In construction, a request for proposal (RFP) signals a new business opportunity. Keep reading to learn about the various types of requests and how construction companies respond to them.
What is a request for proposal in construction projects?
A request for proposal in construction invites contractors to review project documents and submit bids. These requests are typically sent out by either the owner or general contractor. As mentioned in our earlier article about construction bidding, this occurs during the solicitation phase.
Once interested parties have submitted their bids, the requester will review them and select a winner based on criteria that should be explained in the initial correspondence.
Often, the winner simply boils down to whoever submitted the lowest bid. While this has its risks, solicitors typically pre-screen contractors early on, only sending requests for proposals to ones that qualify.
Construction RFP components
Here’s a breakdown of the components typically included in a construction RFP.
General project information
As you might expect, an RFP includes general project information such as the client, rough budget, and tentative scope of work (if available).
Solicitors will also typically include details concerning the type of contract that will govern the project. For example, they might refer to the specific AIA Contract Document being used.
Some solicitors have specific templates for proposals. Others simply provide a list of requirements (i.e. what information should be on the first page, etc). Whether or not you follow these requirements can mean the difference between a successful bid and an unsuccessful one.
Other types of construction requests
Before we move on, it’s worth noting a few other types of construction requests. While they might sound similar, they have very different use cases.
Request for information
A request for information (RFI) is used to gather additional context or address uncertainties regarding a project. For example, if a general contractor is unclear about specifications, they might submit a request for information to the client.
This can occur at a variety of stages in the construction project, including procurement (i.e. a contractor wanting clarification on a project document prior to submitting a bid).
Requests for information are integral to construction project management. They serve a different purpose than construction RFPs, though, as you can see.
Request for qualifications
Remember how we mentioned that solicitors pre-screen candidates prior to sending them construction RFPs? The request for qualifications (RFQ) is one tool for doing this.
The solicitor will request proof that the candidate is capable of completing the task. Only those whose responses satisfy the requirements will progress to further stages of the procurement process.
Request for quote
A request for a quote (also referred to as an RFQ, although not to be confused with a request for qualifications) is typically used when pricing materials, equipment, or some other commodity. In other words, the product itself doesn’t differ drastically from vendor to vendor and it’s simply a matter of arranging favorable terms.
Invitation to tender
An invitation to tender (ITT) is perhaps the type of request most easily-confused with a construction RFP.
While both constitute an invitation to participate in the bidding process, an invitation to tender is used in scenarios where the scope of work is largely pre-determined. In other words, the client knows what they want and is simply looking for candidates to bid on delivering that.
A request for proposal on a construction project, meanwhile, generally shifts some of the responsibility for coming up with a scope of work onto the respondents.
Tips for responding to a construction request for proposal
Next, let’s look at some tips for responding to a construction request for proposal in a professional manner most likely to result in success.
Read the request carefully
A construction RFP will contain valuable details regarding the client’s needs. Review these details carefully and tailor your response to them. If you’re unclear on anything, remember that RFIs exist precisely for that reason. Use them!
Clients, as you can imagine, want to see that you understand their request. You can demonstrate that you do by restating the problems or challenges they’ve identified before discussing how you intend to address them.
Conduct a thorough estimation process
A competent estimation process is the pillar of any successful construction bid. As we discussed in this article, improper estimating is a key cause of cost overruns that can put your company out of business.
In other words, don’t file a successful bid at the expense of bankruptcy! Make sure your bid positions you to be compensated in a way that doesn’t jeopardize your company’s financial stability.
This doesn’t always mean turning a profit; construction companies occasionally take on projects at a loss to achieve some other objective, such as building a key partnership. However, you need to be aware of the numbers – and that starts with estimating.
Determine whether you have the resources to handle the project
Construction resource management is another important aspect of determining a project’s financial viability. If you don’t have the resources to handle a particular project, you’ll need to either obtain them or walk away from the project, which leads nicely to our next point.
Know how to turn down a request gracefully
At some point, you may receive an RFP for a job you – for whatever reason – can’t take on. This is called making a no-bid decision. Rather than simply saying “no thanks,” however, it’s customary that you submit a formal letter explaining why you will not be bidding.
According to the Civil Engineering Blog, you need to submit this letter prior to the bid opening date so the solicitor knows not to expect anything from you.
A tactful, well-written no-bid letter can maintain the prospect of future RFPs, which is important given how large a source of business these requests can be.
If your bid/no-bid analysis results in an affirmative decision, however, make sure you set clear expectations regarding the scope of work. In addition to showing clients exactly what they’ll be getting (so they can compare to other offers) you’ll be protecting yourself from the possibility of an ever-expanding project scope.
Take the response process seriously, every time
No matter how good your relationship with a prospective client is, take the time to craft a serious response. Regulations and standard business practices ensure a degree of fairness in the bidding process – especially on large public projects. As such, you can’t rely solely on who you know.
We hope this guide has been helpful in showing you the ideal approach to handling construction requests for proposals. For more articles related to construction management processes, visit our blog.