It’s been firmly established that a well-run bidding process drives down costs on capital and construction projects while also reducing the risk of change orders and delays. As billions of dollars in project value have been run through our project management platform by some of the largest owners in North America, we’ve seen where best practices make a meaningful impact and where teams commonly falter.
Here are some of the most useful bid management tips we’ve uncovered to optimize steps throughout the bidding process:
Keep shared documents consistent
It’s crucial that each bidder on your project receives every document they need to understand the job scope. If you aren’t using an automated bidding platform or an FTP site that tracks read receipts, consider assigning a junior project manager or vendor coordinator to confirm with each bidder that they indeed have the latest and greatest document package.
Enforce bid due dates
Send a reminder to the bidders a few days in advance of the due date as well as on the day of to reinforce that your deadline is strict. This might seem like an obvious practice, but it’s one of the seemingly small tasks that nevertheless gets forgotten.
Use the site walkthrough to learn more about bidders
The walkthrough is an opportunity for the bidders to evaluate the logistics of your project in more detail, but it’s also a chance for you to test their fastidiousness. It should be easy to tell who read the plans and proactively thought through the project based on the specificity of their questions. After all, who wants to work with a contractor who didn’t take the time to review the documents beforehand?
Consider requiring bidders to submit RFIs electronically to both the project manager and the architect
This will also reduce the risk of a questions not being answered in a timely fashion. Multiple parties will probably be responsible for contributing RFI answers and you want to make sure everyone, including the architect or engineer, is responding quickly.
And remember, some contractors will intentionally not ask RFIs where they see something missing on the drawings, hoping to exclude it from their bid and then submit a change order later on. Diligently sharing every question and answer with the group can help mitigate this behavior.
Distribute addendums as quickly as possible
Occasionally, as the job goes along, the architect or the engineer will need to issue addendums or updates to the scope. Make sure these documents are quickly distributed to all bidders so their bids aren’t delayed.
Breakout items in bid leveling
Lookout for bidders lumping various trade items together. For example, some bidders might breakout fire alarm from electrical, but one bidder may lump them all together. You’ll need to take extra care to pull these numbers apart to put them on an apples-to-apples basis.
Make a note on the comparison sheet that the bidder’s number has been adjusted, and also keep track of the original bid for reference purposes. Additionally, reach out to the bidder with clarifying questions as soon as possible so final bids are not delayed.
Push bidders to replace allowances with true bid costs
Sometimes bidders will price line items as an allowance, which is the bidder’s best estimate for that cost. This indicates that the bidder does not yet have firm pricing, which can happen if a bidder hasn’t received pricing from a sub but they still want to bid the job or when certain parts of the drawings are in flux. Push bidders to replace allowances with true bid prices as quickly as possible. A fixed price fully bid item is important for you to accurately compare vendors.
The best time to negotiate on price is during the bid process, and the worst time to negotiate on price is once the job has already been awarded. If you think you may want to add something to the job, include it as an alternate. Even if you don’t go forward with it, the winning bidder has at least agreed to a firm price if you decide to include it later.
Select the right size for your bid group
Try leveraging a smaller bid group for better prices. Sometimes contractors provide less detail on their bids in the early rounds of bidding because they’re reluctant to invest a lot of estimating time until they know they have a real shot at the job. But if they’re included in the best and final round with, say, a 33% or 50% chance of winning, they’re likely to invest more time into providing a deeper level of detail.
Thank losing bidders
In your haste to move forward with your project, it’s not uncommon to forget to inform the losing bidders. Be sure to thank them for their hard work and remind them that you’ll keep them in mind for future work.
If you regularly request bids from a vendor who rarely wins and gets limited feedback from you during the process, they’ll be reluctant to give you their attention and may either start preparing low quality, expensive bids or bow out of your process altogether. A simple explanation and note of gratitude can go a long way.
Consider package bidding
If you have multiple similar jobs occurring around the same time, consider using package bidding to get economies of scale by awarding all the work to one vendor. Projects like a restroom renovation and an office buildout on the same floor, are typically good candidates for package bidding.
It’s a good idea to create a separate bid form for each scope of work so you can conduct your leveling and analysis work at the most detailed level. However, you should expect a discount if you award the whole package of work to one bidder.
Like all entrepreneurial thinkers, commercial real estate owners want to refine and standardize as many business variables as possible in order to proactively control for better outcomes. Implementing these tips and best practices into your bidding process will help drive more predictable, scalable results.