In the construction industry, a contract
for a particular project is typically awarded to the contractor who provides
the lowest price for a given scope of work. The price, which is submitted to
the developer or project owner for review, is known in the industry as a bid.
While bids may seem fairly simple to
produce, there are several important factors to consider when pricing a job. It
is crucial that the bid is properly prepared, includes all relevant information
and conditions, and is created to match the bid requirements set for the
project.
The decision to bid or not bid a project is
often one of the greatest dilemmas a contractor or service professional faces
following an inquiry to bid. The immediate temptation is to bid on most
projects that become available in order to keep work coming in and avoid
unproductive down time.
Yet, the decision to bid a construction
project which is not suitable for a particular company can be costly not only
financially, but in its potential to damage the company's future credibility.
In such situations, opting not to bid a project may be the best decision a
contractor can make.
How does a contractor faced with this
dilemma make an informed decision? While there are no clear-cut answers to this
question, the builder should consider the following after receiving the bidding
documents and reviewing the project:
Competition: Who else is likely to bid this job? How many bidders will there be? Are the
bidders equal, or are they smaller contractors with lower overhead?
Nature of the job: Is the firm capable of building the project? Has the company done
any similar work in the past? Do the firm's superintendents and project
managers have the right kind of experience to handle the job?
Market conditions: Is the job extended over a long period? Will there be many unknown
factors such as labour rates, material costs, or other prevailing economic
conditions which may upset the project?
Firm's previous experience with the owner or architect: Has the company worked with the
client in the past? Has the relationship been satisfactory? Would it be prudent
to work for them again? Is the company obliged to submit a bid due to this past
relationship?
Cost to prepare a proposal: Does the probability of getting the job warrant the cost of
preparing the proposal? What are the chances of winning the job at a reasonable
profit? This is often underestimated, and many companies spend long hours
preparing a proposal for a bid they are unlikely to win.
All of these factors should be considered
in a logical way in order to reach a decision to bid or not bid a job. It is
also important that the contractor pursue this thinking as early as possible
and reach a firm decision in order to allow as much time as possible for the
estimating staff to prepare an accurate bid.
Good planning and sound decision making during
the bidding process can be the difference between a successful project and an
unsuccessful one. The decision to bid or not bid a project is arguably the most
important factor in the success of a business.
When contractors receive a new lead
notification from our system, it is important to check all the submitted
project information before you decide to bid or not to bid on the job. With our
matching system, project owners are expected to provide a budget for their
project, thus eliminating unrealistic bids.
As a contractor or service provider, when a
client's budget does not match your expectations, the best option is to pass on
the opportunity to bid. However, if the budget is close to your margins, by
making a few minor changes that won't compromise quality, you can present a
proposal that may win the project.
Related Articles:
Tips Before You Sign a Construction Contract
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construction related issues. MyCanadianContractors.com does not warrant the
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