October 26, 2006
Surviving today’s tough bid climate
By CHRISTOPHER CARLSON
What can be done to attract more bidders to my project? Our clients frequently ask this question, particularly those involved with public projects that get two bids or less. The benefits to both architect and owner of having multiple bidders are substantial, including preventing re-design and re-bidding.
In order to attract more bidders it is helpful to understand the current construction environment. There is a lot of work out there, and many contractors are favoring negotiated work over competitively bid projects. Additionally, project schedules are longer because contractors cannot find qualified labor or subcontractors (remember subs typically perform more than 80 percent of all work).
Why are contractors staying away from public work? Typically, public projects have restrictive front-end documents, are over administrated, over regulated, over documented, slow to pay, have unrealistic schedules and higher risk. Private projects tend to be less restrictive and less risky for contractors.
Given two identical projects, one private and one public, the private work will attract more bidders every time. The bottom line is more bidders will be found on projects that contractors can make the most profit on, in the least time, with the least effort and risk.
Here are 10 ways to attract more bidders:
1. Have a good reputation. As an architect or owner, make sure you have a good reputation. There are contractors that absolutely will not bid projects designed by particular architects or owned/operated by certain clients/agencies because they are difficult to deal with.
Bidders will add contingency costs where they know the client/architect will be hard to deal with, is inflexible or slow to respond.
Subconsultants with good reputations should also be selected.
2. Have a winning attitude. Don’t have an attitude that the contractors are the “bad guys” and that everything is a win-loose situation it’s not. The contractors are the guys that are going to build your award-winning project and get you on the cover of Architectural Record. Have them as assets instead of adversaries.
Acquire a real understanding of how construction cost estimates work. Architects think they understand cost estimating and the bid schedule of values but often they don’t. A misunderstanding here makes for unnecessary problems, bad attitudes, confusion, delays and distrust and a free re-design for public work!
3. Budget and schedule. Have a realistic budget prepared by someone that has experience and proven accuracy estimating what your project will bid at and don’t forget your contingencies. Also, have someone who can explore the various bid scenarios and project delivery methods with you and your client.
Have a realistic construction schedule created by someone that has proven expertise in construction scheduling; or create a draft schedule based on similar dollar value projects and include contract language that states you will negotiate the schedule when a contractor has been selected.
4. It will be difficult to get labor for remote jobs. There will be more travel time, fuel surcharges and possibly higher labor costs. Find some way to adjust the schedule and budget or you will get less interest in your project.
5. Act as an agent for your project. Solicit contractors you would like to have bid your project and start well before the bid date. Call contractors and major subs and tell them about your future project bid date, ask them to bid it and send them free contract documents.
Contractors are so busy now they may miss projects up for bid. Don’t let this happen, it’s tough to get a date if you don’t ask anyone to the dance.
6. Can the project be phased? Investigate if phasing or sequencing of your project will produce a smoother schedule and a more inviting bid package.
Using multiple bid packages can create a more inviting bid environment, save costs and allow the architect to continue drawing later phases of the project while the excavation contractor is busy.
Phasing correctly can make design time more efficient, as well as avoid cost escalation and prevent additional mark-ups on items such as site work.
Pre-purchase materials that are rapidly escalating in price. This will limit risk for the contractor and result in a better price and schedule for the project. Also, create a base bid for “must have” items and a few alternates for the “nice to have” items so if the project bids high you can drop the alternates.
7. Have clear, concise construction documents. Less is often more concerning construction documents. Architects tend to over document things or systems they know just enough about to get themselves into trouble. Coordinate your contract documents and your consultants; remove ambiguity and contradictions. Don’t have documents that are incomplete or make the contractor guess at what you want.
8. Don’t over administrate the project and be flexible. Time is money. If you have reams of front-end documents, prospective bidders will tend to pass on your project. Turn the map around by making your front-end documents something you, as the contractor, would not feel at risk to bid on.
Don’t have documents that set up the contractors as the “bad guys” right from the start. Make your documents user-friendly and be fast, flexible and reasonable to questions and requests for substitutions. If you limit material options on everything, you will insure that you have fewer bidders and costs will be higher.
Remember, contractors are under the gun to get contracts signed and materials ordered, so don’t make their job more difficult by procrastinating.
9. Can the damages clause be removed? Many times the damages clause is based on a schedule that is unrealistic to begin with. If this damage-delay clause can be removed or reduced, the project will be more appealing to potential bidders.
Find a way to protect the general from pull-out bids. Stipulate in the documents that if a major low-bid subcontractor pulls out and the general has to go with the next more expensive subcontractor, the general will be allowed to negotiate the increase. This pull-out protection will make the general more comfortable bidding and the major subcontractors will know that they won’t have to come in and match a dollar-losing sub bid.
10. Bid date and addenda. Control and select carefully when your project bids. Be aware of and don’t bid close to other big projects. Also, don’t bid during hunting season, close to holidays or during the busy season (this alone can add 25 percent!).
Allow plenty of time for bidding: four to six weeks. We see projects that have a walk-through and then bid a week later.
Also, issuing numerous addenda advertises the fact that your documentation is incomplete, weak and/or poorly coordinated. No one wants to get involved with this scenario. Numerous addenda/bid-date changes are a red flag that tells the contractors that the construction process will be messy and difficult.
These 10 points are by no means all you can do, nor do they apply equally to every project. However, these should get you thinking about how to attract more bidders to future projects. If you can attract even two additional bidders, you will have performed a substantial service for your client.
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