Your Cheat Sheet to Winning More Bids with Fewer Proposals
It’s estimated that by 2022, the global construction output will reach $12.9 trillion USD, with $1.9 trillion reached in the US alone in 2019. The real question is, with over 70,000 contracting companies in the US, how will your GC firm handle the competition? The easy answer is by knowing how to bid a job as a general contractor. However, that process can be as complex and unique as every contractor. Maybe your company was among the 56% that registered a LEED project last year and is part of the $8 million conservation and development sub-sector. Perhaps you’re one of the 4% of contractors who have gone over to 3D additive printing solutions. Whatever makes your business stand out, your bidding process must be competitive to keep up with the changes in the industry.
How to Bid a Job as a General Contractor
- Size up the project. Is it commercial, residential, industrial or a government project? Is it similar to another project you’ve worked on so that you can use some of the lessons and experiences you’ve gained from that project? Are you going to have to add new subcontractors or skillsets to your current operation to pull it off?
- Consider what you’ll handle and what you need subcontractors to do. Some GCs will subcontract the entire project out, acting only as a supervisory or managerial oversight to the project. Others will handle almost the entire project, only bringing in a subcontractor if something is beyond their experience. Most contractors fall somewhere in between. Where does your company fall?
- Decide on your project delivery method. Are you planning on using Construction Management at Risk, Design-Build or Design-Bid-Build? In the first, the construction manager joins the project at the beginning and helps reduce costs as the structure is being designed. In the second, one firm handles the entire design and build process, while in the third, one firm designs the structure and takes bids for the construction of it.
- Find the best procurement method. Will you use low-bid, best-value, negotiated, qualification-based, or sole-source procurement to get your project underway? The first looks at cost alone, the second considers other factors, the third allows negotiation after the contractor has been selected, the fourth uses a two-step process to ensure the contractor has sufficient technical skills while the last only allows procurement from a single contractor.
- Determine your contract type. Are you considering cost plus fee, guaranteed maximum price, fixed price, target price or unit price? Cost plus fee allows you to simply add a fee on top of your overall costs, guaranteed maximum price is just that – you cannot charge more if a project runs over, fixed price has a set amount at the beginning, target price is agreed on at the beginning and the contractor tries to come in below that with cost savings or overruns shared between both parties while the unit price is based on a set number of individual units of labor and materials.
- Estimate your project costs. Once you’ve determined the delivery, procurement and contract type, it’s time to determine the costs. Will you need additional rentals? What about overtime on a fast-track project? Have you added in a cushion for that subcontractor that either comes in below budget or at twice their bid? Consider all the expenses you’ll have directly related to the project.
- Add in overhead expenses. What about the cost of office staff? Have you included the project’s portion of your vehicle fleet’s monthly payments? How about rent, utilities and outsourced IT and marketing efforts? Insurance? There are a wide range of expenses you’ll need to consider that go beyond what you need to work the job, but are necessary to keep your business in operation.
- Don’t forget profitability! You’re in this to make money, and that means that you need to make a profit. As a GC, you’ve probably run into cost overruns in the past as well as projects that provided you with a tidy profit. If you don’t work a profit margin into this project, you won’t have the extra to take care of your next overrun, whether it’s this project or the next.
- Examine your proposal carefully. It’s easy to make mistakes in your estimating process, so walk away from it for at least a half an hour, then go back and go over your work with a fine-toothed comb. Have you added extra insurance? Dinner for late-night work? Check your calculations very carefully and make sure you haven’t missed anything.
By having a solid understanding of how to bid a job as a general contractor, you’ll be able to successfully complete your budding process while keeping your crew moving. But what if you don’t have time to bid new projects on top of all of the work you’re currently going through? That’s where 1Build comes into play. Our estimating service helps you keep new projects rolling in while you keep your current projects moving forward. If you’d like to see how it works, just request a demo, sign up for an account or explore a case study where we helped a contractor increase their bidding capacity by 15x. Don’t forget to take a look at our Ultimate Bidding Guide while you’re here!