Are you looking to win more construction bids in 2023? Maybe you’re planning to grow and scale your construction business in the new year, or perhaps you’re just looking to be more efficient in your estimating and bidding process to improve your bid-hit ratio.
What does it take to win more construction bids? Here are a few tips on how to bid smarter by going after the right opportunities to win more work.
Find Quality Construction Leads
You shouldn’t bid on every opportunity that comes your way. You also can’t sit around and expect project leads to come to you. Market your business to owners and general contractors you want to work with by showcasing your experience and expertise in your trade.
Reach out to your network to find out about upcoming opportunities. Take the time to get prequalified with general contractors or owners you want to work with, so you can receive more invitations to bid (ITBs). Make sure they know what trades you can perform and the types of projects you are interested in bidding on.
Take a proactive approach by utilizing as many tools as possible to ensure you are receiving quality leads. Word of mouth, bid boards, local contractors associations, and your subs and suppliers are all great sources for learning about upcoming bidding opportunities. Consider investing in a leads service with a searchable database, updated project details, and plans and specifications attached so you can focus on finding the right opportunities for your business.
Select the Right Projects to Bid
Winning construction bids on projects your business can’t adequately perform can be just as costly as not winning them. Remember, it is never too late to abandon a bid—even after you’ve started working on it.
Once you start crunching the numbers you might discover that your company won’t make a reasonable profit if you were to win the contract. The best thing to do is dump it and move on to the next project.
For example, you may discover during your bid preparation that your company cannot adequately handle the scope and requirements of the project. At that point, you need to make the smart business decision to walk away from the bid.
Finding the right balance between bidding and winning enough jobs can be difficult. On the one hand, you don’t want to bid and win so much work that you can’t properly manage and complete the projects you’ve been awarded. You also don’t want too little work that you aren’t making any money and your workers aren’t staying busy.
Selecting the right work to bid is vital to maintaining a profitable business, which is why it’s vital to have an established bid/no-bid decision-making process in place to win more construction bids.
Understand Your Bid-Hit Ratio
Are you keeping track of your bid-hit ratio? If not, you need to start. Your bid-hit ratio is the number of projects you must bid to win one job. Understanding your bid-hit can help you how many projects you need to be bidding to keep your pipeline full and weed out the opportunities that don’t have a high probability of winning.
To really make your bid-hit ratio work for you to maximize your bidding efforts you need to do an in-depth analysis. Sort the projects you’ve bid and group specific categories. Consider things like public versus private work, building type, scope of work, geographic location, contract size, and the general contractor or owner of the project.
By categorizing and analyzing your bid-hit ratio, you get better insight into which types of projects to go after. For example, let’s say your overall bid-hit ratio is 7:1. After performing your analysis you discover that your bid-hit ratio for medium-sized private office projects is 4:1 and your ratio for large, public school projects is 10:1.
In this scenario you have a better bid-hit ratio on the private office projects, so you should focus more effort on those opportunities and less time bidding on school projects.
Now that you know the types of projects that you have the best opportunity of winning, it’s time to look at profitability on those projects. Make sure you are recording accurate job costs for materials, labor, and equipment. Compare your actual costs to your estimates and ask the following questions:
- Were your estimates for labor and materials accurate?
- Did you include all the job costs in your estimate including like bonding, supplies, and equipment?
- Did you factor in your profit and overhead mark-up correctly?
- Was your contingency budget adequate?
If your profit margins on projects aren’t what you expected there are two possible reasons. Either your estimates are too low, or you are having productivity issues on the jobsite which is causing job costs to be higher. Regardless of which is the cause, you should work to resolve the issues to get your profit margins where they need to be.
By combining the data from your bid-hit ratios and your profit margin analysis you can hone in on the projects that you have the best chance of winning and make the most money on.
Conduct a Bid/No-Bid Review
Now that you’re getting quality leads and you know the types of projects to pursue, it’s time to start bidding, right? Not so fast, before you start investing your time into putting together a bid proposal you need to conduct a thorough bid/no-bid review of each opportunity.
The first thing to do is gather all the project documents, plans, and specifications and familiarize yourself with them. You want to make money, so crunch some quick numbers to determine whether you can make a reasonable profit on the project.
Next, determine whether you can perform the work if you win. Make sure you have the manpower and equipment available to start the job on time and complete it on schedule. Does your company have the experience and expertise to handle the size and the scope of the project? It’s no good to anyone if you bid and win a job you can’t complete.
Perform a risk assessment to determine if there are any red flags that might cause problems if you win the project like unknown site conditions, safety concerns, accelerated timelines, and incomplete or inaccurate bidding documents.
Other factors to consider in your review should include project location, duration, competition, and client. Decide which criteria are most important to your company when selecting projects to bid and apply them to all projects you are considering bidding on.
Identify and Manage Risks
Identifying and managing risks is probably the most overlooked aspect of preparing a bid. Once you’ve identified the potential risks, you will need to analyze and evaluate each one individually so that they can be properly managed and mitigated.
Consider the probability of each identified risk and the impact it can have on the project. For example, a low-probability risk with a low impact might be easy to mitigate. But a high-probability risk with a high impact that you can’t effectively manage could be detrimental to the project’s profitability.
Identifying and evaluating possible risks associated with a project when preparing your bid will make you better prepared to handle a situation when something goes wrong.
By starting the process early, you can avoid bidding on projects that aren’t profitable. It will also lead to more accurate bids with reasonable contingencies built in and result in your company winning more bids. Project management will run smoother, and you’ll save time, money, and resources as work progresses.
Seek Clarifications, Avoid Assumptions
As you’re preparing your bid, you need to do your due diligence to ensure that you have all the pertinent information, that the information is accurate, and that you have a complete understanding of this information.
Fully review the plans and specifications to determine everything required to bid on the project and complete the work. This includes knowing everything from what bonds are required to whether there are participation goals for minority business enterprises (MBEs) or if material substitutions are allowed in the bid. If you are unsure of any aspect of the project when preparing your bid, you should seek clarification from the architect, owner, or owner’s representative.
Be aware that there are typically cut-off dates in place for questions to be submitted. This allows for the project team to make any changes to the plans and specifications and for any addenda to be issued to the bidders and plan holders.
If you are unclear on any aspect of the project, the onus is on you to get clarification. Making assumptions is no way to submit a winning bid. If you can’t get your questions answered to your satisfaction, you might want to reconsider whether bidding the project makes sense.
Most bidding opportunities provide prospective bidders with a chance to attend a pre-bid meeting and visit the jobsite. Often, these are mandatory in order to submit a bid and with good reason. No two jobsites are identical, and unknown site conditions can cause unexpected, and costly, issues when construction gets underway.
When conducting a site visit, you’ll want to take measurements, inspect the topography, and take some soil bore samples if that hasn’t already been done. You will also want to look at road access and traffic to the site, determine how much space there is for staging, equipment and materials delivery and storage, and what environmental protections will be needed during construction.
Failing to attend a pre-bid meeting means missing out on your best opportunity to get clarification on the requirements of the project. It could be the only chance you get to walk around the site and get a better understanding of exactly what you will be dealing with. If the pre-bid meeting is mandatory, failing to attend will result in your not being able to bid on the project.
Ensure Accurate Takeoffs & Measurements
Your takeoffs lay the groundwork for your estimates. If they’re incomplete or incorrect, it can really throw off your estimates. Accurate takeoffs help you determine the exact quantities needed for all your materials and supplies, which are required to determine your labor and equipment needs.
If you miss items during takeoff or don’t get accurate measurements, you’ll either overestimate the project and not win the bid or you’ll underestimate and risk winning a project that won’t be profitable.
Takeoff software is a great option to ensure your measurements and estimates are accurate. It’s also a huge time saver over doing takeoffs manually. These tools are only as good as the user, so it’s important that estimators get the proper training and are comfortable using the software.
Take the time to fully review the plans and specifications to determine accurate measurements and takeoffs. This will result in correct construction costs when calculating your bid. Takeoff software can ensure that your measurements are correct so you can submit a more accurate bid.
Inaccurate measurements will cause you to miscalculate the amount of building materials and labor needed to complete the job. This, in turn, will lead you to either overestimate or underestimate your construction costs. Using the right units of measure is also important when calculating your bid. Using square feet when you should have used square yards or vice versa can drastically affect your estimated costs.
Make sure that you are taking measurements from the right place. Often the plans will instruct you not to scale the drawings or direct you to use the written or calculated dimensions provided in the specifications.
This often occurs when electronic documents are used because enlarging or shrinking the size of a drawing when printing can result in the scale being incorrect. If there is ever any doubt as to where to take your measurements from you should contact the architect for clarification.
Nail Down Labor Costs
Labor costs are probably the hardest item to nail down accurately when it comes to your estimate. There are several variables in play when estimating labor costs, including the number of available workers for the project, their experience level, rate of pay, and productivity.
Focus on determining how many man-hours it takes to perform a task to use as a guide when estimating labor costs. Employee turnover, absences, and injuries can all affect your actual labor costs.
More experienced workers may be able to complete tasks quickly, reducing the number of man-hours needed. On the flip side, you will have to pay a higher rate for their services. Workers with less experience will require more man-hours to complete a job, but you can pay those workers a lower wage.
Don’t forget to determine whether prevailing wages are required on the project, which may or may not be different from what you typically pay each worker. Always keep records of job costs, especially labor costs, as you can use this historical data for more accurate estimates on future projects.
Wage rate determination is required on all federal government construction projects as mandated by the Davis-Bacon Act. Wage rates are determined by the location of the project and the type of construction being performed. Many states also have prevailing wage laws for public construction projects. Wage rates can vary greatly from state to state and even from county to county.
When determining your labor costs, remember to factor in any projected overtime as the wage rates for overtime hours worked can be as much as double the prevailing wage rate.
Account for All Materials and Equipment Costs
Costs for building materials and supplies can change rapidly and can vary greatly in different parts of the country. For example, if specialty materials are required—that you aren’t familiar with—don’t assume that the cost is comparable to similar items. Your best bet is to call around to local suppliers to get up-to-date costs for materials and delivery.
Make sure that the building materials and supplies required in the specifications are clearly defined so your pricing is correct. If you are uncertain of the materials being requested in the specifications, you should always get clarification from the architect, owner, or owner’s representative.
When putting a bid together you need to make sure that you have all the necessary equipment needed to perform the work. This may mean you have to rent or purchase additional equipment.
Even if your company owns all the required equipment, you will need to make sure that it isn’t already allocated for use at another jobsite. Also, make sure that no major maintenance or repairs are scheduled that would take the equipment offline for an extended amount of time.
Make sure that the equipment is in good working order and operating at peak performance, which might otherwise cause delays in your construction schedule. Equipment that isn’t optimally performing can increase the time it takes to complete certain tasks.
Unexpectedly having to rent additional equipment or face delays can negatively affect the bottom line of a project. Remember to factor in fuel costs to operate the machinery and to transport the equipment to the jobsite.
Evaluate Subcontractors & Subcontractor Pricing
Getting subcontractor pricing can be complicated. You want competitive prices from your subcontractors, but you also want some assurance that they can perform the work required. This is true whether it is a subcontractor you are using for the first time or one that you have worked with for years.
One solution is to set up a prequalification process for those subcontractors who want to work with you. This allows you to have a better understanding of the type of work they can perform by evaluating their quality and performance on past projects.
At a minimum, you should be getting bids from at least three different companies for each trade. As you subcontract out work, this will ensure you are getting competitive prices. Carefully review and evaluate every subcontractor bid to make sure that the prices quoted are complete and accurate.
When requesting bids from subcontractors, clearly define the scope of work that the subcontractor is expected to perform. Failing to do this can result in unnecessary costs being added to your bid because of an overlap of work being bid by both you and your subcontractor.
Take Your Time
Preparing a competitive bid proposal takes time. If you rush to put a bid together, it’s going to lead to mistakes. You need adequate time to read through and understand the plans and scope of work—plus time to gather and evaluate subcontractor bids. Don’t fall into the trap of thinking that if you’ve done similar work in the past that you can just slap a bid together without doing your due diligence.
Everyone makes mistakes, estimators are no exception. Small estimating errors or omissions might not make much of an impact but big ones like omitting scope items, inaccurate measurements, or using the wrong units of measure can spell trouble. Take the time to carefully review your work or have another person on your estimating team review your estimates.
Give yourself adequate time to put your estimates and bid together. Rushing through your work just to meet a bid deadline will only result in mistakes that will cost you in the end. So, take the time to get it right the first time.
Failing to fully complete the bid form and submit all required documents is a surefire way to get what might otherwise be a winning bid rejected. Required documents and paperwork can be anything from bid bonds to acknowledging receipt of any addenda.
A good way to ensure that you have all the required paperwork for your bid is to use a checklist as you prepare your bid and then go back and double-check to make sure that everything is included. It never hurts to get another set of eyes to look over the bid proposal to make sure nothing has been forgotten before you submit your bid.
Profitability on a project is almost always determined by your estimates. If you underestimate your bid, there’s usually no amount of cost-cutting measures that will make up for the shortfall.
Putting a bid together is more involved than just pulling some numbers together and filling out a bid form. If you don’t have the time to fully evaluate and compile a proper bid, then you shouldn’t attempt to do so. Sometimes not bidding on a project is a better business decision than submitting a bid that you threw together at the last minute.
Do you conduct a postmortem to review bids, win or lose, after they’ve been awarded? If you keep losing bids and aren’t sure why it’s probably worthwhile to do a little investigating. Review your takeoffs and estimates to ensure they were accurately prepared. Speak with the owner or general contractor and ask why you didn’t win.
Was your price too high? Did the winning company have better experience or performance history? Did you forget to submit something in your proposal? Understanding why you lost, or hopefully won, a bid is important as it allows you to make adjustments on future opportunities and win more construction bids.