Whenever clients need to execute construction projects, they advertise for bids from contractors and subcontractors.
Bids should demonstrate a contractor’s ability to handle the project, address any objections the client or project owner may have, and offer the most competitive price. The successful bidder achieves this by understanding the bidding process and crafting strategies to meet the contractual terms.
Given the importance of creating successful bids, we have created this detailed guide to the bidding process.
We’ll cover the types of construction bids, explain the bid submission process, list the mistakes to avoid, and show how to prepare and create a bid that aligns with the project details.
We’ll also reveal how estimating software like ServiceTitan optimizes the entire process and helps you create winning bids.
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What is Construction Bidding?
Construction bidding involves multiple construction companies (bidders) submitting competitive proposals to clients, general contractors, or project owners to execute a specific project.
Bids contain cost estimates, material, and labor costs, and plans to meet the project requirements. They also include the project delivery method, due dates, and partnerships with other contractors or subcontractors to complete the project.
Construction bids are essentially your way of telling customers you are the best person for the job. And that you can execute or manage it at a specific cost while maintaining construction industry quality standards.
What Are the Different Types of Construction Bids?
Clients use different methods to manage the bidding process based on the project’s requirements and specifications.
There are essentially three types of bid-tendering process:
1. Negotiated tendering: Contractors identify a specific contractor they wish to work with and agree on a price. This type of tendering closes the door to competition and gives project owners fewer options, limiting their ability to negotiate. However, it’s ideal for complex, large-scale projects requiring specific skill sets.
2. Open tendering: Multiple contractors submit bids for the project, and the client (typically a government agency) picks one that offers the right price and has the required expertise, experience, and financial credibility.
3. Selective tendering: The project owner invites a few contractors with expertise, experience, credibility, and resources to submit bids and then picks the best. This process results in more quality bids, which saves time.
It’s important to note that these tendering methods are sometimes used together. For example, a government agency may send requests for proposals (RFPs) or requests for quotes (RFQs) to specific contractors and advertise an open tender to broaden their choices.
Before you bid for any project, try to identify the type of tendering process involved. This will help you create the right bid strategy to boost your chances of winning the contract.
You must also understand the key players involved in the bidding process, so read on.
Who Are the Key Players in the Construction Bidding Process?
There are three key people involved in the construction bidding process:
Project owners: The people who start the bidding process by issuing RFPs or RFQs. They are typically an arm of the government or commercial entities such as real estate agencies, property developers, construction companies, etc.
General contractors: People like you who create and tender bids for projects.
Subcontractors: People who will handle certain specialized aspects of the larger project. General contractors usually include them in their bid proposals, which reveal their selection criteria, cost estimates, and the legal ramifications of their involvement.
Now, let's get into the nitty-gritty of preparing to bid for construction jobs.
How to Prepare for Bidding on Construction Jobs
Before you participate in bidding, follow these tips to prepare for creating winning proposals:
Researching opportunities
Project owners typically send RFPs or RFQs to specific contractors (negotiated or selective tendering) or advertise the bid opportunity to the general public (open tendering).
As a contractor, you must have a strategy for finding open tenders. This strategy could involve searching relevant websites, newspapers, industry journals, and project aggregator pages like Global Tenders.
Try to partner with contractors that always have projects in the pipeline. Offer to assist them in handling the first project they bring you at a discounted rate without impairing quality.
Lastly, delivering quality work in each project eventually produces people willing to refer you to project owners. Before long, you might not even need to participate in tenders, as they’ll invite you to bid.
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Creating an accurate cost estimate
Take your time to find near-accurate estimates for all costs. This will earn you the project owner’s trust and a healthy profit margin when the project is completed.
To access accurate costs when creating estimates, you can use ServiceTitan’s Pricebook Pro, which fetches current material costs from the catalogs of top manufacturers and suppliers.
The platform also shows the minimum and maximum average prices other contractors in your region charge for the same service. This price insight can help you charge competitive prices when bidding for projects, giving you a fair chance of landing the contract.
Building a strong proposal
Before we explore how to create a strong proposal, you should know that project owners are only interested in seeing their projects completed to their standards. That’s why they will always pick contractors with the best reputation, expertise, financial capacity, and resources to handle or manage the project to completion.
Therefore, a strong proposal must have the following elements to prove that you can meet the client’s expectations and deliver everything set out in the bid documents:
Near-accurate estimates of construction costs.
Certifications, licenses, permits, and insurance documents.
Methodology for efficient project management and fulfilling the work scope.
Social proof (certification of completion of past projects, documents to prove healthy financial standing, testimonials from past project owners, etc.)
Key differentiators, including innovative design methods, resources, faster completion times, extended warranties, etc.
How to Craft the Perfect Construction Bid
Follow these steps to create the perfect construction bid:
Breaking down the bid (Include the key details)
Regardless of the project you’re competing for, bid proposals must include some basic information to be considered by the client for the contract. This includes the following:
A description of your company.
Cost breakdown showing the amount to be expended on labor, materials, equipment, and overhead.
A statement that shows you understand what the project is about.
A description of the scope of the services offered.
Proposed delivery timelines and milestones.
Proof of expertise (credentials, case studies, and testimonials).
Terms and conditions associated with the project.
Once you’ve covered these details, you can include the other elements of a strong proposal we mentioned earlier.
Optimizing bid presentation
It’s one thing to create a bid proposal that captures vital information, but it’s another to present it in an appealing way that makes the project owner want to read it.
Clients sometimes think contractors who submit poorly arranged bid proposals are unprofessional and lack the expertise for the project.
Fortunately, we designed ServiceTitan’s Proposals and Quote feature to help contractors create professional proposals in minutes.
Simply select the project’s equipment, location, and cost description. Then, pick a proposal type and estimate template. Our AI-powered algorithm (Titan Intelligence) will automatically fetch the customer’s data from our contractor CRM and arrange all the details into a professional-looking proposal.
Once the proposal is ready, you can send it directly to clients for them to review and sign digitally. ServiceTitan will notify you when that happens so you can kick-start the project.
Setting competitive pricing
When quoting prices in your bid proposal, you must balance making a profit and keeping pace with your competitors' charges. You don’t want to overrun your budget or lose the contract to another company that charges the client a more reasonable price.
To that end, research deeply before quoting prices. Interact with manufacturers and suppliers about recent pricing trends to add a reasonable amount to guard against price fluctuations.
You can also use ServiceTitans Pricebook Pro to find the average price other companies in your region charge for the same service.
How to Submit and Follow Up on Bids
Upon completing the bid proposal, the next steps are to submit it and conduct appropriate client follow-up.
Submission best practices
Before submitting a bid proposal, review the project requirements one last time to ensure you’ve provided everything required. Also, cross-check all your quoted prices; a missing zero can change a hundred thousand dollars to ten thousand dollars.
If you’re hiring subcontractors, collate their proposals and ensure they have provided all the required information.
Lastly, speak with a third-party guarantor or surety to give you a bid bond—a cash deposit that proves to the client, especially federal government agencies, that you can finish the project.
Effective follow-up strategies
One way to get to the top of the proposal pile customers are reviewing and show that you’re genuinely interested in the project is to send follow-up messages.
Follow-up messages are also an opportunity to clarify ambiguities and build a relationship with the client, which can lead to more contracts.
It is advisable to follow up on bid proposals one or two weeks after submission. This shows that you understand how complicated the bidding process can be and gives the customer enough time to review the proposal.
Common Mistakes to Avoid in Construction Bidding
Due to the complicated nature of construction bidding, it’s easy to overlook key details or commit errors that jeopardize your chances of winning the contract. Being aware of these potential mistakes is the first step to avoiding them.
Here are common bidding mistakes derived from our research and interactions with general contractors who collate bids from subcontractors:
Underestimating or overestimating costs.
Leaving out key items.
Failing to provide required information and documents.
Forgetting bid instructions such as formatting guidelines and submission timelines.
Ambiguous description of the project scope and specification.
Hiring unvetted subcontractors with bad reputations.
Omitting key details or providing wrong information while rushing to submit the proposal at the last minute.
The key to avoiding these mistakes is to take your time when creating your proposal. Don’t wait until the last minute to gather your documents and file the proposal.
Over to You!
Now, you’ve learned all you can about creating winning bids. You can now improve your bidding win rate and get the contracts you need to fuel your company’s growth.
If you wish to create bids that align with the client’s expectations and put you ahead of other bidders, consider investing in software like ServiceTitan.
ServiceTitan is a comprehensive contractor platform. It’s the perfect tool for streamlining marketing, field operations, inventory management, and customer interactions. Join the many companies nationwide who use it to grow their revenue.
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ServiceTitan is a comprehensive software solution built specifically to help service companies streamline their operations, boost revenue, and substantially elevate the trajectory of their business. Our comprehensive, cloud-based platform is used by thousands of electrical, HVAC, plumbing, garage door, and chimney sweep shops across the country—and has increased their revenue by an average of 25% in just their first year with us.
