21 Feb My Year Analyzing Construction Bids: 5 Things I learned – Part 2
I have spent most of my days over the past 12 months staring at construction bids. The RhinoDox team and I have been deeply embedded with our clients discussing construction bidding best practices.
Part I dove into Why Bid History Matters and how there are Fortunes in Followup (if you did more of it). You can read Part 1 here. Today we are sharing Part 2…
Part 2: Your Bid Needs and Overhaul.
I keep asking a simple question, “What makes up a good construction bid?” I ask this question to anyone who has an opinion. I’ve sought out thought leaders in construction, talked to estimating and operations at our clients, leadership, estimator’s and PMs at GCs, random people at social gatherings, and a nice man at the local diner last week. I ask this question every day and below is what I have learned so far. So let’s dig into it!
What GCs Want….
GCs want the lowest price. But you already knew that. What they really want are bids that are easy to understand and organized so they don’t have to ‘hunt and peck’ to find information to level their bid. They want to know exactly what they are getting and for what price
Bids should be broken out into 5 main areas described below:
- Scope of Work
- Clarifications and Assumptions
- General Qualifications
Below is an explanation of each section:
Very simply, put the price at the top. It’s the first thing everybody reads. If you think putting the price at the bottom will get them to read your entire bid, I have some oceanfront property to sell you in Montana.
2) SCOPE OF WORK or PLANS and SPECS
If your price is good, your prospect will continue reading. When a GC is leveling bids, the meat of your proposal should be listed in the scope of work. Here are a few tips on this section.
Tip 1: Avoid one long list of every inclusion and one long list of every exclusion. The more you can break it out, the easier it is to understand.
Some of our clients break it out by Spec Section. Add the word ‘Partial’ to the title if you aren’t covering the entire section.
Others break it out by grouping it as the type of work: EIFS, Frame/Hang/Tape, ACT, Glazing, Louvers, ETC. Breaking it out this way makes it easier to digest and read through.
Tip 1 Test: If you find Payment and Performance Bond sandwiched in a big list between some important Plan/Spec items, you are doing it wrong.
Tip 2: For each scope of work, list inclusions and exclusions that are specific to that scope. Each section can have it’s own inclusions and exclusions.
If you are wondering if an item in your proposal goes here, ask yourself, “Can this line item can be tied to that specific scope?” For example, Payment and Performance Bonds CANNOT be tied to a specific scope. It can only be tied to the overall project (more on that below)
Tip 3: Don’t make your client ‘hunt and peck’ in your proposal. If they are reading about Plans and Spec work above, don’t make them go to the bottom in a long list of exclusions to see what they aren’t getting.
Rule of thumb on this: The more important it is, the higher it should go on the proposal.
3) CLARIFICATIONS AND ASSUMPTIONS
This is one of the more interesting and varied areas of proposals I see. It’s somewhere between non-existent and very informative.
When necessary, this area is used to help inform about things your client should know about the work you are proposing. I see this mostly used to fill in the information that is technical in nature, but isn’t covered in the plans. Sometimes this is technical specifications about the material OR conditions in which it is installed.
This might SHOCK YOU, and I’m only relaying what I have been told, BUT….some architects are lazy. Not all. But some. This area is the chance to show your expertise and that you have read through all documents and drawings.
This is also a useful area to address certain items upstream so they don’t bite you in the butt downstream.
This is NOT the area you use to communicate “What they need to know about doing business with you.” (more on that later).
4) PROJECT SPECIFIC QUALIFICATIONS
In RhinoDox we think about this area as ‘Everything Else’. We laid out details in the scope of work. We clarified that in the ‘Clarifications and Assumptions’ section. Project Qualifications is meant to communicate everything else that is included or excluded.
These items directly affect the base bid price but CANNOT be tied directly to a scope item.
We traditionally categorize these into five areas as follows:
A) Job Site Items and Conditions – Things we need onsite or site conditions like dumpsters, temporary Enclosures, temporary utilities, cranes, etc.
B) Job Site Labor – Things we need to do onsite like demo, overtime, cleanup, safety personnel, etc.
C) Engineering/Plans/Testing – As-Built drawings, mockups, BIM Modeling, field testing, etc
D) Administrative/MISC – Ex: Permits & fees, sales tax, MBE/WBE/VBE, Section 3 hiring
E) Insurance – Ex: Payment and performance bonds, errors and ommisions, OCIP/CCIP
F) CYA Scope Items – One other area that we stick down here are all the Plans and Specs exclusions that happen rarely or infrequently but need to be included.
In addition to readability, organizing in this matter allows an estimator to ‘mind shift’ when putting the proposal together. They tackle Scopes/Plans & Specs –> Clarifications & Assumptions –> Project Specific Quals and everything else.
Dividing into groups allows compartmentalizing the components of the job one area at a time. This is another way to help estimators avoid unintentional errors and omissions.
5) CONDITIONS – aka ‘What you need to know about doing business with us’
The name ‘CONDITIONS’ is up for debate. But these are items are written to the proposal 100% of the time. Some clients list these items in the proposal and others choose not to. For those that choose not to, it’s because they have decided that this language doesn’t matter. Only language in the contract matter….which is mostly true.
However, if your bid is accepted and these terms are in the proposal, you at least have a jumping off point when negotiating your contract. Below is a list of examples of what we are referring to from our demo company ‘Highpoint Construction’:
- Pricing: Due to volatility in materials market this quote is valid for 10 days. A formal notice of intent must be submitted to Highpoint Construction within the above days to be able to hold pricing for Thirty (30) days of the date of bid.
- Contract: This proposal is contingent upon both parties entering a written contract on terms and conditions consistent with or equivalent to the terms and conditions of ConsensusDocs 750.
- Material Price Change: A change in the price of an item of material of more than 5% between the date of this bid proposal and the receipt of contract shall warrant an equitable adjustment in the subcontract price.
- Open Access: Our proposal is based on the GC providing an open access portal on each floor to allow for the stocking of material via boom truck. Material stocking via stairway or elevator will incur additional costs. General contractor is to furnish hoisting facilities at no charge.
- Liability: Highpoint Construction assumes no responsibility or liability for any loss and/or damages caused by visible or concealed deficiencies or failures, including but not limited to mold, mildew or other toxins, either pre-existing or post-replacement unless said loss and/or damages are proven to be caused solely by the negligence of Highpoint Construction
- Maintaining Schedule: Other Subcontractor’s failure to maintain schedule causing Highpoint Construction to work overtime shall constitute a change order and is NOT included in this proposal.
- BIM: Highpoint Construction has in-house BIM capabilities that can be provided to assist in clash detection and pre-construction coordination.
- Design Warranty: HIGHPOINT CONSTRUCTION is not a Design Professional and does not warrant or represent the sufficiency of the plans and specifications. We further make no representation as to the sufficiency of the same for any purpose and we rely on the Contract Documents provided to us by the Customer, Owner or Architect.
- Damages: Liquidated and/or consequential damages are not included
- Indemnity: Any contractual duty to indemnify, defend and hold harmless the Contractor, Owner, Architect, or their agents will not include any right to indemnity where the indemnified party’s negligence is a proximate cause of injury to persons or property.
There are many factors in what makes a good bid (besides low cost). Constructing a bid in this matter and consistently across all estimators is essential to successful bidding. If you enjoyed Part 2 of this series, tune in next time for Part 3 where I discuss the 4 Decisions Necessary for Profitable Jobs.
You can watch the video below or schedule some time to see how we are helping clients with their bidding process.