When you walk into a shop to buy a pair of jeans, you look at the readymade product, make a selection, see the attached price tag, and make an easy purchase. However, products and price tags become ambiguous when it comes to constructing or refurbishing an entirely new construction project.
Construction bidding is a complicated, extensive process that requires you to speak its terminology and understand the role of every expert involved. For more assistance regarding planning and bidding, click here.
What is construction bidding?
Suppose a company wants to extend its operations and requires a newly constructed office from scratch. The company will send a bidding invitation to contractors or subcontractors explaining the work, completion time, set of requirements, and so on. Constructors will send a proposal to accept the invitation to prospective clients.
Hence, construction bidding is the process of submitting a tender or a bid as a proposal by the constructor to the client to manage or undertake the project involved. The client awards the bid to the contractor with the most viable bid and seals the commitment. The bidding process allows constructors to take up projects for the company and start building.
Construction bidding terminologies you should know
Bidding: The selection of successful bidders by a general contractor or client through competitive bidding, which includes processes such as submitting and evaluating bids.
General contractor: A person who agrees to manage a particular project, essentially building or refurbishing projects. They might also hire subcontractors to do parts of the project.
Tender: A tender is an invitation to bid for official projects by the constructor, offered by the client. The tender process is well-governed and defined to ensure that the selection process is fair and transparent. The tender mentions the scope of work, completion time, general or special conditions to contract, and the bid format.
Tendering or invitation to tender: Tendering is a formal, structured procedure for generating offers from potential suppliers or contractors for the required project. The end goal is to be awarded by the client.
Bill of quantities: A bill of quantities is a document used in tendering which specifies material, part, overhead, and labor costs and gives out terms and conditions to enable constructors to price their work. Preparing a bill of quantities requires that designs are complete with a specification prepared.
The basic construction bidding process
The entire bidding process is just like applying for a job via your resume. The clients assess your capabilities and skills to do the job, and if passed, you will likely move forward. The steps to the bidding process include:
- Bid solicitation
- Cost estimation
- Bid submission
- Bid selection
- Contract formation
- Project delivery
Let’s get into each step.
1. Bid solicitation
This is the initialization of the process. Here, the owner sends out an RFP or an open invitation for bid. The bid package lays out the project specifications and designs related to the scope, defining the type of contract and the construction method to be used. This allows the contractors to become acquitted with the client’s basic requirements and assess their compatibility for the project.
Price plays an influential role when awarding the contract, but it needn’t be the case. Clients put heavy emphasis on companies being able to serve the needs of the bid and justify their costs.
2. Cost estimation
The contractor creates a bid, highlighting all the relevant company information like previous work done, plans for the current project, cost estimates (for labor, overhead, and materials), and estimated time for completion.
If the project requires a subcontractor, the contractor will also solicit bids from subcontractors for the particular job and add the costs to the best-estimated price. Cost estimation can also be done using a bill of quantities and cost estimating software.
3. Bid submission
This is where construction companies look forward to submitting their bids to clients. This step lets clients see an estimate for their projects in case the price isn’t fixed.
4. Bid selection
The selection process varies depending on whether you bid for a government project or a private contractor.
If you’re bidding for a government or a public project, the lowest bid is selected as per the rules laid down by the government to prevent any chance of favoritism or fraud.
On the other hand, if you’re bidding for a private project, the project owner or the contractor can offer the project based on the lowest building price or other variables per the company guidelines. These variables can include the quality or experience of the bidders.
5. Contract formation
Once you have acquired the bid, the next step is contract formation, which must be concluded before beginning construction. In this stage, contract papers have to be duly signed by both parties. This is the perfect time for the contractor to negotiate the final pricing and the rules and regulations of the contract with the project owner. Any unclear contract closures and regulations can be discussed and finalized at this stage.
6. Project delivery
After finalizing and forming the contract, the construction project is now ready to roll as per the project delivery method.
Different types of construction bids
There are three different types of construction bids.
1. Selective tendering
In selective tendering, bidders are allowed to submit tenders upon invitation by the contractor. Builders are selected based on their capability to handle the size, nature, and scope of work.
2. Open tendering
Open tendering is used by both the government and the private sector. Anyone with experience can submit a tender for the construction project, giving equal opportunity to all applicants.
3. Negotiated tendering
These project tenders are used from the beginning of the project to dispute resolution. The project owners will be negotiating with only one contractor from the beginning to the end of the project.
Forming a construction bid is not an easy task. To make a competitive and winning bid proposal, you must spend a lot of time and pay attention to detail. The key to winning more construction is accurately estimating all the costs required during the construction process while calculating a reasonable profit for yourself.