In the ninth part of our Bidding Insights series brought to you by Construction Data Company (www.cdcnews.com) in cooperation with the Stevens Construction Institute, (www.stevensci.com), we discuss a few odds and ends of the bidding process. There are other factors and considerations in the bidding process that firms should consider.
First is determining whether or not to create a small projects division. By utilizing overhead sizing, firms may be left with the question of whether or not they are competitive against a smaller contractor on smaller projects. Since small projects don’t require the higher overhead of larger projects, a firm may consider starting a small projects or special projects division. In order to do so successfully, the firm must establish a division that exhibits the following characteristics:
• A manager with high energy and low maintenance. The person must be independent and able to function autonomously.
• An office that is austere. No frills = low overhead.
• The paperwork is chaotic, but the manager knows everything about it.
Adding a small projects division can be a profitable and successful venture for a firm, assuming overhead can be kept at a bare minimum.
Second is bid conditioning. Bid conditioning could be considered a best practice. It is not an option on public work, but it does present an opportunity in the private sector. A firm should think about getting into the practice of conditioning their bids by adding the following:
• Plan Pages
• Date of Specifications
• Work Exclusions
• A Schedule of Values
• Certificate(s) of Insurance
• An Exclusion of Depositions in Any Mediation or Arbitration Process
Third is the critical consideration of when should cost savings be re-flected in bids. It is recommended that a firm’s cost savings should not immediately result in lower bids. Firms should keep their bids at the same market level which will assist the firm in overall wealth building. Firms should start bidding lower when their competitors start bidding lower and when the firm is losing their normal share of the work.
Fourth is to beware of questionable procurement procedures to win bids. The biggest concern in this area is Electronic Reverse Auction Bidding (ERAB). Owners are using this process via the Internet to drive down prices. Since ERAB involves a bid period as opposed to a single submission, this method of procurement takes all of the pressures to be the lowest bidder and multiplies them by adding the increased pressure of seeing other bids, despite the fact that they’re anonymous. Some firms may feel pressured to alter their bids on the spot and file a revised bid as they see the bid prices spiral downwards. This is a no-win situation for the firm, even if it wins the bid.