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How To Bid On a Construction Job


One of the most important skills needed by a developer, builder, contractor or any service professional is the ability to accurately bid on jobs. Bidding on a construction project is the process of estimating the cost of each component of the project, determining availability of materials and labor, and presenting this information to the customer in a clean, organized and appealing way.


An error in bidding can be a costly mistake for a construction company that has to honor the final contract and leave the project with no profit. On the other hand, over-bidding a construction job can result in lost business. In every single construction project there are as many opportunities to make money as there are to lose money.


To make a profit on a project, you need to estimate not only the obvious cost, but also the potential hidden cost. No matter how good a set of construction drawings is, there will always be some missing information. Most often, drawings do not state the building material manufacturer which leaves the door open for misunderstanding and an unhappy home owner.


Before a construction estimator even visits a site or looks at plans, the company should decide on the kinds of profits it must make to remain viable, where it can afford to lose and what overhead costs are running at the time. Consider the time you spend putting the proposal together, operating an office, in addition to the supplies and staffing costs. Add up all the costs involved in doing the project (the overhead and your salary), then figure out how much margin you want to add. A 10-to-20 percent margin, after all expenses have been paid, is a good operating strategy to stay in business. A company that only breaks even eventually will have to fold.


Consider investing in construction estimating software that can take a lot of guesswork out of the process. Estimating programs allow you to enter all of the parameters of a project and prompt you for information you might have neglected to gather. You can set your desired profit margins, and the software will prepare the bid and even fill out bidding forms. Construction programs also can help to manage bids and remind you when follow ups are due, but even without estimating software you can provide an accurate bid.


The following steps will help you make accurate proposals on your next projects:


1. Meet with potential clients

This can't be stressed enough. It is essential to take the time to visit the job site and review the plans and specifications. Ask as many questions as you require to clearly understand your client's finished project expectations.


2. Calculate Material Costs

List all the materials needed and contact your suppliers for availability and pricing. Include delivery cost and an allowance for damaged or lost materials in your calculation. Mark up your material costs enough to remain profitable, but not so much as to sacrifice your competitive edge.


3. Calculate Labor Costs

Estimate your labor time and cost in wages. Don't forget to include overhead costs like workers compensation and benefits in your calculations. Add your mark up on labor to this figure. This will be part of your gross profit from the project.


4. Request Subcontractor Bids.

Get bids on any portions of the job you will need to subcontract out. Mark up your cost on subcontract labor slightly to cover your administrative costs. This is the time to check that your subcontractors are properly insured and that they have sufficient working capital to undertake the project.


5. Have a Time Table

Prepare a time line for the construction project. Consider availability of materials, labor and subcontractor labor as well. Allow extra time for back orders, inclement weather, last minute subcontractor problems and/or delays due to the client.


6. Prepare your Bid

Write your bid for the construction project. Provide enough detail so that the client has a clear understanding of what he is getting for his money. Make sure that your proposal looks professional.


7. Present your Bid to the Client

When you present your bid provide references from satisfied customers. Don't wait until the client asks for references. Successful contractors will be more than happy to showcase their previous jobs. Also provide photos of high quality jobs you've completed in the past. Show evidence that you, your employees and subcontractors are all properly insured.


8. Clarify Changes

Include in your bid an estimated competition date. Also spell out how you will deal with changes to the original scope of the project. Specify that any changes must be requested in writing, and that the cost of the additional work will be detailed and signed by the client before you proceed. This protects both you and the client. When you neglect this aspect of bid preparation, clients may expect you to make changes as part of the original job, and you may end up working extra for free.


9. Follow Up

Ask the client when you might follow up to discuss who will be awarded the job. When you follow up, if the client wants to give the construction project to another contractor, ask if you might compare bids. Often service providers get intimidated and don't ask for this opportunity. Explain to the client that the low bidder is not always the most cost effective option. Offer to work with the client on cost if your client's budget is the deciding factor. Suggest alternative materials or design options that could cut the cost without compromising quality, but never compromise quality for price.


10. Leave your Contact Information

Even if the construction project will be awarded to someone else always leave your business card with your contact information. Be professional, thank the client for the opportunity they gave you to bid on their project and offer your services for the next upcoming project. Professionalism goes a long way when building relationships.


If you don't win the bid, find out what the final bid was and compare it to your own. You may find that that with some minor adjustments you could come closer to winning the project. On the other hand, you may realize that you are competing against companies that are willing to break just even to keep crews employed or to win favor with an important investor. Track all of your bids and regularly compare the winning and losing bids to adopt a formula that wins most of the contracts you want.


Related Articles:


Tips Before You Sign a Construction Contract



Note: MyCanadianContractors.com offers these informative articles as resources to help you understand better some construction related issues. MyCanadianContractors.com does not warrant the accuracy, safety or legality of any content. MyCanadianContractors.com shall not be liable whatsoever with respect to use of any content. Please read the terms and conditions regarding the use of this site.


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