Construction companies acquire most of their jobs through the process of bidding. The process involves contractors submitting their proposals to the main contractor or architect, who review the submitted documents and award the project to the lowest bidder. Work begins after a legally binding contract is signed between the two parties.
With contractors becoming more competitive, attention to detail is required when preparing proposals. The content of your offer plays as equally an important role as the bottom line in deciding the success of the bid. A small error can mean a difference between winning and missing out on a profitable project.
Factors Under Consideration
In several cases, a project owner is simply looking for a bidder who can offer the lowest price. However, if the tenderer cannot provide the correct certification and licences, the client will consider someone with a more reliable record, even if slightly more expensive. Unless the price is the only factor, assume that your proposal should show your technical skills and the ability to produce quality results at a reasonable price.
Analysing Your Bid-Hit Ratio
To increase the number of bids that you win, start by tracking your bid-hit ratio. Contractor coach George Hedley advises analysing your win ratio by checking metrics such as geography, sector and the size of the job. Find trends in what type of projects you’re likely to win, and focus on bidding for similar contracts. Always responding to the right projects with a well developed and estimated proposal is also expected to improve your bid rate.
Getting to Know the Project
Be aware of your ability and what projects are lucrative enough to keep your firm operating smoothly. Spend time reading the range and requirements of the project and determine if it is profitable enough for your company. Read the site conditions and note obstructions, equipment requirements and additional investments needed. Meet with site authorities and the project owners for any clarifications relevant to the scope of works or design.
After determining all job costs accurately, decide whether the project is worth your investment. Consider factors such as profitability, the financial condition of the client, historical analysis, risks, the current market situation and competition.
Accurate Estimation of Costs
Start by pinpointing your direct and indirect costs and determining your profit. Research construction costs in the local area, as well as on your previous projects. Take note that the costs of materials and labour fluctuate based on supply and season. Also, take into account if some items are custom made, require rush production or extra handling.
Aside from the direct costs, your bid must also account for indirect expenses such as tools and equipment, insurance and depreciation. Buying new equipment may not be cost effective for the bid, so you might consider buying secondhand or renting from a plant hire company.
Today’s construction companies struggle to win bids while maintaining tight profit margins. Developing a sound bidding strategy will increase your chance of winning contracts and maximise your time, money and resources.