Before a contractor wins a construction project, they must go through the bidding process. The bidding process is similar to applying for a job. You will win the contract if the bidding panel likes the conditions and services you are offering.
Before submitting a bid for either a government or a private tender, you must follow a specific procedure. These are:
- Bid solicitation
- Bid submission
- Bid selection
- Contract creation
The bidding process
Bid solicitation is the first process of getting a tender. This is where a project owner will send out a request for proposal (RFP), which is a business document that is used to solicit bids from qualified contractors. The document will give brief background information about the job and a detailed description of the project.
A request for proposal will also have information about the project deadline and technical specifications of the construction project. If your company is interested in the project, then you will be required to give a response within a stipulated time frame.
After you have received the request for a proposal, you will be required to submit a bid. To increase the chances of getting the job, you must include relevant information about your company. You should include past performance, a portfolio of prior projects, and a cost estimate of how much it would be to implement the construction project at hand.
Other relevant information that you should include in your bid documents is the type of equipment you will require, the labor, and overhead costs. This is a part of the information used to gauge whether your company will win the contract or not.
At this stage, the bid selection panel will evaluate your bid documents to determine whether they meet their criteria. In some projects, the lowest bid tends to win the contract. However, this should not always be the case because not all low bids can guarantee quality work. This is because the contractor may possess some hidden costs.
In some government projects, contractors tend to undervalue the cost of a project so that they can win the contract. When this happens, the contract tends to stall.
Criteria for bid evaluation
When determining whether a construction company is qualified, the selection committee will utilize five main criteria. These are:
- Technical capability
The first area that the company will use in their decision is your technical expertise. Your technical expertise will be judged based on the type of technology you are using and the involved personnel.
If you use a modern AI-powered construction optioneering platform such as https://www.alicetechnologies.com/solutions/for-owners, you can enhance your chances of winning the contract. This is because such a platform makes it easy for the contractor to create multiple simulations involving the project. This way, you will know which implementation strategy will yield the greatest return on investment.
The platform helps to save on construction costs and to reduce risks. It reduces risks by ensuring resources are optimally allocated and by simulating suitable alternatives.
Other technical factors that will be evaluated are your team’s expertise, the type of equipment you have, and the company’s overall experience.
- Financial muscle
Another important factor determining whether or not you win the contract is your company’s financial muscle. Do you have the financial stability to implement the project? What is your credit rating? Do you have any banking arrangements or bonding? These are some of the questions that the selection panel will try to find answers to.
They do not want to award a contract or a tender to a company that will file for bankruptcy a few months down the line.
Did you know that more than 70% of a company’s market value results from brand equity? The higher your brand equity, the better because every property developer will want to work with your company. The evaluation committee will also consider other factors such as your past failures, the type of litigation handled, and your time as a contractor.
Because reputation is weighted so heavily, it is in the interest of every construction company to avoid a negative reputation.
- Management capability
If they realize that your management structure is weak, you will most likely not receive the contract. A weak management structure can bring about a bad reputation or cause project overruns which can delay a construction project. In addition, if you hire an unskilled project manager, they might demotivate your entire team, causing inefficiency.
- Safety measures
Another factor considered is the safety measures you put in place to protect your workers. A simple accident can delay the entire project due to litigation. Do you have safety accountability? Do you have safety fire procedures and protocols? These are some of the questions the selection panel will ask.
The construction contract
When the selection committee awards you the job, you must sign a construction contract. There are four main types of construction contracts that you can sign: fixed-price contracts, cost-plus contracts, time and material contracts, and unit price contracts. The first is a fixed-price contract whereby the contractor is paid a lump sum of money.
In a cost-plus contract, the client must pay for all costs associated with the project, such as materials and labor. The client will also pay for the contractor’s overhead and markup. The third type of contract is a time and material contract. In this contract, the client receives an hourly wage.
Lastly, you can also sign a unit price contract. This is a contract that is based on broken down measurable unit costs. The type of contract you sign will depend on the project you handle and how the client would like to compensate you.