidding and more time winning jobs since you’ll have the right tactics and tools in place to effectively evaluate the right opportunities and ultimately create proposals that set your company apart.

Want to maximize the value of your digital bid management solutions? Download our eBook, “3 Keys to a Better Bidding Process” to learn how.

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Grace Ellis

As Manager of Content Marketing Strategy at Autodesk and Editor in Chief of the Digital Builder Blog, Grace has nearly 15 years of experience creating world-class content for technology firms. She has been working within the construction technology space for the last 6+ years and is passionate about empowering industry professionals with cutting-edge tools and leading strategies that improve the quality of their jobs and lives.