Resources: Bidding on a Job
Take our handy test to find out if you should bid on a job.
In construction, the bidding process is part science and part art, both important to the success of your business. When starting a construction business, the habit is to bid on every job that comes your way. After a year or two of hard knocks, the wisdom of picking and choosing bids emerges from the ashes of the jobs you never should have touched – the ones you lost your shirt on. Save yourself a lot of unneeded aggravation. Here is a list of questions to ask yourself before you launch into the bidding process. Rate your answers on a scale of one to five (one means you see dangers in bidding and five means you are perfectly matched for the job) to see if the bidding opportunity in front of you gets a passing grade – or is simply something you should-pass on.
Is the scope of the job within your experience?
As time and experience expose your strengths and weaknesses, you discover you are most comfortable with certain types of work. What do you do best: commercial or residential or industrial? How much of this bid lies inside your comfort zone? Commercial construction is not the same as residential. Residential is not the same as industrial. Neither are all the material applications the same. Though you may be very good at laying concrete, you are courting disaster if you think laying a concrete basement floor is anything like building a concrete swimming pool.
The temptation to try something different must be balanced by a realistic assessment of your limitations. If there is much in the bid that is new to you, can your subcontractors make up for the experience you lack? Consider also, how much your jobs in progress are already pushing your limits. Do you need the extra stress?
Will you be able to deliver an accurate bid on time?
Even the bids you lose must be accurate, complete and timely, as they represent your company just as does your marketing and your portfolio of previous work. The architect will remember your bid for next time, especially if in the execution of the job, he discovers your bid was the right price after all. Given the time constraints you currently have, can you deliver a bid that represents your company well? If you cannot, score this bid low.
How many bidders are involved?
It is simple math: the greater the number of bidders, the less your chance of winning. Is it worth the time if you are bidding against 15 other companies? How about 10, or five, or three? If the work required is very familiar and you consider yourself an expert in it, rate this bid a five, regardless of the number of competitors. If much of it is unfamiliar, a rating of two is plenty.
Is the job within your geographical “comfort zone?”
Traveling costs money. Getting to know unfamiliar municipal building bylaws and building inspectors can cost money. The logistics of material delivery over longer distances costs money. Finally, unfamiliar soil and geographical conditions can cost money. When you add it all up, can you compete? Expanding into a new neighbourhood is exciting, but you have to be ready and able to cover the costs without bidding yourself out of contention.
Will you be able to do the job in the time allotted?
Most jobs have a projected completion date. Before you decide to bid on a contract with a specified finish date, check to see why the constraint exists. How soft is the date? Is it forced by the closing date of a house sale, or just picked out of the air? If it is carved in stone or has a penalty attached, your timing will mean everything. If you cannot meet the strict deadline, the job gets a zero. If the date is flexible, give the bid a higher score.
Are you comfortable with the client and the architect?
Before getting involved in a renovation or a building project, customers are always told how important it is to choose a contractor they comfortable with. But are you comfortable the customer? While they are wondering if you are capable of doing the job, you should be determining if they are capable of paying for it. They will be concerned with your communication skills, but can they communicate? What will they be like when they ask for changes? Will they be expecting you to pay for them? Are they able to articulate their needs, or are they vague and inconsistent in their decisions. If you feel uneasy about the customer better give the bid a low score.
How ‘good’ is the money for the project?
Is the customer paying for the job with a second mortgage or out of cash flow? It is hard to determine before the bidding process, but during your preliminary interview you may be able to uncover a little information about how the job is being financed. Talking about the draw schedule you expect on the contract may reveal where the money is coming from. Rate the quality of the money according to the source and the speed at which the customer is willing to release it. How badly do you need this job? Score this one out of ten because needing the job is always going to carry the most weight in the decision to bid. With this scoring system, if you score the maximum ten points here, you still need a couple of the other factors to score reasonably well before the bid passes the 50 per cent mark (our bid approval percentage standard).
If you score each question out of five, the maximum rating you can get if you gave full marks to each question is 40. A score of 20 is a pass. Go for it! If the job does not score above 19, perhaps your time is better served looking for a better client, or focusing on the work you have.