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Bidding: Understanding the Process and Successful Strategies

Eugene Washington, PE

Course Outline

  1. Business plan
  2. Resources
  3. Owner selection
  4. Type of work
  5. Kind of owner
  6. Location
  7. Equipment availability
  8. Project size
  9. Crew availability
  10. Number of bidders
  11. Competition
  12. Wage rules
  13. Time of year
  14. Estimating team
  15. Estimating criteria
  16. Bid day procedures
  17. Proposal contents
  18. Subcontractor and supplier relations
  19. Setting the bid price

Learning Objective

The purpose of this course is to explain all the effort that goes into the tendering of successful construction proposals. It offers suggestions on bidding strategies and how to prepare for bid closing day. Another goal of this course is to convince the reader that bidding should be an honest and ethical endeavor. The course explains why it is important to know when, where, which projects, who to bid to, and how much to bid.

Course Introduction

Bidding jobs is as intense as any high-stakes poker game, only infinitely more complex. It starts with the company business plan and ends in a mad rush to turn in responsive bids just seconds before the absolute deadline. In between is long hours of study, thought, analysis, takeoff, discussion and calculation. On a simple job only one person may spend just a few hours preparing a bid. On very large complex projects this time can involve dozens of people and the time invested is measured in work-years. The fundamental process is the same regardless of the size of the bid price, only the organization and effort changes. The purpose of bidding is to be the lowest responsible bidder and yet make a profit on the work. This is a very fine line to tread.

Course Content

The military applies strategy and tactics to its operations to win. Strategy is the overall business plan and tactics is the methods used to achieve the strategic goals. The same concept applies to bidding. The goal is to win work and make a profit at completion of the project. The business plan defines the market to be pursued:

    1. What kind of work?
    2. Which owners?
    3. What region?

Even a specialty contractor can have many choices. An electrical contractor can do high line, residential, commercial, industrial and or utility work. The contractor can decide to work for a variety of owners: federal, state, local agencies, and private developers or corporations. The region can be worldwide or just a part of one city. These choices should be flexible to accommodate the constantly changing construction market.

Once the decision is made, the contractor accumulates the resources necessary to be competitive. The first and most important resource is people. Key managers and craft must be hired, trained and developed. Nothing was ever built without people. Most work is priced on past productivity experience. Highly skilled people will be far more efficient than inexperienced and unmotivated people. It is important to gain the loyalty of these key individuals. Their efforts allow the estimator to apply lower cost to the work and help win bids. They also make projects profitable. The estimating team is crucial to winning successful bids. Often the better construction plan wins the work. On one underground pipeline project the specifications required the trench to be shored with "solid sheeting". We determined that the ground was stable and chose plywood and speed shores as the "solid sheeting". The other contractors assumed sheet piles were required. This interpretation saved us a few million dollars and won us a very successful project.

Other key resources are equipment, tools and materials to support the selected market. The earthmover will need scrapers, tractors and or trucks. The underground contractor will want backhoes and loaders. The bridge builder needs cranes and falsework materials. A marine contractor needs dredges, barges and tugs. The list of options is nearly endless. Once the resources are available, bidding can begin.

Subcontractor and suppliers are key resources. They will pass on key information and selectively price to their favorite primes and owners. It is important to develop a good report with these people. They will then go out of their way to work with you and offer their best pricing.

There is usually far more work available than any one contractor can bid. The first step in bidding is to choose which projects to bid. There are a number of factors to consider:

    1. Type of work
    2. Kind of owner
    3. Location
    4. Equipment availability
    5. Project size
    6. Crew availability
    7. Number of bidders
    8. Competition
    9. Wage rules
    10. Time of year

Some contractors are specialists and some are generalists. The generalist will look at a range of project types and will bid on the work that looks attractive for the resources available. Many successful heavy construction contractors use aggregate mines as a base to be competitive. They will manufacture gravels, sand, road base, asphalt and concrete to supply their construction operations. That way they can avoid a double mark up on those materials and partially control a local market. They will bid aggressively work that is within a reasonable haul distance of their aggregate plants. They are also in a position to develop a project specific aggregate mine because they have the special in-house expertise. They usually are very tough competition on roads, subdivisions and site work projects.

Specialists can also be very tough competition. For instance, a contractor that specializes in highway bridges will have crews that have built nothing but bridges for 10 or more years. They have all the tools and techniques down pat. The contractor will have a mechanized form fabrication shop and an inventory of falsework beams, timbers, and erection hardware. With their ability to achieve high productivity and amortize the materials over several projects, they will be very aggressive on the projects they want.

Even though some markets are partially controlled, there are all sort of markets that no one has control of. Buildings, treatment plants, earthmoving, pipelines, pump plants are just a few examples. Sometimes it is advantageous to joint venture projects. A concrete contractor may team with a mechanical contractor to bid on water treatment plants or industrial work. A bridge specialist may venture with a road builder to take advantage of each otherís strength to construct a length of freeway. Such joint ventures reduce risk and eliminate double markups.

The type of owner makes a big difference to the bid and the work. Public works tends to be very paperwork oriented and bureaucratic. They can require full time onsite safety and or quality assurance people, overly complex CPM schedules, and cumbersome submittal procedures. This distracts the project management team and adds overhead which often hampers productivity. Private owners tend to be more proactive toward project completion. They are investing in the work and time is literally money to them. Some owners, engineers, inspectors and construction managers have the philosophy that a contractor should not be allowed to make a profit. These people will do every thing they can to delay and harass the contractor. Avoid bidding to them or price the bid accordingly. We have chosen to bid to such clients because nobody liked to work for them. The bid list was short and the bid prices high. We usually made more profit off them than other work even thought the cost of doing the work was much higher. Some developers and private owners can make it very difficult to collect payment for the work performed. They will be very slow paying, trumping up back charges and insisting on a kickback to release even partial payments.

It is well worth your while to research the reputation of any new owner or construction manager that you are considering bidding to. We have some public works clients that we will do everything we can to give them our best price. There are other public works owner, engineers and construction managers that we add additional contingency to the bid because we know they are difficult to work for. Some owners we simply will not bid to. We rate private owners the same way. I have heard the cynical comment that there are only two kinds of developers: one cut and two cut weasels (reference is that you must offer to lower your price once or twice). That is not true. I know of several very honest and forthright developers and will go out of my way to work with them. There are other developers I wonít even bother talking to.

Some public work owners will find every excuse to withhold payments. These excuses include rejecting the schedule update, rejecting submittals, rejecting completed work or just delaying the payment request with cumbersome approval procedures. On one job when I found out that our first progress payment was over three months overdue, I asked for a meeting with the joint owner, a state agency and a federal agency. The construction manager laughed and said "Join the club, weíve been here for nine months and have not received our first progress payment". In the meeting after all the intricate steps of payment approval was carefully explained, I said, "There are only four people in the whole world that know what is owed to us and we are all in this room." "You are in breach of contract we and will terminate the work in ten days if we are not fully paid up to date." We were paid on time thereafter.

Every large complex project will accumulate changes. Some owners will drag out the negotiation process until the work is complete and then offer pennies on the dollar, knowing full well the contractorís options are limited. Lawsuits are expensive and time consuming. The owner is in no hurry to pay you, so they can wait you out. Some owners will refuse to settle claims short of legal action. Some public agency managers will use this tactic to avoid the responsibility of making a decision, admitting a mistake and justifying it to their supervisors. They know that litigation will take years and the truth will be lost or muddled in the process. You may wish to add contingency money to the bid price to cover such reputations.

The location of the project to bid is very important. The open shop contractor may have a very difficult time trying to build work in a strong union area. Even the local suppliers, subcontractors and ownerís representatives may resent the open shop presence. Sometimes the union will incite harassment or hate campaigns targeting the open shop employees. Vandalism, theft and assault can easily occur. On the other hand, a union contractor may have difficulty being competitive in a right-to-work area. The higher wages including benefits paid to the union crafts are usually much higher than open shop wages. In some smaller communities the "good old boy" network will highly resent the "tourist" contractor and make it very difficult to do business in town.

For certain types of smaller projects there are what I call dead zones. These are spots that are a little remote, far from where most local contractors are centered. When these zones are identified, watch for the occasional project that suits you and falls in the dead zone. Usually there will be only two or three bidders and their price will be higher than normal. This is because of the inconvenience of managing work far away form the usual home base and the lack of interest of their loyal crews.

Equipment availability can be a key factor in the bid process. Heavy construction equipment is very expense to purchase. It pays for itself only by performing work. If a machine costs $500,000 to buy and has a life of 10,000 hours the basic pay down is $50 per hour. Interest and inflation must also be considered. If the machine can be used only 500 hours per year it will take 20 years to write off and the interest will double the cost of ownership. If the same machine can be kept busy working 2,000 hours per year it will pay for itself in 5 years and save many thousand dollars in interest as well as earn revenue as a faster rate. The estimators should be kept aware of when the equipment will be available. They can concentrate on projects that can effectively utilize the equipment fleets and bid at the right time. Often the fleet will be augmented with outside rental equipment because the owned units are not available or cannot be used often enough to justify ownership.

Management must support the estimating by deciding what equipment rental rates to apply to the work. If work is slow, internal equipment rental rates may be lowered to keep the machines busy. If work is plentiful, management may wish to raise the equipment rates to pay the equipment off faster, or to afford to buy additional equipment. The cost of maintaining equipment will remain static. When OPEC or the energy companies are creating shortages the price of fuel may change dramatically and quickly. An earthwork fleet can easily use 50,000 gallons of fuel per month. A ten-cent rise in price adds $5,000 to the cost. When bidding fuel intensive work always be aware of the potential fuel price risk.

Project size is a function of the business plan and the capability of the contractor. Smaller contractors dominate most of the market with project prices below $1,000,000. These smaller contractors have low overhead costs. Medium sized contractors generally dominate the project market between $1,000,000 and $10,000,000. Large contractors look for bigger work. The goal of an individual contractor or district is often driven by the annual overhead cost. If the typical contractor overhead is $2,000,000 and the average markup fee is 10% of the estimated project cost; the contractor must have at least $20,000,000 of good work just to break even. The goal may be to do $50,000,000 to $100,000,000 per year to assure a good profit. Since the statistical odds of being the low bidder on any given bid is about 10%, the contractor must bid about $750,000,000 of work a year. If the contractor is going after only $1,000,000 jobs, then 3 bids must be turned in each and every working day. Even if the contractor could turn in that many bids, the management of 75 jobs per year gets to be unwieldy. Realistically, it is reasonable to bid 30 to 50 projects per year in the range of $5,000,000 to $50,000,000. It is tempting at times to go after some very big jobs, but realize you may be risking the entire company if the project turns sour. If there are major claims that donít get settled for several years, what sustains the company until the lawsuit is settled? Often there is a middle range of job sizes that is too big for the smaller local contractors and too small to attract contractors from outside of the local region.

Crew availability can be a major issue. If an area is booming, fully staffing projects with expert journey craft persons can be all but impossible. The decision must be made how to handle the shortfall. You can pass on the bid. You can bid with higher than average wages. You can also bid with lower than normal productivity. Or you can add a contingency to the bid or bid with a higher markup. You can also do none of the above and hope for the best, which usually means a losing job.

Bidding work aggressively when your supervision is not available is taking a major risk. All projects should be bid with the key field manager in mind. For one thing, each manager has areas of expertise and weakness in other types of work. If you must bid using someone other than your first choice, that fact should be factored into the bid. When ever possible, you should try to keep a steady flow of work for key supervisors and crews in their arena of expertise.

Try to estimate the number of bidders. Obviously, the fewer bidders the better the odds of being the low bidder. Some jobs attract more bidders than others. The projectís size, type, location, owner, engineer, construction manager and timing all play a role in the number of bidders that are attracted. Try to spot projects that tend to have fewer bidders. This will increase your odds of tendering a successful proposal, but also will allow you to bid higher profit margins. Keep records of the bid results in a table and sort them using any criteria that appear to set a trend. In one area we worked, the time of year was a major factor. May, June, August, September and October were the best months to bid. There were fewer bidders per project and the prices were higher. Our theory was that in the winter and spring contractors were aggressively building up backlog. In the fall they were too busy running their work to bid aggressively. When an owner consistently attracts fewer bids, there probably is a good reason. Such an owner may be very difficult to work for.

On any given project to bid there is a select list of only a few contractors that you need to be concerned about. These are the ones with the expertise, supervision, crews, and equipment available to efficiently build the work. If they are busy with other work, it usually means you have a much better chance of winning the work with a good profit margin. Sometimes a contractor will decide to dominate a market and chase out competition. Let them price themselves into bankruptcy. You donít need to go down the sewer with them. There is always good work to bid if you are patient.

Keep an eye on your competition. Watch how they do the work. Often you will spot a good idea, or even be shown how not to do a task. Contractors are innovative and are always finding more efficient ways to perform their work. No new procedure will stay secret very long in the construction business. Contractors spy on each other too much. You must stay up with the times, inventing better solutions and borrowing others. Keep track of your competitionís workload and progress as much as possible.

Also, talk to your competitors. You can find out all sorts of good information. They will tell you who is good to work for, who isnít. They will pass on almost any information they have on other contractors. All you have to do is enter into a conversation and ask questions. They will ask the same of you. Be very careful about expressing opinions about named individuals. You will be very surprised as to who knows whom.

Wage rate rules can be a determining factor. If the project requires federal prevailing wages, there is little difference between the union and an open-shop contractor. The open-shop contractor will have a big advantage in labor costs when the non-union lower wage and benefit packages can be effectively applied. Many major metropolitan have a strong union presence that can make it difficult for open-shop contractor to do work in those metropolitan areas. Out side of those areas and in right-to-work states, the open-shop has the advantage. Work rules must be considered. In union environments each union has a defined craft. Laborers are not allowed to do carpentry work and visa versa. Operators may require an oiler as well as an operator assigned to each crane. These work rules will often cause inefficient utilization of the project crews. On the other hand, the union journey individuals are usually more skilled and better trained than the average nonunion crafts.

In one area we worked, the time of year was a major factor. May, June, August, September and October were the best months to bid. There were fewer bidders per project and the prices were higher. Our theory was that in the winter and spring contractors were aggressively building up backlog. In the summer and fall they were too busy running their work to bid aggressively.

Once the project has been selected to bid, it first step is to decide the estimating team and the amount of time needed to determine an estimated cost and schedule. This may be one person for only a few hours for a small job or a large team for months on a massive project. As soon as possible a clear and absolute assignment of responsibilities should be made. This can be made by area or by specification section. For instance, one person may be assigned to cost all the mechanical piping, specification section 15000. The caution here is that the yard piping involves trenching, spec 2000, and concrete encasement, spec 3000. Make a clear assignment as to who is responsible for the trench and encasement. If no one is specifically assigned the overlaps, either there will be a double up of effort or a missed scope of work.

Make sure that the various team members coordinate their efforts. The person estimating the concrete may assume wall sleeves for pipe penetrations are flush and estimate high form productivity, while the piping estimator uses a flanged insert that penetrates the form or the concrete will be built around the pipe. These conflicting assumptions are very costly if not resolved early in the estimating process.

A criteria meeting should be held as early as possible in the bidding process to resolve overlaps and estimating assumptions. Construction methods should be established, such as form systems and productivity. The scope of work that is to be subcontracted out should be clearly defined. For instance the earthmoving may be massive and it may be better to involve a grading subcontractor or the landscaping may be incidental and no subcontractor coverage can be expected.

The estimating team should be continually monitored for progress and thoroughness. If one person becomes overwhelmed, make sure help is given as soon as possible. If large gaps in the estimate are not covered in a timely manner, the choice is to throw money at the gaps and hope for the best or worse the gaps will not be discovered until after the bid. Then you have another choice, throw in the bid, or eat the loss.

A few days before the bid a final estimate review meeting should take place. The meeting should include the estimators and management. This should be a detailed and through process where each estimator explains exactly the reasoning for the costs generated and the scope included. The review will establish the confidence level of management that the costs estimated are reasonable. You can expect some disagreement and changes to be ordered, or alternate methods to be explored. Management will use the review as one of the basis to set the bid fee.

Every major bid involves partners that help you win a low bid. These partners are the subcontractors and suppliers. If these people have trust in your company they will want to give you their best price and service. They will learn quickly who shops their price, who is slow pay, who lies to mislead, and who will trump up excuses for back charges. They will give first priority to those that have treated them fairly and ethically. The prime contractors who consistently abuse the trust of their subcontractors and suppliers will soon find it hard to get competitive pricing and quality service.

Bid closing day can be very hectic. All the various subcontractor and suppliers will be sending in their pricing and then their revised prices. You must be ready for this event. You will not have time to review every quote in detail, dig out the estimate plug price, compare with other quotes and make an adjustment to the bid price unless you are fully prepared. Most major bidding errors occur on bid day. When people are rushed and confused, they tend to make math and scope comparison mistakes. First, learn the area industry practice of subcontractor bid scopes and set up your estimate to accommodate the practice. At least the day before break out the estimate plug prices and set up estimated plug price comparison sheets. Make assignments as to who will compare and adjust each trade and supplier scope. This can easily be computerized so the chance of math error is reduced. Be sure everyone understands how taxes and bonds are to be handled. Check to make sure everyone involved is making proper comparisons and understands exactly what they are supposed to be doing during the bid day. Make sure that there are no overlaps or gaps in the assignments.

Usually the major subcontractors and suppliers will fax scope letters a day or so before the bid. Set up the adjustment sheets and assignments to reflect the sub-bid scopes. Often there will be variations in scope between subcontractors and suppliers bidding on the same basic area. For instance, one fabricated metal supplier will offer to furnish and install structural steel as well as hatches, handrail and gratings. Another may only furnish structural steel, hatches and gratings, excluding handrail. In order to make a reasonable comparison between the two suppliers, a price for furnishing hatches and a steel erection price must be estimated or an erection subcontract price must be obtained and added to the subcontractor with the lessor scope. Then the two scopes can be compared and the better price and or scope can then compared to the estimate plug cost. The difference is then added or deducted to the bid cost.

A common bid day mistakes include making the same change twice, either adding or deducting too much money. Another common mistake is taking the change in cost the wrong way, such as taking a deduction as an increase in cost. Transposing numbers is easy to do when you are in a hurry. Usually several changes will be made in the last few minutes by subcontractors and suppliers. This last minute flurry of activity is often where major mistakes are made. Chaos and panic can easily reign. Some contractors will only note changes and not try to adjust the bid price in the last few minutes proceeding the bid time. The reason for this is the probability that making a mistake is far greater than the bid price change will change the bid position to first. A good bid is one that leaves less than 2% on the table. Usually a scramble to compare minor sub and supplier prices in the last few minutes is a dangerous waste of time. Reserve the last few minutes to getting the bid package responsive and one or two critical subcontractors.

Getting the bid proposal package right is critical. All the pricing needs to be entered correctly. If the price is not written correctly, you may have to withdraw your bid or absorb the loss. If the signatures or the required documentation is not properly included or executed, there is a good chance your bid will be declared non responsive and thrown out. All that means is a lot of valuable effort and money has been wasted for no gain. Every owner has a unique proposal form and will require varying amount of detail and proposal requirements. Pricing can be an extensive unit price list (I have seen nearly 1,000 bid items) or a single lump sum. The price may include alternate add or deduct prices to the base proposal. Find out how the low bid is to be determined; it may or may not include the alternate menu.

Additional requirements often include an officer of the company signature, bid bond, subcontractor list, materials list, project management, equipment, schedule and a non-collusion affidavit. It may also require a disadvantaged business participation goal and a good faith effort. Often State law prevents bid named subcontractors from being substituted, deleted or added after the bid time. If you have named the wrong subcontractor or supplier in your bid, you are usually stuck. This law is designed to prevent bid shopping after bid opening. Many good bids have been tossed out because of minor errors.

One very common error is failure to turn the bid in on time. Usually the bid is accepted up to a certain time, such as 2:00 PM a certain day. An effort to turn a bid in at 2:00:01 PM will usually be rejected and the bid not even opened. If it is opened and low, there will be protest from the other bidders. This can result in a court injunction or a rebid of the work. Sometimes the owner uses a time stamp that may be a little fast or slow. The courts commonly accept the stamp as "local" time and it is the responsibility of the contractor to know what is the "local" time. Several times I have seen someone try to carry a fully executed proposal package from the home office and screech into the bid closing parking lot about a minute too late.

It is recommended that a bid closing person be sent to the site of the bidding address at least an hour early. This person carries the bid documents pre-executed except for items to be filled in at the last few minutes. Equip the person with a secure cell phone (I have witnessed electronic eaves dropping). He can relay the exact official closing time and other useful tidbit of information, such as which other bidders are present. Sometimes suppliers will show up at the bid closing and shop each otherís pricing until the last minute. Be sure the person carrying the bid is well versed in what parts need to be filled out and what procedures are necessary. Does the carrier take last minute price cuts in the parking lot or ignore them. Make sure there is a clear understanding of the division of responsibilities among all parties involved with the bid closing.

Bid shopping is common practice. Some suppliers and subcontractors will attempt to discover their competitorís prices. Some prime contractors will try to shave costs by asking for cuts in prices or informing the subcontractor he must beat a certain price. Most subcontractors learn to trust these prime contractors as far as they can throw a D10 tractor single-handed. If the subcontractor agrees to a price cut, he usually immediately passes the new price to all the prime contractors. I have had many a sub tell me, "Yeah, I know Joe Blow canít be trusted, but so does everyone else. I bid 25% higher to him and let him cheat me out of 10% after I complain and threaten, I laugh all the way to the bank!"

I have never engaged in bid shopping and refuse to allow the bid team I work with to shop bids. The subs and suppliers know they can trust my word. Because of that trust we often get the best price early on bid day. Commonly a sub or supplier will ask: "How do I look?" or "What price do I have to beat?" This can be an innocent question or a test to see if you will shop prices. I generally answer that I will tell them only after bid time where they stand. If they persist, I say: "If I give out other prices to you then I have to give your price out to everyone else, I donít do business that way." Many times a sub will give us a special price trying to help us win the bid because they want to work with us. On those occasions, the sub usually wants us to keep their price confidential. I always respect that request and refuse to relay the price to anyone outside the need to know. The other subcontractors wonder and next time they will usually work hard to give us their best price. Also, try to protect your subs from obvious errors.

Many times, I have had subs give prices that are substantially below the rest of the pack and it is obviously a mistake. There is no point in trying to build a project where a major sub is going bankrupt or does not have an incentive to give good service. It is counterproductive to force a subcontractor to take a losing proposition, as it will usually cost a large chunk of your profit and time to cope with his unwillingness to cooperate to complete the project. I always call the mistaken sub and tell him he looks too low to be to safe. I will not give exact numbers, but will ask the sub to recheck his price because it appears to be much too low. Usually, they thank me and raise their price to a reasonable level. Sometimes in gratitude, they will give us a preferential price that helps win the bid.

The subcontractors and suppliers are an integral part of the construction team. Without them no bids can be won or projects built. They should be treated with the same ethical business standards you want for yourself. Always be honest and forthright with them. Accommodate them when you can, but insist on quality and timely execution of their work. Communicate with them during the estimating stage to establish scope of work, schedule, and offer accommodations that will allow the subs and suppliers to give you their most competitive price. For instance, a masonry subcontractor may be stretched too thin if he must include the purchase of the block in his price. You may offer to purchase the block separately to ease the subcontractorís burden.

Some subcontractors and suppliers habitually wait literally to the last minute to give out their price. I try to discourage that practice. When they call, I often refuse to take their price and say: "You are too late, we have already closed the bid. Goodbye." I have also said: "Everyone else got their bid to me early, I donít need your price." Usually one such dismissive statement is enough; thereafter they get their prices to me in a timely fashion.

Another trick some subs will try is to lay all the risk of their work on the prime contractor in order to low-ball their price. We generally ignore such a proposal and tell the sub that unless he is willing to assume the risk of his work he can forget bidding to us.

Bidding is an art form by itself and should be distinguished from the estimate. The bid is the price to the owner or prime contractor. The estimate is the cost to do the work. The estimates should be kept as consistent as possible, using established productions, costs and uniform estimating procedures. If the project lends itself to an innovative technique, make a comparison to a more conventional solution. Sometimes several viable alternatives should be priced and scheduled.

Establishing the bid price is process of weighing all the various market factors and deciding what fee can be put on the work and just barely become the low bidder. Often bids are tendered just to test a new market or area without any real hope of being low bidder. Whenever there is time, it is wise to find out what the various markets are doing where and when. Often contractors chase a declining market to take work although there is little or no hope of making a profit.

I have often seen trends in phased work such as canals or highways where the work is to be a series of similar bid packages let over a period of time. Nearly every interested contractor reacts as "Wow, if we can buy the first contract we will have a lock on the other packages!" Yeah, right. So one of the herd low-balls the price just to get a foot in the door. As soon as the bid results are available to all, the other contractors analyze the result and convince themselves that they can bid even lower. This process of diminishing returns often goes on for three or four phases until all the original contractors realize they have big losers on their hands. Only after this farce plays out will the bid pricing become reasonable. Often the original bidders will withdraw from the market, having suffered major financial losses. That may be a good time to step up and tender a low and profitable bid.

Another trend we have noticed is when the right bid price calculates to just over a large round number, such as $10,050,000, someone will bid just under $10,000,000, like $9,950,000. Keep this in mind as it may help win a bid if you can reduce your bid to $9,900,000 and still make a reasonable profit.

The estimating and bidding process is complex and mostly subjective. Nearly everyone has a different opinion of how the work should be built, priced, and managed. We see that in every bid where the prices are scattered over a wide range. The process is challenging, demanding, hectic, exciting, disappointing, and rewarding. Estimators often work 60 to 80 hour weeks to meet deadlines. Bid days are often frantic exercises that drain the participants. We are often deeply disappointed when we are not low the bidder. When we are successful we are euphoric, its Miller time! I do not know of a more intense and sustaining activity. The successful bidder must be knowledgeable over a wide range of subjects, must be competitive, even wily and street smart.

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DISCLAIMER: The materials contained in the online course are not intended as a representation or warranty on the part of or any other person/organization named herein. The materials are for general information only. They are not a substitute for competent professional advice. Application of this information to a specific project should be reviewed by a registered professional engineer. Anyone making use of the information set forth herein does so at their own risk and assumes any and all resulting liability arising therefrom.