Most contractors are struggling–losing more bids than they’re winning. In this guide, we provide 7 practical tips to win more bids.

7 Ways to Win More Bids

“The lifeblood of a contractor is accurate bidding. Without very detailed estimates, a contractor cannot compete, cannot complete a project, and cannot stay in business.” — Association of General Contractors

Why Bidding Is the Lifeblood of A Builder’s Business

It’s an unfortunate fact of life now that most contractors will lose more bids than they win. Indeed, in the highly competitive environment of construction bidding, general contractors win only 1 out of 6 bids and subcontractors only 1 out of 7 bids. For some contractors, the bid-hit rate is as low as one out of every 35. A bid-hit ratio is simply the number of projects a contractor wins after bidding on them. For example, a 6:1 bid-hit ratio means you’re winning only one out of every six bids.

Losing bids or having an extremely low bid-hit ratio is a primary reason why the average profit margin in the construction industry is less than 1 percent. Most firms are spending time and labor to bid on jobs they inevitably end up losing, which could be better spent managing their business and/or successfully completing the jobs they do win. It should come as no surprise that industry experts agree that to be successful in construction, a builder must become skilled at estimating and bidding.

For these reasons, the goal of every contractor must be to improve their bid-hit ratio by winning more bids. While the average bid-hit ratio is different in each sector, a good rule of thumb is to strive for a bid-hit ratio of 4:1 for private projects and 10:1 for public projects. We know that improving your bid-hit ratio isn’t easy, but it’s absolutely possible if you learn how to avoid mistakes and adopt best practices. In this guide, we explain what the construction bidding process is and how it differs from estimating. We also illuminate the most common challenges contractors face in a competitive bidding process and exercise seven practical tips to increase your chances of winning your next bid. And for contractors just starting their business, we’ve also included a resource section of top bidding sites and a glossary, so you can start to bid like a pro.

What Is the Bidding Procedure and How Is it Different from Estimating?

In general, construction bidding is the process of submitting a proposal to a prospective client or project owner to manage the construction of a structure. It’s also the method by which subcontractors pitch their services and solutions to general contractors. More plainly, it’s a process where contractors commit to providing a project owner with a “specified construction at a given price and often by a given date.”

Sounds simple enough. Not exactly. While many assume contractors should simply review a project’s plans, develop an accurate takeoff and then submit the lowest bid, such assumptions belie the complex situation contractors now face in an increasingly competitive bidding environment. In reality, most contractors find themselves losing more bids than they win and are caught in a vicious cycle of bidding for the wrong jobs or under-bidding only to secure projects at a loss. The majority of these errors are due to the false assumption that a bid and an estimate are interchangeable. But they’re not, and there is so much more to crafting a successful bid than being the lowest bidder. Indeed, it’s no longer enough to review a bunch of plans and knock off a quick takeoff. To end this vicious cycle, we need to start by acknowledging that bidding isn’t synonymous with estimating. That’s right, to win a bid, you need to provide a robust bid, not just an estimate.

Bidding vs Estimating

Smaller contractors are often surprised to learn that in large firms estimating and bidding tasks are performed by two different people. Because these tasks are usually performed by one person in smaller firms, the bidding and estimating procedures have become blurred.

But it’s important to remember that estimating and bidding are two different processes that require different skill sets. A construction bid can be defined as the process of providing a proposal to a client to develop or manage the construction of a structure, whereas an estimate is simply forecasting the expense of building a physical structure. The difference in the processes becomes obvious: one involves calculating the final price to charge the client, while the other involves calculating internal costs.

But the difference in skillset necessary to produce a winning estimate and final winning bid is more opaque. Bidding is a strategic activity–which requires leadership skills–whereas estimating is a tactical activity that requires managerial skills.

Let’s see how this actually works in practice. According to estimating and bidding expert David Gerstel, when you start the bidding process and have to decide to take on a job, you’re asking yourself, “where should I take my business next?” which is a “strategic decision.” In contrast, when you’re beginning work on an estimate, you’re asking questions such as “should I estimate a crane?” or “will I need my top subs or can I move down?” which are tactical decisions. In other words, a builder who tends to win bids has successfully learned how to navigate between these two decision-making activities: he will begin by bidding on a project, then shift to estimating, and when cost estimation is complete, shift back again to bidding to close the project, such as determining a job’s markup. Deciding the markup for a job is a strategic decision that will determine if you’ll actually win the bid or make or lose money on the job.

While accurate estimating is critical for a successful bid and goes hand and hand with bidding, a firm wall needs to be built between these two activities if you want to start winning more bids. If you don’t have a cost estimator on staff and don’t have the time to master complicated estimating software, one of the best things you can do is focus on the strategic decisions involved in bidding and outsource the tactical decisions involved in an estimate to cost estimating services.

Why Contractors Are Often in a Lose/Lose Situation In Competitive Bidding

As the phrase, “bidding procedure” indicates, there are no guarantees when it comes to a process. Although the construction bidding procedure itself is fairly straightforward in theory, it’s not in practice. In theory, a contractor or subcontractor spends time locating and reading bid packages that describe the job, develops a detailed estimate, submits a proposal, and then wins the job. But in reality, many things can and often do go wrong during this process. Take for example the RFP. Because the details of both the RFP and a final bid are essential, if a contractor fails to see or include them, such oversight can jeopardize their chances of winning the project. Moreover, if a contractor wastes time crafting proposals for projects they’re not suited for, they will never be able to focus on all the great projects they can win. On the other hand, if a contractor sends out bids that are incomplete or inaccurate, the end result is wasted time. To be sure, the bidding process can often seem like a delicate balancing act in which builders are confronted simultaneously by numerous challenges, such as selecting the right jobs to bid on while trying to craft persuasive, winning proposals. In fact, builders face so many obstacles during a competitive bidding procedure that it’s worth taking the time to list the most common ones.

Top 7 Challenges of the Competitive Bidding Procedure

Most builders encounter one or more of the following challenges when they look for projects to bid on through the standard bidding prpcedure:

1. They can’t find bid packages to actually bid on
2. If they do find a bid package, they’re unable to craft a winning proposal
3. They bid on the wrong jobs, those that aren’t a good match, resulting cost and schedule overruns (and steadily diminishing returns or losses)
4. They can’t meet (or fail to read) the RFP requirements and get disqualified from the bidding process
5. They suffer from incomplete bid coverage, meaning they cannot find subs necessary to complete an accurate bid
6. Although they’re able to find projects to bid on, they simply don’t have the time to bid on them and/or prepare a compelling bid
7. They don’t have confidence in their ability to create a proposal that grabs attention and produces results

Once you’re aware of these challenges, the best thing you can do is to learn how to overcome them. For the remainder of this post, we provide seven practical tips you can use immediately to start winning more construction bids

Tip #1: Understand How the Process Works

While it’s tempting to think of your bid proposal as a resume or a job application, it’s much more complex than that. A winning bid isn’t just a detailed resume. A winning bid demonstrates a deep knowledge not only of your industry and your craft, but also the bidding process itself. In other words, you need to understand the whole process in order to master the bid. Knowing what the process is and the key decisions owners make when developing an RFP can help you not only to ace the process, but also select the right jobs to bid on so you can increase your bid-hit ratio and get your business out of the red and into the back.

The Construction Process Step-by-Step

Step 1: Bid Solicitation: The owner or issuing entity sends out what’s called a Request for Proposal (RFP), Invitation for Bid or (IFB), or Request to Tender (RTT) to a group of contractors. In the RFP, the owner lays out all of the project specifications and plans, requirements, contract type, and delivery method and requests.

Step 2: Subcontracting: The contractor sends out a bid package outlining the scope of work that needs to be completed on the project and then receives bids from subcontractors for a specific portion of the work. The contractor awards the bid to the subcontractor with the winning bid and converts it via a contract to a commitment. Depending on the project delivery method, this can occur before or after the contractor has won the bid.

Step 3: Bid Submission: Contractors who received the RFP submit their completed bid packages by deadline.

Step 4: Bid Selection: The bid selection step is different depending on whether the project is a government project or a private project. If a government project, the bid is selected based on the lowest bid due to rules that prevent fraud or favoritism. If the project is private, the owner or issuing entity can award a bid based upon the lowest price or other variables, which can include quality or other factors.

Step 5: Contract Formation: Although the bid has already been awarded at this stage, the contract formation stage is when the contract must be signed and provides the best moment for the contractor to negotiate final pricing and the terms of the contract itself.

Step 6: Project Delivery: Project construction begins based upon one of five common project delivery methods we outline below.

3 Key Decisions that Inform a Project RFP

When bidding on a project, it’s important to review the project plans and specifications so you understand how the project is being built, what criteria will be used to select a bid, and how your costs and profits will be covered. An owner must make three important decisions before issuing an RFP: (1) the project delivery method, (2) procurement method, and (3) contract type. Understanding all three will immediately help you to start winning more bids.

1. Project delivery method is broken down into 5 general types: Design-Bid-Build (DBB), Construction Management at Risk (CMR), Design-Build (DB), Integrated Project Delivery (IPD) and Public-Private-Partnership (3P)
2. Construction procurement is generally divided into the following categories: (1) Best Value Method (BVS), (2) Negotiated method (3) Sole Source or Direct Select or (4) Low Bid
3. Contract type: Although there are numerous contract types, the five most common are Lump Sum, Cost-Plus, Time and Materials, Unit Price and GMP Guaranteed Maximum Price

Decision 1: Project  Delivery Method

You’ll want to pay special attention to the procurement method in the RFP, to learn exactly how the winning bid will be selected.

Decision 2: Construction Procurement Method

After the selection of the project delivery method, the next step is deciding the procurement method through which the construction services are obtained.

Construction procurement is generally classified into:

1. Best Value Method (BVS)
2. Negotiated method
3. Sole Source or Direct Select
4. Low Bid

1. Best Value Source Method (BVS)

Unlike the lowest bid method, in BVS, contractors are awarded the job based upon price and quality as measured by past performance. BVS is an excellent way contractors can optimize their bid not only by developing the lowest bid, but also by leveraging their reputation for past success. Winning a bid using BVS means a contractor won’t have to sacrifice their profit margins just to get work and can be a great tool to help contractors improve their bid-hit ratio. Builders should add BVS to the criteria that determine which jobs they should bid on.

2. Negotiated Tendering

In negotiated tendering, a prospective builder selects contractors without formal advertising or a competitive bid process. Usually, a single contractor is chosen to negotiate the final price and technical requirements. What’s important here is that a contractor has a greater chance of having his bid selected because selection is usually based upon a previous successful working relationship. Thus negotiated tendering can be a critical way contractors can win more bids and it reinforces the notion that one of the best ways to increase your bid-hit ratio is not to seek out jobs to bid on but to be put on the right bid list.

3. Sole Source or Direct select

Similar to negotiated tender, in soul source procurement, a prospective builder selects only a single contractor to fulfill all project requirements. As another non-competitive procurement method, contractors would do well to seek out opportunities that include sole-source procurement.

4. Low Bid or Lowest Bid

Finally, as the name implies, low bid or lowest bid procurement is a competitive bidding method in which the lowest bidder is automatically awarded the job. This procurement method is used in government and public construction entities, but it’s also the most common method owners use to build structures. As already suggested, contractors can improve their bidding rate simply by avoiding jobs that utilize competitive bidding procurement.

Decision 3: Contract Model

While the contract model is one of three critical decisions that inform a construction project, it is worth mentioning here because contract models, which are often suggested by owners but often negotiated depending on the project delivery method, impact how costs and profits are covered. Bidding on projects with the wrong contract model can make the difference between whether a contractor makes or loses money on a project, which again should be important criteria used in selecting which jobs a contractor should bid on.  

The most common contract types in the industry are:

1. Cost Plus Fee Contract
2. Guaranteed Maximum Price (GMP) Contract
3. Time and Material Contract
4. Fixed Price Contract
5. Lease Leaseback

Tip #2: Find the Right Jobs to Bid On

For new contractors, one of the biggest hurdles they must overcome is finding new work. Unlike their more seasoned competitors, they don’t have 20 years of experience building impressive projects and have no reputation to fall back on. They’re “hungry” for work and much of this desperation comes not from losing bids, but from the fact that they often cannot find jobs to bid on in the first place. Owners aren’t seeking them out and they lack a network where they might get good referrals. No one is putting them on a bid list. They are hustling and often chasing scraps.

But the good news is that you don’t need to wait for someone to magically send you an RFP and you don’t need to hit the pavement looking for jobs to bid on. There are now a number of free and commercial online bidding resources you can use as well as specific regional sites and government sites to enable you to find more jobs to bid on. Stop wasting money on advertising. Instead, go right to the source and find hundreds of property owners who already need your services and are asking for them.

See our comprehensive list of the 90 best bidding sites and resources.

THE 90 BEST BIDDING WEBSITES

Tip #3: Only Bid On the Jobs You Can Win

The simplest way to overcome the challenge of bidding on the wrong job is to start learning how to accurately evaluate a job before you even bid. There are five key aspects you should evaluate for every job you are thinking about bidding for: (1) the client, (2) the designer, (3) the plans, (4) specifications and (5) other bidders.

Here we include five helpful checklists to get you started. You’ll want to develop a Lead Evaluation Sheet or Lead Sheet that captures all of the following information contained in these checklists.  

Client Evaluation Checklist

• Prior building experience
• Prior builders
• The Reason for the call
• Size
• Commute
• Budget
• Funding
• Is the property owned?
• Schedule
• Priorities
• Bid Process
• Other jobs
• Crew Lead
• Crew
• Subs
• Suppliers
• Client Tone

Designer Evaluation Checklist

• Reputation with builders
• Responsiveness
• Fair Mindedness
• Design talent
• Technical competence
• Environmental intelligence

Plans Checklist

• Page (all present and in technical order)
• Clearly organized notes
• Site grade shown accurately
• New and existing on the same page
• Adequate floor plans and sections
• Essential mechanical and electrical plans
• Conflicts between structural and mechanical systems
• Waterproofing details
• Adequate detailing
• Window schedules
• Finish Schedules
• 3-D rendering

Specification Checklist

• Clarity and organization
• Number and alternate prices required
• Breakdown of bid required
• Time allowed for construction
• Sequence of construction
• Contract required
• Potential penalties if any
• Change order procedure
• Payment schedule

Competition Checklist

• Capabilities
• Reputation
• Need for work

To start picking the right job for your firm, you need to avoid bidding on projects that are too big or trying to do too many jobs too quickly. Select projects that stretch and expand your company’s skills, but are also practically achievable. If you’re doubling your project size, chances are you’re in the danger zone.

Practice saying no. Learn your limits. Some jobs require more skill, more equipment, or more financial muscle than you actually possess. There are certainly acceptable levels of risk and then there is simply recklessness. And learning how to avoid these jobs and passing on “bidding” for them is the first step in helping you win more bids and become financially profitable.

Tip #4: Learn How to Read the RFP

Learning how to read is probably the easiest thing you can do to start improving your chances of winning more bids. Seriously. Most contractors fail to understand that while there are many pitfalls when it comes to developing a winning bid proposal, before you spend hours of time crafting a bid, you need to carefully read and understand every detail of the solicitation or RFP to determine if your company is (1) qualified to take on the project and (2) aware of every requirement so you can bid accurately and effectively.

Generally speaking, a “bid package” in construction describes all the documents necessary to respond to and participate in what is known as the Request for Proposal (RFP) or Invitation for Bid (IFB). In the RFP, the issuing entity includes a letter that details the requirements necessary for bidding on any given project. The requirements always include a range of documents such as estimates, drawings, and specifications. Timelines for completion are usually requested as well as background information on the bidder in terms of years of operation and any expertise with similar construction projects.  

The most common mistake contractors make is failing to read the RFP comprehensively and not including a required document. If a builder fails to comply with the requirements, they’ll be denied the privilege of participating in the bid process or won’t be considered until a complete package is submitted. That’s right, they risk disqualification after they’ve already spent countless hours preparing what they assumed was an air-tight bid. Don’t let this happen to you or your company. Make sure to read the RFP closely and comply with all requirements.

Another mistake is misreading the RFP and not realizing that your company isn’t actually qualified to take on the project for any number of reasons, including the fact that you lack previous experience building the specific structure identified in the RFP. Again, you don’t want to comply with all requirements of an RFP only to find out later that you were disqualified not because you didn’t submit all of your documentation, but because you simply lack something the issuing entity believes is essential for successful project completion. Read the bid invitation closely and ask yourself if you truly fit all the requirements for the job. If not, save yourself time and hours of frustration and simply pass on that project. Soon, you’ll start to see your bid win rate, as well as your bottom line, go up.

Tip #5: Develop a Winning Bid

Now that you’ve got a firm understanding of the bidding process, how to find jobs to bid on and which jobs you should bid for, you’re now ready to focus on developing your proposal. It’s absolutely critical that you nail your bid and provide the most accurate estimate you can in that bid. Here we breakdown everything you need to know to develop a winning bid. While not an exhaustive list, it provides the essential items every winning bid must include.

Overview

As soon as you locate the right bid opportunity, the bidding officially starts and you’ll begin to craft your bid. If the client has provided a bid form, bid sheet or bid template, use it to fill out your proposal. If not, feel free to draft your bid on a blank template. Include the words “Bid Proposal” on the first page in bold.

Before you do anything else, make sure to nail the fundamentals like your business contact information, your name, logo and other details regarding you. Can you imagine not winning a bid because of a typo on your phone number or email address? You would be surprised to learn how many little mistakes like this cost contractors jobs and they happen mostly because they’re so busy applying for every job they find that they miss critical details. Provide this basic information:

• Your company logo
• The name of your company
• Your contact information
• The name of the person you’re submitting the proposal to
• Their company name and address
• The date of making the bid and the time it expires

You’ll also want to incorporate important details about the job, such as who you’re preparing the proposal for, what the project is, and also when you prepared the proposal. Including these items speaks to your professionalism, attention to detail and knowledge of the project at hand.

Supplying an introduction to the project that demonstrates you thoroughly reviewed and also comprehended the RFP and its requirements, will help your bid get pushed to the next phase in the process. In fact, most proposals are eliminated at this phase because they don’t fully address the demands of the client (as we discussed earlier). So, take care to address specific requirements in your bid and repeat specific wording in the requirements so your potential client knows you know exactly what’s required.

Scope

The  Scope of Job Summary is one of the most important sections of the construction bidding process. Using the details and specs discovered in the job proposal, craft a complete summary of every element of the job for the range of job summary. Here, include any type of illustrations, photographs, strategies, or details to supply a detailed plan of what you propose to accomplish.

This is the place in the proposal for specifics, including the materials needed, the number of workers, tools, and various other provisions. If there are any details or things that have not been determined or aren’t in the initial RFP, provide a clear listing of “Assumptions” or “Clarifications” with the reasons why they’ve been included in your bid. This checklist will allow the client to learn that you have not only carefully considered the requirements outlined in the RF, but you’re also knowledgeable enough about your field and the project to introduce elements the owner missed or overlooked when preparing the RFP.

In short, the Scope is the place to showcase your complete understanding of the job, your ability to deliver the desired outcome, as well as disclose “how” you’ll do the job. By fully engaging with the project’s distinct requirements, you’re informing the project owner that you’re the best choice to build the project, increasing the possibility of being selected for the job.

Concerns

After evaluating the RFP, take time to devote space in your proposal to explicitly communicating any concerns or risks you may have about the project and its construction. Take care to include any specific code requirements, potential adjustments, or other risks regarding the particular job that you expect.

Timelines

Ensuring a project is completed on time and under budget is especially important for prospective clients, who pay more each day a project is delayed. Therefore, including a detailed timeline or schedule for the project in your proposal will increase the owner’s confidence in your ability to meet deadlines and limit schedule creep. Make sure to include an end-to-end schedule that incorporates preconstruction, procurement, construction, and post-construction.

Equipment List and Assets

Include a list of everything you need to complete the job. Does the job require you to rent or use your own equipment and tools? Detail how much that will cost and how many days you’ll need to rent the equipment every week.

Cost Estimate

Make sure to include a detailed and thorough cost estimate in your bid for including material takeoff, labor, equipment, variances, and indirect costs. If you’re bidding on a project with multiple components–such as HVAC, electrical, and painting—include costs for each. The estimate you provide, as we noted earlier, is one of, if not the most important, component(s) of your bid. According to Dan Frondorf, cost estimating expert, “It’s more important to consistently submit accurate, well developed, and complete bids than to simply have a low bid every time; the jobs that win will have a greater chance of success if their estimates are solid”

So while it’s important that your bid be as low as it can be while still preserving your project margins, it’s more important that your bid is accurate because the more accurate it is, the lower your estimate will be and the fewer change orders will have to be issued once construction begins. New construction estimating services now enable builders to upload plans online and receive an accurate and detailed estimate within hours. If you don’t have a cost estimator on staff, this is a great option.

Pricing

Along with your estimate, include the total costs in addition to your fees, contingencies, allocations and other mark-ups needed that comprise the overall price for the project.

Summary

Don’t end your proposal without first recapping the most important aspects of your proposal, especially your estimate. You need to be mindful that your bid is only one of many the project owner will be reviewing, so it is critical that you remind them what you’re offering and why you’re the best firm for the job. Once again, take the time to demonstrate your professionalism by thanking the owner for providing the opportunity. The concluding summary is a great way to prepare you to pitch your proposal to the project owner if you’re lucky enough to have your bid pushed to the interview stage.

Supporting Documents

If you’re going to hire subcontractors, you should attach a copy of your agreement. It’s always a good idea to include a sample contract, so the project owner can visualize the terms and conditions and payment schedule for potential negotiation. If it’s not ready yet, include a standard agreement copy. Copies of liability insurance are also essential. Owners will want to be sure that you’re insured as you claim. In short, include any necessary supporting documents that will help the project owner evaluate your bid.

Package and Polish

As already noted, take care to include your logo, picture, brand imagery as well as brand colors in relevant places in your bid presentation. Your branding will not only help your bid stand out from your competitors but also reinforce your professional image. And while it may seem obvious, do not submit a bid without proofing it at least once. We recommend having more than one set of eyes proof your final bid to ensure all errors and typos are caught before it’s too late.

Submit Your Bid

Once you’ve included all items outlined here and you’ve proof-read and branded your bid, you’re ready to submit. Every RFP has specific instructions on how to submit your bid. Make sure you read those instructions carefully and submit your bid by the deadline and in the format requested in the RFP.

Tip #6: Increase Bid Coverage

Finding the right subcontractors to meet construction project needs is one of the biggest challenges general contractors face today. In fact, GC surveys have consistently shown that low bid coverage is one of the primary reasons contractors lose bids. The best subcontractors are just too busy and aren’t actively seeking project opportunities to work with new GCs. Yet your cost estimate and bid depend upon you finding available, high-quality subs. The solution? Start leveraging subcontractor networks where you can find subs actively looking for project opportunities in your region. If you need a sub for an unknown market or for specific trade codes, a sub network like ConstructConnect will enable you to find them quickly.

Tip #7: Improve Bid Accuracy

We cannot stress enough how important accuracy is when bidding for a project. While the entire bid needs to be as accurate as it can possibly be, your estimate’s quality can make or break your chances of winning a bid. Your cost calculations need to be precise for you to make money on the project and for the project owner to save money. For these reasons, take precaution and focus your energy on providing the most accurate, detailed and comprehensive cost estimate you can. If you aren’t a cost estimator and don’t have one on staff, do yourself a favor and outsource this piece of your bid to a skilled on-demand cost estimator.

More Quick Tips to Win Construction Bids

• Track your Win Rate (bid-hit ratio) by project
• When bidding on government contracts, add extra time
• Automate your estimate and save time and increase accuracy
• Leverage the power of your brand
• Don’t bid against too many competitors. Find out the number of competitors, evaluate the other bidders, and learn your position in the pack
• Bid outside your backyard
• Use templates and repurpose relevant work on previous bids
• Track success and learn what worked in the past
• Act as if you’ve already won

Win More Bids With 1build On-demand Cost Estimating

One of the best ways to improve your bid-hit ratio and start winning more bids is to provide an accurate estimate, which will enable you to bid lower without sacrificing your margins. 1build leverages expert estimators and powerful artificial intelligence to provide fast, accurate estimates. Simply submit your plans online and a seasoned estimator will provide you with an accurate estimate for all job costs within 48 hours.

By harnessing the power of 1build, you will:  

• Win More Bids with Fast, Accurate Estimates
• Eliminate Overhead that Cuts into Profit Margins
• Save Money by Increasing Margins
• Eliminate Headaches and Wasted Time
• Grow Your Business

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