As a subcontractor, the construction bidding process can be daunting. With the right strategy, however, most construction professionals are able to streamline things and achieve respectable bid-hit ratios.
Keep reading for some guidance regarding how to bid on a job as a subcontractor.
How to bid on a job as a subcontractor: 10 key tips
1. Know your metrics
At every stage in the subcontractor bidding process, it’s important that you be aware of success-related metrics such as the following.
Your company’s bid-hit ratio
This metric represents the percentage of applications that lead to rewarded contracts. Bid-hit ratios vary depending on the industry and type of work.
According to Engineering News-Record, subcontractors targeting public projects typically file between seven and 11 bids for every award. If your company’s bid-hit ratio is substantially worse than the market average, something’s clearly wrong with your approach.
Most general contractors have specific qualifications subcontractors must meet before they’re even considered for a job. These qualifications may include your company’s size, capacity, or a certain number of similar projects completed in the past.
It virtually never makes sense to apply for a job unless you meet the qualifications. General contractors are often inundated with countless bids, which is why some even limit their bid solicitation to pre-selected parties. This is part of good resource planning.
Labor-related data points like your company’s workforce utilization rate are very useful during the subcontractor bidding process.
Notably, they’ll help you gauge your workforce’s current capacity.
For example, let’s say your workforce utilization rate is hovering near 100%.
This generally isn’t ideal as it means staff is spending virtually all of their time putting out fires with little attention to human capital planning activities like training. In this scenario, then, you’d want to think very carefully before bidding on labor-intensive projects that might stretch your workforce even thinner.
Good construction resource management software makes this analysis simple.
2. Understand the target contract’s needs inside and out
Avoid the mistake of bidding on jobs you don’t understand, which can produce numerous undesirable outcomes. For example, you may significantly underestimate the costs, which – as we discussed in this article – can produce devastating project cost overruns.
Figure out exactly what the client wants. While you can generally glean lots of information from the client’s bid documents, don’t be afraid to ask follow-up questions, which also shows you’re thinking carefully about the project’s requirements.
Depending on the project’s size, it often even makes sense to conduct a site walkthrough during which you can make note of potential issues.
3. Determine the most accurate estimate of your expenses possible
It’s possible to lose big on subcontractor bids even when you receive the award. How? By delivering a low quote, which often happens due to inaccurate estimates.
As discussed in this article, there are many ways to ensure the accuracy of your project estimates, including:
- carefully tracking your resource usage and associated costs
- enlisting an expert’s help if you’re bidding on a project of unfamiliar scope
- calculating labor costs meticulously
- being aware of any specialty work involved in the project’s scope
- identifying risk factors the cost of mitigating them
These points will all influence your profit margins and are therefore essential to keep in mind during the subcontractor bidding process.
Good subcontractor estimating software is crucial here. Read this post for our roundup of seven solid options.
4. Bid selectively
If you follow these tips sequentially, you should by this point have a solid understanding of whether your company has enough capacity for the contract in question.
Subcontractor bidding should be a selective process. Smart subcontractors avoid allocating resources to bids on contracts they have no intention of fulfilling. When responding to an undesirable RFP, for example, subcontractors often submit gracefully-written no-bid letters informing prospective clients not to expect any further response.
This can save you considerable time and money. After all, the estimating and bidding processes are not cheap. Time spent responding to undesirable requests is time not spent bidding on more appropriate ones.
5. Format your bid submission carefully
It’s not uncommon for general contractors to request bids in a specific format. Failing to follow that format may result in your bid being rejected automatically.
Check out this article for some instructions on crafting your bid proposal. For situations in which clients don’t have a preference, we’ve also included a bid template you can follow.
The right format will accomplish many things. For starters, it will help clients easily determine who to follow up with regarding your bid. It should also provide information regarding how you arrived at that bid, which will make it more credible and likely to result in a contract award.
6. Tailor the language in your bid to the client’s preferences
A little personalization can go a long way during the subcontractor bidding process. Check out this blog for more tips on writing an executive summary.
7. Include relevant references
Subcontractors – especially certain types of specialty providers – aren’t always household names, even among general contractors with extensive industry knowledge. That’s where references often come in handy, helping subcontractors prove their suitability.
You may even want to go one step further and include photographs of past projects if that would be relevant to the type of work you do.
The bottom line? Help prospective clients understand why they should choose your bid by highlighting past successes.
8. If possible, deliver your bid as part of a presentation
The right presentation can make negotiations regarding the details of your bid so much easier. If possible, schedule a call or meeting with your prospective client to present and discuss the bid with them.
This makes your bid so much more dynamic by allowing clients to give immediate feedback and ask questions, which helps them retain a sense of ownership and build rapport.
It also gives you a chance to draw their attention towards key points in the bid if you fear they might get lost in the minutiae.
9. Schedule a follow-up
It’s very easy for individual subcontractor bids to get lost in the mix. On large projects, general contractors often receive countless offers and other correspondence.
Setting expectations for the project’s next steps can help you avoid being forgotten about by swamped prospective clients. This is often easiest to set up when you deliver your bid in person or via a call since the prospective client will need to respond on the spot.
If such correspondence is impossible, however, consider including your request for a follow-up (with any relevant details, such as date and time) in your bid’s cover letter.
10. Make note of what works and what doesn’t
As a subcontractor, it’s difficult – if not impossible – to achieve a 1:1 bid-hit ratio. It just doesn’t happen unless you’re a unique provider in a very small market.
So while perfection isn’t the goal, make note of trends in your bidding results. For example, are your bids for certain types of projects consistently rejected? Prospective clients may not be convinced you’re capable of handling that work, which is good to make note of and address in future bids.
This is just one example of a trend you might want to consider when evaluating your bidding strategy.
We hope this guide has rounded out your knowledge regarding how to bid on a job as a subcontractor. For more information about construction management-related best practices, visit our blog.