Construction Bids: Mastering Construction Bidding

Construction projects are won through the construction bidding process. In a nutshell, construction bidding involves a project owner who wants to build a construction project and contractors who can provide construction services.

Managing the construction bidding process and expanding your customer base without breaking the bottom line is a delicate art. Whether you’re a seasoned construction professional or new to the business, you can always learn more about submitting a construction bid!

What Is Construction Bidding?

Construction bidding describes the process of bid submission and approval between a construction company and its customer, but it can also describe how subcontractors get work from the contractor once a job has been taken. Construction bidding can also be referred to as the construction tender process.

A construction bid lives or dies on accuracy. Using blueprints, construction plans and material quantity takeoffs, the bidder must estimate a realistic cost (including a profit margin) to make the job viable.

What Is a Construction Bid?

A construction bid is part of the process of submitting a proposal for a construction project. The construction bid shows potential customers that your organization is the right contractor for the job—meaning you’ll take on building and/or managing their building or structure.

To have an accurate forecast and competitive bid, you need tools to help estimate costs, time and other resources. ProjectManager is project management software that offers planning, scheduling and tracking tools to ensure you keep to your bid during construction management. Use our unlimited file storage to manage your construction bidding documents. Once your bid wins, you can start planning your construction projects with our Gantt charts, project calendars, kanban boards and more. Get started for free.

ProjectManager's Gantt chart for construction — After you win your bid, track your project with powerful scheduling software. Learn more!

Construction bids are often confused with similar construction documents like construction proposals, construction quotes and construction estimates. Here are the main differences between them to avoid confusion.

Construction Bids vs. Construction Proposals

While construction bids and construction proposals are very similar, there’s one key difference between them. Construction bids are used when the conditions of a construction project are well-defined such as its scope of work, drawings, specifications and documentation.

In these cases, the owner is simply looking for a general contractor with the capabilities to execute the work within the timeline and budget that’s been outlined in a construction plan by architects, engineers and the construction project management team.

A construction proposal, on the other hand, is used when some project details are unknown or left open so that contractors can create a proposal that they think best serves the needs of the project owner. The two documents that project owners might use to gather construction bids and proposals are an invitation for bid (IFB) or a request for proposal (RFP).

Construction Bids vs. Construction Quotes

A construction quote is a document that shows the estimated costs for labor or materials for completing a construction project, a portion of it or a specific task. One unique characteristic of construction quotes is that they’re only valid for a limited amount of time due to the ever-changing price of commodity resources such as lumber and fluctuating labor costs.

Construction quotes can be used in many ways. For example, a construction project owner might request a quote from a construction contractor, or a contractor may ask for a quote to find out the cost of materials from its supplier.

Construction Bids vs. Construction Estimates

While a bid is an estimate, they aren’t the same thing. There’s no hard and fast rule, but most of the time when a contractor is talking about an estimate, they’re referring to the costs of materials and labor for their project. The construction bid is what’s sent to the customer as the final, fixed price for the entire job.

Regardless of the difference, estimates need to be accurate so no money is lost if the bid is accepted.

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Construction Proposal Template

Use this free Construction Proposal Template for Word to manage your projects better.

What Should Be Included In a Construction Bid?

There’s no one-size-fits-all style to a construction bid, however, certain elements are required when submitting one. When making a construction bid, be sure to include the following:

Contact Information: A bid will be discarded if there’s no contact information for the construction company that submits it or the potential customer to whom it’s addressed. The basic information is name, address, phone and/or email and a place for signatures, either to acknowledge receipt or agreement on the terms. Also, include the location of the project.
Scope: Next comes a project overview before getting into pricing details. Here, outline the scope of the project, the services provided, the schedule for the work, necessary materials and other features required to get the job done. This section should be detailed and include customer expectations, any subcontractors that’ll be hired, removal of trash, visitor rules, safety protocols and more.
Existing Conditions: Describe the job site as it currently is after conducting a preliminary site assessment. List the conditions of the site as it stands now, what action will be taken to respond to these conditions and who will be responsible for what. Also, note how conditions discovered after the start of the project will be dealt with and who will decide on the scope and cost of any remediation.
Cost: Estimate the price for the entire project here. Break down the total cost into subsections, including labor and materials. Add a section on costs if the project goes over the scope to manage the customer’s expectations.
Terms of Payment: Detail how you’ll get paid for the job if selected by the customer. Most won’t pay the total cost upfront, so decide what down payment you require and the frequency of installments for the balance. These payments can be tied to various milestones in the project, which should be identified.
Relevant Documentation: Because of the size of most construction projects, it’s critical to the bid to identify any sub-projects and an owner who’s responsible for them. This will help the customer know who’s responsible for what when the project begins. It also defines who has legal authority when it comes to signing documents.
Schedule: The work schedule will be detailed here, from the start to the end and all milestones in between. It’s a good idea to determine the extent to which you’re liable for any events that cause delays in the execution of the project. Those events could be inclement weather, delayed permits, etc. Block out the calendar, noting working days, vacation, supply lead time, zoning approval and other third-party processes that can impact the timeline.

The specific contents of a construction bid change from one project to another, depending on the requirements of the project owner who uses a request for proposal (RFP) to specify what they’d like included in the proposal. You can use our free RFP and construction bid templates to make sure your project proposal has everything you need.

Request for Proposal (RFP) Template

This free request for proposal template allows you to gather all the relevant information you’ll need from the contractors who are interested in bidding on your project. The more details you include in your RFP template, the more clearly bidders will be able to understand what your project expectations are, which will help you avoid misunderstandings later when writing construction contracts.

Construction Bid Template

This construction proposal template allows you to gather all the elements you’ll need to prepare a construction bid or proposal, such as the scope of work, costs, work schedule and timeline for your project. It’s easy to use and can help you streamline the construction tender process whether you’re a construction firm, general contractor or subcontractor.

We offer a variety of free construction project management templates for Excel you can use to manage all aspects of your construction project.

Construction Bidding Process

When involved in the construction bidding process, you should ideally have accurate estimates and a low bid. Many customers only look at the bottom line and go with the lowest bidder. However, don’t bid yourself out of business.

Keeping that in mind, it’s best to follow these steps in the construction bidding process.

Solicitation: Referred to as a request for proposal (RFP), this is when an owner puts out a request for bids for a project they want to execute. This means asking companies to bid with all of the materials listed in the previous section.
Subcontract: The general contractor will solicit bids from subcontractors for parts of the project, though this can often wait until the contractor has won the bid.
Submission: The proposal will have a deadline. Once the contractor has detailed the information required by the customer, they submit the bid before or on the deadline.
Selection: There’s a period when the customer goes through all the submitted bids. They’ll choose the one that best fits their needs, which will be the winner of the bid.
Contract: Because of the details of the bid, it can be used by both parties as a legally binding contract once agreed upon. However, it’s more likely the customer and the winner of the bid will finalize the terms and conditions sketched out in the bid and create a legal contractual agreement they both sign.
Project Begins: After all of this, the project will begin and follow the agreed-upon schedule and pricing of the bid.

Types of Construction Bidding

There are different types of construction bidding, also known as construction tenders which allow project owners to specify what type of contractors and subcontractors may send bids and other guidelines for their bidding process. There are four main types of tender in construction: open, negotiated, selective and serial tendering. Here’s a quick overview.

Open Tendering

This type of construction tender allows any contractor to apply for a construction project. The main benefit of using an open tender process for your project is that it allows you to gather many construction bids, which helps you find the best contractor for your projects, whether you’re looking for a low-cost bid, an experienced contractor or the best price-quality ratio.

Open tendering is the preferred method for construction government projects because it promotes fair competition, ensures transparency and helps decision-makers select the bid that best fits the needs of their community.

In the US, city and state governments are constantly accepting bids for a variety of public construction projects, which are often posted on their websites or authorized construction bidding websites that show available open tenders and the information you’ll need to send your bids.

Negotiated Tendering

This is a special type of tender that’s used whenever the project owner has decided he’d like to proceed with a particular contractor and proceeds to only receive a bid from him. From there, the owner will continue to negotiate its price, terms and specifications.

Selective Tendering

A selective construction tender allows a small group of contractors to apply for a construction bidding process, which combines the simplicity of negotiated tendering, but widens its scope so you can get different types of bids and have a better understanding of what your project might cost.

Serial Tendering

Serial tendering consists of opening a construction bidding process for multiple related projects that are expected to be completed in the future, such as when a construction firm wants to build a series of apartment complexes with similar characteristics.

The main benefit of this type of tender is that it allows both the construction owner and contractor to take advantage of economies of scale for resources such as materials and equipment and it simplifies the construction bidding process.

How to Bid On Construction Jobs

Before we dive into the steps of the construction bidding process, it’s important to know the key elements of construction bidding. Whether you’re a project owner or a contractor, you’ll need to know about these elements.

There are several types of project delivery and procurement methods, as well as different types of construction contracts from which you can choose. Each has pros and cons depending on the specific requirements of your project, so you’ll need to evaluate which of them works best for you. The following are the most popular methods and contracts for your construction bidding process.

1. Define Your Project Delivery Method

A project delivery method defines the responsibilities and risks assumed by the project owner, construction managers and contractors when starting a construction project.

Design Bid Build: This project delivery method consists of a design phase where a designer creates construction documents. Then those documents are released to contractors who will estimate the project costs and present a bid to the project owner. The project owner then will evaluate bids and select a contractor.
Design-Build: An alternative method to design-bid-build in which the contractor assumes responsibility for the design and construction of the project.
Construction Manager at Risk: In the construction manager at risk method, the construction manager commits to delivering the construction project at a guaranteed maximum price (GMP).

2. Select a Construction Procurement Method

Here’s a brief explanation of the main responsibilities of the project owner and contractors under the two most popular construction procurement methods.

General Contracting: The project owner hires a general contractor who will build the construction project. The contractor executes the construction work and might hire subcontractors to cover certain areas.
Construction Management: The project owner hires multiple subcontractors for each type of construction work such as plumbing, electrical work or masonry. This requires a huge effort from the owner and is suggested for bigger construction firms.

3. Choose a Contract Model

The project owner and contractor must agree on a contract model to establish a legally binding agreement for the execution of the construction project. Here are some examples.

Cost Plus Fee Contract: A cost plus fee contract requires contractors to report costs as they occur rather than deducting them from a budget. Then the project owner pays for the accumulated costs plus a fixed fee that’s agreed with the contractor before executing the project.
Guaranteed Maximum Price (GMP) Contract: In a GMP contract, the contractor defines a guaranteed maximum price for the project owner. The contractor must commit to this price even at his own expense if costs exceed his construction estimates.
Time and Materials Contract: In a time and materials contract (T&M), the project owner pays an hourly rate for labor and purchases materials as needed by the contractor. It’s a good alternative when the project scope is uncertain and when close supervision is needed.

Construction Bidding Best Practices

The construction bidding process is highly competitive and there can be dozens of businesses vying for one job. How do you differentiate yourself and win the work without losing money in the process?

Use Construction Bidding Websites

Various websites show construction tenders for a particular area. For example, ConstructConnect shows a wide variety of construction tenders located in the state of Texas.

Some organizations post their construction tenders such as the Texas Park and Wildlife, but some sites act as intermediaries between private construction owners, contractors and subcontractors.

Know the Competition

It helps to know who else is bidding on the job. Know the competitors and what they’re doing. It’s helpful to network or join building trade groups to stay updated on what others in the construction industry are doing. When there’s a proposal, it doesn’t hurt to be the first one to bid, so keep an eye on marketplaces where bids are posted.

Be Judicious With Your Bidding

Although it helps to be the first to bid, it’s not ideal to bid on every job with a proposal. Spend time making the best proposal for the job while also ensuring it fits what your organization can accomplish at a profit. Cultivate a niche and look for work that will result in repeat business.

Build Relationships

Business is better executed on the foundation of a strong relationship, so strive to build relationships with people who are in a position to make decisions on awarding work to your company. Identify the individuals responsible for pulling the trigger on new work and develop trust with them.

Accentuate Your Strengths

When in the construction bidding process, don’t be bashful. Promote the qualities your business has that make it the right fit for the customer. Show off the team and be sure to let them know you have the experience necessary to do the job right. Sometimes value is more important than the price tag.

Take Your Time

Take your time when making the bid. Make sure to do the research and explain how you can give them the best return on their investment. If you know anyone who has worked for the customer previously, talk to them to get an idea of what the customer wants.

More Construction Project Management Templates

Construction projects involve creating a variety of documents which help the project management team have a better understanding and control over all the different areas of the project.

Making all these documents from scratch can not only be challenging but also time-consuming, which is why we’ve created dozens of free project management templates for Excel and Word you can use for construction. Here are some of them.

Construction Estimate Template

This free construction estimate template for Excel allows you to list down all your project costs such as materials, labor, equipment rental or any other cost categories you’d like to include.

Construction Schedule Template

This construction schedule template allows you to use an interactive Gantt chart to map out your project tasks on a timeline, identify dependencies, schedule resources, find the critical path of your project and much more.

ProjectManager & Construction Bids

ProjectManager is award-winning software used to organize plans that are productive and easy to share. Building your bid is akin to starting a project; you need to define a budget, manage resources, create a schedule and show it to your potential customer in the hopes that they accept your bid.

Manage All Your Construction Bids In One Place

ProjectManager’s kanban board is the perfect tool to track all the construction bids your organization is either evaluating or applying for. A kanban board has columns that allow you to group your construction bids by their status, such as sent, in review and approved. ProjectManager’s kanban boards allow you to communicate with your team members in real time and attach files with unlimited storage.

ProjectManager's kanban board showing construction bids

Lay Out Your Project on Gantt Charts

When you’ve done the due diligence and are ready to create a schedule, our online Gantt chart is there to organize all your tasks. Add a start and end date to each task and they populate a visual timeline that shows you the entire project on one page.

Create Dependencies and Milestones

At this point, you can link all four types of task dependencies to avoid bottlenecks that can delay the execution phase of the project. Plus, set milestones as diamond icons on the timeline to mark when one phase ends and another begins. Milestones can also be used to mark any important dates you don’t want to slip through the cracks during the heat of the project.

dependencies and milestones on a Gantt chart

Unlimited File Storage for Documentation

Construction projects are complicated and involve lots of documentation. Our online tool has unlimited file storage that acts as a central hub for your project documents, making it easy to find when you need it. No more messy desks or cluttered email folders to search through. You can share the project with your customer and, if they accept your bid, they’ll be notified by email and in-app alerts on the project’s progress.