Many contractors try to win projects by bidding as low as possible. However, with the bidding process getting more complicated, it's important to know how to win construction bids and stay profitable.
Bidding low isn’t the same as bidding smart. Simply increasing the number of bids without changing your approach can waste both time and money. Here are tips to help you win more construction bids.
Find Quality Construction Leads?
Don’t bid on every project that comes your way or wait for leads to find you. Instead, focus on getting the right number of quality leads. Here’s how:
- Look for owners and general contractors you want to work with. Promote your business by highlighting your experience and skills. Let them know what types of projects you’re interested in. Building these relationships takes time, but it’s worth it. Respect and trust can lead to more invitations to bid.
- Tap into your network to learn about new projects. If you’re new to networking, don’t worry; we have tips for you. Your subcontractors and suppliers are also great sources for upcoming projects. You can also join organizations like the Association of General Contractors or other trade-specific groups. A quick Google search can help you find one in your area.
- Consider subscribing to a leads service like ConstructConnect Project Intelligence. It offers a searchable database with up-to-date project details, plans, and specifications.
Choose the Right Projects
- Now that you know how to find good projects, it’s important to pick the right ones for your business. Winning a bid for a project that doesn’t fit your business can be just as bad as losing the bid.
- Remember, it's never too late to back out of a bid, even after you've started working on it. If you realize the costs are too high and you won't make a profit, it's better to drop the bid and find another project.
- Balancing how much you bid and how many jobs you win can be tough. You don’t want to win so many jobs that you can’t finish them on time, but you also don’t want too little work that doesn’t bring in enough money.
- Choosing the right projects to bid on is key to making more profit. That’s why having a strong bid/no-bid decision process is so important.
Track Bid-Hit-Ratio?
Are you tracking your bid-hit ratio? If not, it’s time to start. Your bid-hit ratio shows how many bids you need to win one job. Knowing this helps you understand how many projects you need to keep your business running smoothly. It also helps you avoid bidding on jobs you’re unlikely to win. To get the most out of your bid-hit ratio, you should do a detailed analysis.
- List the projects you’ve bid on and group them by categories like:
- Public projects
- Private projects
- Types of buildings
- Required trades
- Project locations
- General contractors
- Project owners
- Next, mark the projects you’ve won in each group.
- Now, calculate your ratio. It’s the number of bids you’ve made compared to the ones you’ve won. For example, if you’ve bid on 7 public projects and won 1, your bid-hit ratio is 7:1.
- Do this for all your categories.
- Then, compare your ratios. The goal is to find the ratio with the smallest difference between the two numbers. For example, if your bid-hit ratio for public projects is 7:1 and for private projects is 4:1, the private projects have a better ratio. You’re winning more with fewer bids. This means you should focus more on private projects and spend less time bidding on public ones.
Maximizing Profit by Targeting the Right Projects
Once you know which projects to target, it’s time to check how much profit they bring. Start by tracking accurate job costs for materials, labor, and equipment. Then, compare your actual costs to your estimates and ask:
- Were my estimates for labor and materials accurate?
- Did I include all job costs, like bonding, supplies, and equipment?
- Did I correctly factor in profit and overhead?
- Was my contingency budget enough?
- If your profit margins aren’t as expected, your estimates might be too low, or there could be productivity issues on-site that raised costs.
Whatever the cause, work to fix these issues to improve your profit margins. By combining your bid-hit ratio data with your profit margin analysis, you can focus on projects that give you the best chance to win and make the most money.
Evaluate the Bid Opportunity
Before you invest time in a bid proposal, do a thorough bid/no-bid review of each opportunity. Here’s how:
- Get all the project documents, plans, and specs.
- Read them carefully.
- Calculate the numbers to see if you can make a decent profit.
- Check if you have the workforce and equipment to complete the job on time.
- Ensure you can handle the project’s size and scope.
- Watch for red flags that could cause problems, like unknown site conditions, safety issues, tight timelines, or incomplete documents.
- Project location
- Duration of the project
- Other companies competing for the project
- The client or project owner
- Doing this review will help you choose the best opportunities for your company.
Manage Risks in the Bid
- Identifying and managing risks is often overlooked when preparing a bid. If you find potential risks, study each one carefully to address them.
- Think about how dangerous each risk is and its impact on the project. If a risk seems unlikely or has a low impact, it might be easier to handle. But risks that are likely and could significantly affect the job can hurt your profits.
- Being able to spot and manage risks makes you a better bidder and prepares you for issues that may arise.
- Starting this process early helps you avoid bidding on projects that won’t be profitable. It also helps you make more accurate bids and contingency budgets. This way, project management will run smoother, saving you time, money, and resources.
Accurate Takeoffs & Measurements
Your takeoffs are the foundation of your estimates. If they're incorrect or incomplete, your estimates will be off.
- Accurate takeoffs ensure you know exactly how much material and equipment you need. This helps you hire the right number of workers and get the right amount of supplies.
- Missing items or incorrect measurements can hurt your business. Overestimating costs might make you lose the bid, while underestimating could lead to a project with little profit.
- Takeoff software can help make your measurements and estimates more accurate and saves time compared to doing it manually.
Whether you use software or do takeoffs manually, keep these tips in mind:
- Review plans and specifications thoroughly to ensure accuracy.
- Use the correct units of measurement and scale.
- If the scale looks off, double-check with the architect. It's better to be safe than sorry!
Summary
No matter the size of your company or your location, you should start using these steps today to win more construction bids.
