Running A Business

A Beginner’s Guide to Bidding on Construction Jobs

Mar 01, 2020 • 10+ min read
Construction business owner bidding on a job
Table of Contents

      When it comes to construction projects, contractors usually eat what they kill. This means that if you get out there and actively bid on projects, you’ll keep your crew busy and your business thriving. Take a conservative approach to the bidding game, however, and your business will likely starve. There simply aren’t many projects that just fall into your lap.

      At its core, a construction bid is a proposal. You’re telling a potential client what you can do for them and how much it will ultimately cost. Because your bid will include your expenses and profit, it differs from a simple estimate, which usually just accounts for the costs of the job.

      “In some cases, the only thing that matters in the construction bidding process is presenting the lowest price to the owner; in other cases, the contractor’s qualifications are just as important—if not more important—than having the lowest dollar amount,” explains engineering and construction expert Juan Rodriguez. “Knowing how to bid construction jobs can make the difference between success and bankruptcy for a construction contractor. If a contractor does not know how to bid on construction jobs, they will have no chance of turning a profit.”

      This bid is where a delicate balance comes into play. Cost matters to all clients, so you’ll want to submit one of the (if not the) lowest bids for any given project. At the same time, you need to protect your interests and ensure you’ll earn a solid profit. Neglect either side of the coin and your business will inevitably suffer.

      Here is the typical lifecycle of a construction bid:

      1. Solicitation: A client solicits bids on a project. They supply interested contractors with the relevant plans and specifications.
      2. Due diligence: After reviewing the details of the bid, you’ll want to visit the site to conduct an analysis and make sure you understand the project’s scope.
      3. Submission: Contractors review the project documents, contact subcontractors, and crunch the numbers. Then they submit their bids by the required deadline.
      4. Selection: After receiving all qualified bids, the client chooses the winning contractor. As mentioned earlier, the decision often comes down to cost.
      5. Formation of contract: At this point, the client and contractor collaborate to confirm all details.
      6. Delivery of project: This stage is where the rubber meets the road. The contractor moves in with their crew and equipment to carry out the required work.

      Making Your Construction Bid Truly Shine

      Following the steps listed above will get you through a potential client’s front door. But your competitors are all using a similar approach. You’ll need to ensure that accuracy and efficiency shine through every aspect of your bid, helping it rise above the pack. While cost may be king, it’s certainly not the only consideration.

      “Putting together a winning bid proposal, or even a competitive one, takes knowledge and skill,” says a construction bidding guide from iSqFt. “It’s a bit more complicated than just putting some numbers together and hoping for the best. Good bid preparation for general contractors requires a lot of time and effort and involves everything from reading and fully understanding the plans and specifications to accurately estimating costs for labor, materials, and equipment. Making even the smallest mistake can mean the difference between submitting a winning bid and missing out on a coveted and profitable project.”

      One of the big mistakes contractors make is failing to be judicious in their bidding. It can be tempting to seek out all kinds of projects, but this approach is like shooting a shotgun from your hip and hoping to hit a bull’s-eye 50 yards away. Only bid on projects that match up with your strengths, so you can correctly estimate costs and immediately put your talents to work if you’re able to land the project.

      In the grand scheme of things, winning a job you’re not equipped for is worse than not getting that job in the first place. It puts your crew in a bad position, and you’ll struggle to control your internal costs, risking your reputation in the process.

      For this reason, never worry about walking away from a bid. If your due diligence reveals that you aren’t set up to succeed on the project or your profits may be compromised, respectfully thank the client for their time and move on. A bad bid match is bad business for everyone involved.

      How to Bid a Job

      Here are some additional tips for improving chances for success with construction bids:

      • Follow the bid instructions studiously
      • Properly account for all your overhead costs
      • Only work with subcontractors who are skilled and reliable
      • Ask the client for clarification whenever necessary
      • Keep your information organized
      • Provide every detail necessary to state your case
      • Include testimonials from happy customers
      • Share relevant awards and certifications
      • Track your bidding results so you can improve your process

      If all these considerations seem overwhelming, take heart in the fact that construction bid estimation software can shoulder much of the burden. The technology has improved dramatically in recent years and makes the entire process faster and easier. For this reason, it has grown in popularity among contractors of all stripes.

      “This software was introduced over 2 decades ago and has had a major impact on the industry by making once difficult aspects of the process much faster and more efficient,” says Rodriguez. “But perhaps the biggest benefit of estimating software is the way it automates job costing. The software typically comes with a database of construction costs that are updated monthly by subscription. Builders can also keep their own database for job costing so that the software more accurately reflects local costs and price fluctuations in the market.”

      By letting software complement your efforts, you’ll be able to prepare bids that align with the requirements, tout your company’s differentials, precisely capture costs, ensure profit, and stand out from the competition.

      Consider Bidding on Government Projects

      One of the best places for any small business to look for bidding opportunities is with government construction. Whether it’s a school, office, utility building, transportation center, or something else entirely, there are always government projects going on.

      Government jobs can be particularly nice when the economy is dragging. Other jobs may dry up, but the government will always carry out designated projects. Some projects are even initiated with the specific goal of stimulating the economy.

      “Each year, the government awards hundreds of billions of dollars in federal contracts to businesses to meet the needs of federal agencies and the military,” explains USA.gov. “The government’s goal is to award at least 23% of those contracts to small businesses. To sell your products or services to the federal government, your business must meet specific requirements. Although the contracting process can seem complicated and overwhelming at first, the government provides lots of information and tips to help you learn to compete as a federal contractor.”

      So how does the government make decisions for bids? The process is much more heavily regulated than with non-government jobs. Mountains of paperwork are often required, so it’s important to allocate enough time to do everything correctly. Fail to attach the correct documents or provide all the necessary details, and your bid will be dead in the water.

      It’s important to note that while these projects all fall under the government umbrella, they are administered by various agencies and organizations. So don’t assume the details will be the same across all government jobs.

      Finding government projects to bid on isn’t too difficult. Start by visiting SAM.gov. The federal government created this free resource as a hub for contract opportunities. As the website states, “Anyone interested in doing business with the government can use this system to research active opportunities.”

      The projects found on SAM.gov are all worth at least $25,000. You can use the convenient search tool to find projects based on keyword, solicitation ID, or individual federal organizations. Numerous filters will help you sharpen your search and locate the most relevant opportunities.

      Once you find a potential project, simply click on the link to access scope documents. You will also find instructions for bid submissions and the deadline to take action.

      Another free resource worth investigating is America’s Business Network, which is a portal curated by the North America Procurement Council. You’ll find all manner of bids, RFQs, and RFPs put out by government agencies or private organizations. You can search by state, date, or project details, though the functionality isn’t nearly as sleek as what you’ll enjoy on SAM.gov.

      Plenty of other websites will connect you with bid opportunities for a fee. These paid resources often specialize in certain types of construction projects, potentially helping you sharpen your search and find bid targets faster.

      Here are 6 resources that could be worth checking out:

      1. Government Contracts and Bids: Using this website is as much about analysis as it is searching. With robust reporting and tracking, it helps you maximize your time and find the most profitable projects.
      2. Onvia.com: While there are thousands of government projects listed, the real benefit with Onvia is that you can find informal opportunities that often aren’t broadcasted to the public.
      3. Find RFP: In addition to aggregating potential projects for you, this website stores your preferences and sends alerts when possible bid opportunities arise.
      4. GovernmentBids.com: This site is a great resource for construction, electrical, and road work opportunities. Create a profile within your industry and then find projects by state and region.
      5. State and Federal Bids: The main focus of this website is bridge and road construction, making it a logical choice for construction companies with those focuses. Additionally, you’ll find projects for schools, water, airport authorities, and jails.
      6. BidNet: By gathering RFPs from federal, state, and local governments, BidNet offers an impressive listing of opportunities. New projects are sent daily by email, with reminders of expiring term contracts.

      Finding Lucrative Projects Outside of the Government Sphere

      While government jobs offer unique benefits, they are hardly the only projects worth seeking. Many construction companies actually prefer to work in the private sector, as the competition isn’t as fierce and the processes can be more streamlined. If you’ve ever waited in line for hours at the DMV, you already have an idea of the negative side effects of government bureaucracy.

      It’s true that non-government jobs are less procedural than government jobs, but that doesn’t mean you should treat your bidding any less carefully. Make sure you allocate enough time to do a thorough analysis of the project before submitting. Your bid should include every document and detail requested, with extra emphasis placed on your company’s differentials.

      Numerous websites are available as you search for non-government bidding opportunities. These include iSqFt, Construction Bid Source, Building Construction Bid Network, Bid Express, ConstructionMarketData, Dodge Global Network, MedicalConstructionData, Infrastructure Civil Works and Construction Tenders, North America Procurement Council, BidClerk, and Building Radar.

      If you want to avoid the breadth of nationwide searches and instead want to focus on local opportunities, it’s worth checking out the jobs coming from your state’s procurement office. Once you create a profile, you’ll receive updates on upcoming work for which you can submit a bid.

      Obtaining the Best Financing When Necessary

      Construction projects come with a wide array of internal costs, so extra funding may be required. This need is especially true when you account for the rising costs of equipment and materials. Many small businesses turn to equipment financing, as it is engineered specifically for these types of expenses.

      “Whether you need to purchase computers for a growing team or invest in specialized machinery or vehicles, you’ll need to consider how you will pay for that equipment,” says the US Chamber of Commerce. “A business equipment loan can help you quickly obtain working capital to buy or lease the items you need for your business. You’ll be able to manage your cash flow seamlessly, as this financing will allow you to spread out your payments over a longer period of time.”

      Equipment loans can have dollar amounts up to $5,000,000, with favorable interest rates starting at 7.5%. Plan on the repayment terms ranging from 1–5 years. You can use the money for nearly anything related to your project, including power tools, trucks, trailers, or materials.

      Of course, you have other small business financing options if an equipment loan isn’t a great fit. Here are a few of the top contenders for your construction needs.

      1. Term loans: With amounts up to $2 million, these loans can cover many different kinds of large expenses. The rates begin at 6%, with repayment terms of up to 5 years.
      2. Short term loans: These loans are similar to term loans, but offer an expedited timeline. In some cases, you can actually get the money in just 24 hours. The tradeoff is that the amounts are lower, the interest rates higher, and the repayment terms shorter.
      3. Business lines of credit: Like a credit card, this revolving financing connects you with a set amount of money that you can borrow from whenever you like. The dollar amounts go as high as $500,000, and the interest rates vary from 8–24%.

      Rest assured that there’s a business loan for any need that may arise for your construction business. All that stands between you and an ideal financing product is due diligence. Although you may feel pressure to get financing in a hurry, taking a careful approach puts your business in the best possible position to score short-term wins and build long-term success.

       

      About the author
      Grant Olsen

      Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.

      Share Article:

      Business insights right to your inbox

      Subscribe to our weekly newsletter for industry news and business strategies and tips

      Subscribe to the newsletter

      Subscribe to our weekly newsletter for industry news and business strategies and tips.