In the construction industry, projects are typically awarded through a process known as bidding. During a bid, contractors review the project drawings and other information, then submit a price to perform the work. Owners and developers evaluate and compare these bids before awarding a contract to the selected bidder. While the lowest bidder is usually awarded the job, owners may also consider work history, experience and other factors when evaluating bids.
The most widely used bidding strategy for many contractors is to simply bid on every job that comes along. This high-volume approach is based on the belief that putting out a large quantity of bids means that you will usually win at least a certain percentage of them. This strategy is very time consuming and usually results in low profit margins. The bidding-by-volume approach is most effective for newer companies with little name recognition in the industry who have trouble landing work. It may also be a good strategy for companies struggling to find work, or those that have a large number of employees who are not busy with current projects.
A more effective strategy is to carefully evaluate bid opportunities based on quality, and to pass on bids that are not a good match for the company. This allows estimators to take their time on each bid and refine their price, which usually results in more successful bids. To utilize this strategy, consider the type of work your company is most successful at. This may be a specific project type, like hospitals or schools, or a certain size range of jobs. Once you find an appropriate bid opportunity, take the time to produce an accurate estimate and obtain material prices from suppliers. Evaluate the plans and schedule to see how you could perform the job efficiently. This will allow you to keep your bid low and improve your chances of landing the job.
Most bids for government work or municipal agencies are sealed bids. This means that prices are submitted and the lowest qualified bidder gets the job. There is no room for negotiation or bid modification. Many private projects, on the other hand, are open bid. This means that prices are submitted to the owner, and he can base his selection on a wide number of factors. There is no legal obligation to give the contract to the low bidder.
On this type of job, you can rely on networking and personal relationships to help you land work. Prepare your bids as carefully as you can, and stay in contact with the owner as much as possible throughout the process. Offer to help the owner or general contractor with budget pricing early in the project. This will often give you a leg up on the bid, and the owner may give you a second look at the project if other bidders have lower pricing. Once you land work, make sure that it is performed to the highest standards. This will often lead the owner to award you additional work through a negotiation process, rather than a bid. Negotiated work often comes with higher profit margins and fewer communication problems.