Contract documents

August 20, 2024

Introduction

One of the most critical pieces of a construction contractor’s arsenal is the ability to bid. Bidding is more than submitting credentials and figures in a neatly bound proposal. No, bidding is an art at times, a skill that requires discipline, preparation, and integrity. It’s a delicate dance that strikes the balance between profitability and practicality. From the profit perspective, contractors must submit an offer that secures the work and positions their firm for financial gain.  This leads to the second part of the equation: practicality, meaning the proposal must be realistic enough to position the firm to win the business.

Bidding is at the core of the construction mix, and in a challenging economy where project density declines, the stakes of building a bid become even higher.  During this stage, the skills component and knowing how to structure and navigate the often-ambiguous terrain of a bid takes front and center. Challenging economies can be frightening, with turmoil and uncertainty swirling about. This is especially true in construction, where many factors, including price points, staffing, and weather, lie beyond leaders’ control. During those times, knowing how to bid in every sense of the term becomes essential.

Things to Remember When Bidding in a Challenging Economy

Bidding is tough and a challenging economy makes it even more difficult, but remembering these five things can simplify that process.

1. Leverage relationships: Relationships are critical to the success of any construction firm during any stage of business evolution, especially when it comes to bidding in a troubled economy. If there’s a history, chances are you understand how to build your bid and they’re comfortable with how your firm works. With that, look for bids from partners
2. Be honest about your capabilities: Being honest about what your firm can and can’t do should always be your business philosophy, and living by a policy rooted in honesty becomes even more critical during a challenging economy. It’s easy to panic and bite off more than you can chew when the opportunity well begins drying up, but the damage it could do makes proceeding with caution the more attractive option.
3. Conduct a financial analysis: A financial analysis is always a good idea when you’re preparing to bid on a project, but it becomes a necessity during an economic downturn. Remember, every dollar counts as your firm is looking to maintain relevance during the financial storm. With that, analyzing the potential opportunity to make sure it has profit potential is a must.
4. Emphasize details: Details matter when bidding on construction projects, especially in a weak economy. It’s important to understand everything you’re committing to and the associated costs since they will define how you approach the project.
5. Choose bids wisely: Even when the economy is in a downturn, bid opportunities abound. However, just because there are open bids, that doesn’t mean they’re right for every firm. Desperation replaces pragmatism and if it goes unchecked, it can result in lost time and valuable resources.

Conclusion

Bidding is a tough but necessary part of the construction mix. Understanding how to manage this process often separates market leaders from the rest of the pack. For aspiring market leaders or those already in that position, remember to build relationships at all points, not just when times become lean. Also, no matter how challenging the times become, firms should always be honest about their capabilities. Honesty could also mean conducting a financial analysis to ensure a prospective project aligns with the firm’s business model.

Details always matter, and when things are tight, and they usually are in a shrinking economy, leaders should pay extra attention to them. Lastly, firms must avoid impulse bidding and choose instead to remain loyal to their ideal customer profile and allow it to guide them, not fear or any other compulsive behavior.

Save time and minimize risk with the most trusted contracts in the construction industry – powered by AIA Contract Documents’ next-generation platform, Catina. Request a Demo Here.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.