How to Evaluate Bids

In the construction industry, most jobs are awarded through a process called bidding. To participate, subcontractors will review the project drawings and put together an estimate on what it would cost their company to perform the work. For instance, an electrician would include wiring, light fixtures, switches, receptacles and equipment. He would need to include both materials and installation costs, as well as a reasonable fee for overhead and profit. The general contractor is responsible for reviewing and evaluating the bids, and selecting a subcontractor from each trade to perform the work. While the idea is generally to choose the lowest bidder, the process is rarely that simple. The bid reviewer must examine a variety of factors to ensure the bids are evaluated accurately and fairly.

Difficulty: Moderate

Instructions

Things You'll Need:

• Project drawings
• Project specifications (spec book)
• Bids from each trade

1. Separate the bids by trade. On larger jobs, you'll likely receive a half-dozen bids or more for each trade, and with dozens of possible trades, you could find yourself overwhelmed by hundreds of bids. Create a folder for each category (electric, plumbing, painting, etc.) then sort the bids into the correct folders. Work with one folder at a time to help stay focused.

2. Start with pricing. If one bidder is much higher or much lower than the others, this bid can usually be eliminated fairly quickly. A bidder that is too high can't be competitive on a low-bid job. One that is too low most likely missed some work on the drawings. If one of these extreme bids comes from a contractor who you normally work well with, you can offer them a "second look." Ask them to look for errors in their bid and send revised pricing if applicable.

3. Compare scope. With your electrical contractors for example, you'll want to check that they included all the basic materials and installation, but you'll also want to look for special items, which may include permits, underground utilities, mechanical connections, or any other tasks specific to the job. Some contractors may list the scope of work on their bid, while you may have to call others and ask what's included in their price. By defining the scope, you can do an "apples to apples" comparison of the bids.

4. Check that general project conditions are included. This may include overtime or night work, wage scale, payment or performance bonds, or special licensing, such as security clearance. Any of these factors could impact a bid price significantly, so you must ensure that they are included if required.

5. Ask whether any applicable sales tax is included. This is one of those items that some subcontractors will include automatically, while others will leave it out unless asked. Check with your bidders to see whether they've included tax before trying to compare one number with another.

6. Determine whether each bidder is capable of meeting the project's schedule. Some companies may not have the man-power, or may be too busy with other jobs to give your project the attention it needs per your schedule. If the schedule is critical on your job, ask each bidder to put their acknowledgment of the schedule in their bid.

7. Evaluate your previous experience with each bidder. Quite often, a general contractor will select a high-performing company with a higher bid over an unknown with a low bid. The same is true for subcontractors that have a reputation for being difficult to work with, or who have difficulty keeping to the schedule. If you know one of your bidders will get the job done right, and on time, evaluate whether they are worth a slightly higher price, assuming they are not the low bidder. It may be worth paying a bit more to ensure the job will get done, and to minimize your own headaches.

Tips & Warnings

• Some state and federal jobs have strict rules about awarding the contract to the lowest-qualifying bidder. On these projects, it is generally illegal to offer bidders a "second look," or to choose contractors based on anything but scope and price.

References

• US Department of Transportation Bid Review Process

Who Can Help Sponsored

• Earn your degree from industry experts at University of Phoenix. Take the next step in your career.