Raise your hand if you want to win more construction bids this year.
We’re guessing your hand is raised because who doesn’t want more business? Whether you’re planning to grow your brand or just looking to get better at estimating and bidding, we all want to be successful and do the best we can.
It doesn’t matter if you’re a big name in construction, a small company, or just a single tradesperson; everyone in the industry can bid smarter by following some simple steps. The good news is we’ve collected them for you.
So, what does it take to win more construction bids? Check out the steps below.
Find Quality Construction Leads
Don’t bid on every opportunity that comes your way or expect project leads to just come to you. You need to find the right amount of quality leads. Here’s how:
- Search for owners and general contractors you want to work with.
Promote your business to them by showcasing your experience and expertise in your trade. Make sure they know what kind of projects you want to bid on and the skills you can have. It is worth taking the time to build these relationships. Respect and trust can help lead to more invitations to bid (ITBs).
- Think about subscribing to a leads service.
ConstructConnect Project Intelligence has a searchable database, up-to-the-minute project details, and plans and specifications attached.
All the above are great sources to find the right opportunities for your business.
Find the Right Projects to Bid
Now that you know how to find quality projects, you must find the right ones for your business. If you win a bid for a project, your business can’t do well; it’s just as bad as losing the bid.
Please remember that it is never too late to drop a bid—even after you’ve started working on it. Once you start looking at how much it costs, you may see that you would not get a profit from the job. If you notice this, the best thing to do is dump the bid and look for another project.
Finding the right balance between bidding and winning enough jobs can be hard. You don’t want to bid and win so much that you can’t finish the jobs on time or so little work that you’re not making money.
Choosing the right work to bid on puts you on the right path to more profits. That’s why it’s important to have a strong bid/no-bid decision process in place.
What is a 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 on to win one job. Understanding this ratio can help you learn how many projects you need to keep your pipeline full. It can also help you cut out bids that you may not be able to win.
To make your bid-hit ratio work best for your business, you should perform an in-depth study:
1. List the projects you’ve bid on and put them into specific groups. These groups can be things like:
- Public projects
- Private projects
- Types of buildings
- Trades required
- Locations of the projects
- Who is the general contractor?
- Who is the project owner?
2. After putting your bids into groups, mark the ones you’ve won. 3. Now, you are ready to calculate your ratio. It is the number of bids you have made compared to the ones you have won.
- For example, If you have bid on 7 public projects and won 1 of them, you would give a bid-hit ratio of 7:1.
4. Do this calculation for all your categories. 5. Now, compare all your ratios.
The goal is to find the ratio with the smallest difference between the two numbers.
Here’s an example. If your public project bid-hit ratio is 7:1 and your bid-hit ratio for private projects is 4:1, you have a better ratio with private projects. This is because you are putting in fewer bids to win those projects. That means you should focus more on those private opportunities and spend less time bidding on public projects.
Once you know which kind of projects to go for, it’s time to look at how much profit they bring you. To do this right, you must first keep track of accurate job costs for materials, labor, and equipment. Next, you need to compare your actual costs to your estimates and ask the following questions:
- Were my estimates for labor and materials accurate?
- Did I include all the job costs in my estimate, including bonding, supplies, and equipment?
- Did I factor in my profit and overhead mark-up correctly?
- Was my contingency budget enough?
If your profit margins aren’t what you expect, you have either made your estimates too low, or there are productivity issues on site, which caused costs to increase.
Regardless of 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 better seek out the projects you have the best chance of winning and making the most money on.
Conduct a Bid/No-Bid Review
Before you start investing your time into a bid proposal, you need to do a thorough bid/no-bid review of each opportunity.
- Get all the project documents, plans, and specifications.
- Take the time to read them carefully
- Run calculations on the numbers to see if you can make a decent profit.
- Determine you have the workforce and equipment to complete the job on time.
- Make sure you can also handle the project’s size and scope.
- Look out for any “red flags” that might cause problems if you win the project.
- Red flags can be things like unknown site conditions, safety concerns, sped-up timelines, or incomplete or incorrect bidding documents.
There are a couple of other things you may want to consider in your review:
- Project location.
- Duration of the project.
- Other companies you may be competing against for the project.
- The client or project owner.
Doing the bid/no bid review and determining which of the other things are most important to your company will help you when it’s time to choose an opportunity.
Identify and Manage Risks
Discovering and taking care of risks may be the most overlooked part of preparing a bid. If you’ve found potential risks, you need to study each one individually to make them right.
Consider how dangerous the risk is and the impact it can have on the project. If the risk doesn’t seem too likely to happen or would have a low impact on progress, it might be easy to take care of. However, a risk that could become a reality and seriously affect the job could hurt your profits.
You will be a much better bidder if you can identify the risks connected to a project. It will also make you better prepared to handle a situation when something goes wrong.
Starting this process early means you can avoid bidding on projects that won’t make you a profit. It can help you make more accurate bids and contingency budgets, too. Project management will run smoother, and you’ll save time, money, and resources as work progresses.
Seek Clarifications, Avoid Assumptions
Outside of your equipment and workers, you also need to make sure your bid covers other things the project owner or architect may require.
These things can include:
- Specific bonds.
- Participation goals for MBEs, or minority business enterprises.
- Using certain brands of materials.
Review all the plans and specifications to see if there are any requirements like these. If you are unsure of anything, reach out to the architect, the owner, or the owner’s representative as soon as possible. This is because there are often cut-off dates for questions to be asked. Cut-off dates allow the project team to make any changes to the plans and specifications and for any add-ons to be issued to the bidders and plan holders.
Not getting clarity and making assumptions is no way to win a bid. If you’ve asked questions but aren’t getting helpful answers, you might want to reconsider if it’s worth continuing your bid.
Most opportunities allow bidders to have a pre-bid meeting and visit the job site. These are often mandatory to submit a bid. That’s a good thing because every job site is unique. What you don’t know about the site can cause unexpected and costly issues when construction starts.
When conducting a site visit, you should do the following:
- Take measurements.
- Inspect the topography and take some soil bore samples if that hasn’t been done.
- Look at road access and traffic to the site.
- Determine how much space there is for equipment and materials.
- Find out if there are environmental protections needed during construction.
If you skip a pre-bid meeting, you’ll miss your best chance to get answers on the project’s unique requirements. It could also be the only chance to walk around the site and see what you would be dealing with.
If the pre-bid meeting is mandatory and you miss it, you won’t be able to bid at all.
Ensure Accurate Takeoffs & Measurements
Accurate takeoffs help you know the exact amount of materials and supplies you need. You need to know the exact amounts so you can hire enough workers and get enough equipment.
You can harm your business If you miss items during your takeoff or get measurements wrong. Doing this can cause you to overestimate the costs and not win the bid or underestimate them and risk winning a project that won’t make you much money.
Whether you are using software or doing takeoffs manually, you need to remember these things:
- Fully review the plans and specifications to make sure your measurements and takeoffs are right.
- Use the right units of measurement and the correct scale. Plans may ask you to use certain written or calculated dimensions.
When plans are uploaded online or printed out, a scale can sometimes appear off. If you have any doubt, or if something doesn’t look right, contact the architect. Remember, it’s better to be safe than sorry!
Nail Down Labor Costs
Labor costs can be the hardest item to nail down when it comes to your estimate. There are several things in play, including:
- The number of workers available.
- Their skill levels.
- The rate of pay.
To help you keep track, follow these steps:
- Find out how many hours it may take workers to perform a task.
- More experienced workers may be able to do tasks quickly, reducing the hours needed. However, you’ll need to pay them more.
- Workers with less experience need more time to do a job but require a lower wage.
- Don’t forget to factor in potential overtime costs.
- Determine if prevailing wages are required on the project. These may be different from what you typically pay each worker.
- Always keep records of job costs, especially labor costs. You can use these records for more accurate estimates on future projects.
If you are bidding on a U.S. Government or federally-funded project, be aware that wage rates are mandated by a law known as the Davis-Bacon Act. Wage rates are determined by the project’s location and the type of construction being performed. The U.S. Department of Labor has a helpful webpage that goes over the law and what it means for you.
Federally funded projects in Canada are subject to the Fair Wages and Hours of Labour Act. The Canadian government has a webpage that goes over this law.
Many U.S. states also have prevailing wage laws for public construction projects. Wage rates can vary from state to state and county to county. This is where potential overtime costs become very important. Wage rates for overtime hours can be as much as double the prevailing wage rate.
Account for All Materials and Equipment Costs
When it comes to how materials and equipment will impact your bid, keep the following in mind:
- The costs of materials and supplies can vary by location. If your project is an area that’s new to you or requires unfamiliar materials, ask suppliers in that area for the current costs.
- Make sure you have all the right equipment. This may mean you have to rent or purchase some.
- Even if your company owns all the required equipment, check that it’s not being used for another job.
- Check if the equipment works or needs repairs that could cause delays.
- Factor in any fuel costs for the equipment and transporting it to the job site.
Unexpectedly having to rent, buy, or repair equipment will hurt your bottom line.
Evaluate Subcontractors & Subcontractor Pricing
It can be complicated to figure out how much to pay for your subcontractors. Try these steps to make it easier for you:
- You should get bids from at least 3 different companies for each trade needed. This will make sure you are getting competitive prices.
- Make sure you have clearly defined the scope of work for each subcontractor.
- Carefully review each bid to make sure the prices quoted are accurate.
It’s not necessary, but think about making a prequalification process, too. This allows you to judge your candidates better by evaluating how they did on previous projects.
Take Your Time
Preparing a competitive bid proposal takes time. If you rush a bid, you will make mistakes.
- Read and understand the plans and scope of work
- Take the time to gather and evaluate subcontractor bids.
- Carefully review all measurements and costs. Consider having another person, especially an estimator, double-check your work.
- Make sure you have all the required documents and paperwork. Missing just one of them is a surefire way to lose a bid.
- TIP: Create a checklist as you begin your bid so you can keep track of any required paperwork.
- Your estimates almost always determine your profit. If you underestimate your bid, there’s little to no amount of cost-cutting that can make things right.
If you don’t have the time to evaluate your bid fully, you shouldn’t attempt to submit it. Sometimes, not bidding on a project is a better business decision than submitting one you slapped together.
Win or lose, you should always conduct a final review after bids are judged. If you didn’t win, kindly ask the owner or general contractor for reasons why. Understanding what caused the result of your bid will allow you to make better decisions for future opportunities.
It doesn’t matter if your company is big or small, or if you’re in a rural area or the big city; you should be using the above steps today to win more construction bids in 2024.
Best of luck, and we’ll see you on the job site!