Construction bidding is said to be one of the most vital projects in the field of contractors. It involves the completion of a project under a set of terms and conditions. Initially, contractors would take out an estimated budget to protect their bottom line. There is a thin line of difference between construction bidding and estimating. The former means a firm offer that is presented to the customer, while the latter denotes the usage for internal purposes. In a construction bidding, the profit will depend on the calculations made in the estimating stage. Moreover, it is seen that in smaller projects – the line that differentiates the two often gets blurred.
Important Terms Used In Construction Bidding
There are a number of important terms that are used in construction bidding-
In this process, customers make bidding requests for various projects to contractors. While making the request, the client will give the specification of the project to the contractor so that they have a clear understanding of what needs to be done.
Contractors are of generally two types: subcontractors and general contractors. A general contractor gets hold of different projects through bids or otherwise from a subcontractor.
3. Contract formation
Contract formation denotes the stage where a client finalizes a deal with a contractor and forms a contract. All the terms and conditions are formulated at this stage.
4. Bid package
A bid package is an entire package including the financial figures, drawings, and specifications that are submitted to the client in the bidding process.
5. Bill of qualities
This denotes the breakdown of a project into several component’s costs.
6. Bid – hit ratio
It means the number of bids that are submitted by a company per award. The bid-hit ratio will not only depend on a company’s location but also on its area of expertise. For instance, some companies submit more than 50 unsuccessful bids for every one award, while there may be some that achieve a 1.5:1 bid-hit ratio. One must remember that to determine an appropriate ratio, one must look into the competitors in their area.
Construction Bidding Process
Whenever a contractor is all set to accept the project, they generally ask for bids from all sources and submit a package containing its terms and conditions and the estimated budget.
There are several types of solicitation, RFP, RFSO, and ITT. If any project is open to the public, then a client contacts the party directly to solicit a bid.
Once contractor gets a solicitation, they can decide if the project is of their interest or not. If yes, then they can take out an estimated budget including labor and material costs.
Sometimes, a project may also require a subcontractor, then the contractor has to ask for bids from other sources to get the best results. One can signup to xfactorgov.com for to learn more about construction bidding.
Before a bid is submitted to the client, it needs to be cross-checked at least twice. Usually, there are two main types of construction bids. The first one is called the Design-Build method. In this method, the contractor is offered to combine the architectural design with that of the general contracting services. The second type is known as the Construction Manager At-Risk method. This method places responsibilities on the contractors and separates the architect roles and the contractor.
Thus, a Design-Build method is mostly used than the construction manager at-risk method.
4. Award phase
Once a client receives all the bids, they have to choose the best one out of the rest. This may be not a cheap offer. A client takes down the criteria that they consider for Request for Proposals (RFPs).
Some of the criteria are –
• Consider the lowest bid of all
• Consider the Most Economically Advantageous Tender also known as (MEAT). The MEAT mainly considers economic factors that are beyond the price factor. For instance, post-project service, time, and lastly their quality.
• A project that is closest to the mean value, allows the contractor to bid
• Avoid any estimate that offers too high or too low bids. And make sure to evaluate the rest of the bid by using the above-mentioned criteria.
Once a contractor is chosen, a series of negotiations are followed so that a client and a contractor may sort out the differences. In case, negotiations are not in favor of the two, a client has a preferred tenderer and a reserve renderer – that acts as a backup for the client.
Once both parties agree with the terms and conditions of a contract, they can formalize it easily.
Thus, to bid on a contract, the contractors can go through various websites to find a suitable contract. These websites are BidClerk, BidNet, BidCentral, and others. Every state has its procurement website.