8 Factors To Consider When Deciding Whether or Not To Bid on a Construction Job

Bidding on every construction project is not the best practice. It can compromise a company’s reputation and take a heavy toll on its financial budget. 

Not only that, but aggressive bidding can also adversely affect a construction company’s ability to estimate construction projects properly. However, many of these companies do take help from construction management software like Bridgit to bid efficiently for projects. 

The construction bidding process requires the involvement of different experts in domains like management, leadership, finance, and decision-making. Preparing a bidding proposal also needs time to cover every detail the client requires.

So, you must consider some aspects before bidding on a construction job to keep your business thriving. This article addresses all the major ones!

8 Factors To Consider When Deciding Whether or Not To Bid on a Construction Job

According to a study, companies have a 49% chance of failure in unbalanced bidding, which occurs due to the following:

● Incorrect market insights - Companies fail to analyze the ongoing construction market and spend more than the required amount.

● Poor financing - Contractors and construction managers don't evenly distribute the budget throughout the project.

● Lack of project management - Managers and team leaders don't track the resource utilization and project status.

So, you must consider the following eight factors before bidding on a construction job to make the best out of the project.

1.  Construction market

Being a contractor, you must have deeper construction market insights and the value it delivers to companies. For example, you must know the cost of buying or leasing equipment and strategically decide, considering the construction budget.

The equipment will also need regular maintenance and repair if damaged. So, you must consider the costs associated with a particular machinery.

Similarly, you must analyze the hourly wages and salaries of workers, which vary every year. For example, the hourly wage of a laborer is $17 in the United States. The wages and salaries payable must be analyzed using a payroll management system for a smooth workflow.

Remember that independent contractors might want to acquire the maximum profit by controlling the construction budget. However, you have the authority to evenly divide the budget and ensure every team keeps a financial record.

2.  Project type

Clients solicit bids and look for the most lucrative construction package considering budget and quality. They share an RFP (Request for Proposal) document, which includes the project type, scope, and specifications.

There are four major types of construction projects:

● Residential - It includes homes and apartments.

● Commercial - It includes shopping malls, warehouses, and offices.

● Industrial - It includes factories and manufacturing plants.

● Infrastructure - It includes bridges, roads, and sewerage systems.

Once you get the RFP, you must check the project type and analyze whether your company can complete the project.

Every construction company holds different expertise but can't construct every project. For example, a company builds only family homes, which means it can't build large-scale industrial projects.

The capacity includes financial strength, workforce, equipment, technology, and construction experience. Many large-scale construction companies have all the expertise to complete a project, but they only bid according to their present capacity.

3.  Project location

The construction site is another important factor before bidding on a job. The client will share the project location in the RFP so potential contractors and managers can visit the site.

The project location holds unique value because not every construction can be done on all types of land. For example, high-rise buildings require loam as the soil type because it doesn't shift due to moisture. On the other hand, clay is a poor choice for high-rise buildings as it changes due to dryness or moisture.

You must also consider other factors in the project location, like population and surroundings, before deciding whether or not to bid for a construction job.

4.  Client

Like other industries, the construction industry is also susceptible to fraud, making companies lose thousands of dollars. Although companies can investigate fraud cases done by employees, they fail to find out the mischief done by the clients.

That's why knowing the client after receiving their RFP is important. You might not find the client's details on the document. However, you can contact them and schedule a meeting to learn more about them.

You can also check out their social profiles if you are bidding for construction jobs on online platforms.

5.  Delivery method

Usually, companies select one of the following five construction delivery methods:

● Design-Bid-Build (DBB) 

● Design-Build (DB)

● Construction manager at risk (CAMR)

● Job order contracting (JOC)

● Multiple award task order contract (MATOC)

The project delivery method refers to the execution of the construction and the phases associated with it. The most common delivery method is Design-Bid-Build (DBB), as designers work with the project owner or client before bidding.

There is no standard delivery method, but large-scale construction companies strictly follow a single methodology to keep smooth progress.

6.  Project timeline

Companies usually don't take work out of their capacity, but they might go for that project when they find a profitable deal. Doing so affects the ongoing project's timeline because you must efficiently manage the resources and schedule.

If you don't make feasible changes, the project that was profitable initially might financially hit your company. For example, you rented construction equipment for project A, and now you want to bid for another job. You must decide whether to use the same equipment or rent another one for the new project. That will affect your ongoing construction schedule and budgeting.

7.  Financing

Bidding for a construction project requires your company to be financially strong to cover losses and make the best decisions. The goal must be to efficiently complete a construction project and deliver it with quality to the client. 

However, you can't achieve that goal if your company is financially unstable. So, ensure your company has enough financial resources to start working on a construction project.

8.  Risk assessment

Lastly, you must have a sound risk assessment plan before bidding on a construction job. There are several risks associated with construction projects, including:

● Weather conditions

● Equipment failure

● Workers' health

The best practice is to prepare a general risk assessment plan and reanalyze it with the client's requirement document, i.e., RFP. Once you are clear with RFP, prepare a risk plan and submit it with the bidding proposal.

Conclusion

Bidding for a construction proposal requires time and effort. Some clients want specific details to verify the contractor's competency. That's why it's important to determine your company's capacity and understand RFP before bidding on a construction job. Also, don’t forget to consider the above 8 factors when bidding on a construction job the next time.