As a Municipal & Heavy Contractor, we are contracted by Municipalities (Cities) to perform heavy construction projects, which are projects that cannot be classified as Building, Residential, or Highway. We acquire these contracts through bid lettings. A bid letting is a process of opening and tabulating bids—submitted by qualified contractors—for construction projects.
Being successful with bidding requires a deep understanding of the process and the strategy that contractors should use. The bidding process is broken down into five key steps: bid solicitation, bid submission, bid selection, contract formation, and project delivery.
During the bid solicitation phase, the property owner or their representative will typically issue an Invitation for Bid (IFB), a Request for Quote (RFQ), or a Request for Proposal (RFP).
For public project bids, agencies are typically required to issue an open invitation to qualifying contractors who are registered to work on government construction jobs. On private projects, bids may be open or sent to a smaller group of contractors in a non-competitive bidding process.
Bid packages (regardless of project type) always contain project details to enable contractors to produce an accurate bid, including:
- Construction specifications
- Project requirements
- Contract type
- Project delivery method
- Bonding & insurance requirements
In the bid submission phase, interested contractors submit documentation about the project timeline and costs, as well as information about their business. During this phase, general contractors will often solicit their own bids, proposals, or RFIs from subcontractors they need to hire to complete specialized aspects of the job. The GC will combine the subcontractor proposals to prepare the bid they submit to the property owner.
In order to create an accurate bid, contractors must create an accurate estimate of project costs, including:
- Profit margin
With bid selection, property owners will often pick the bid with the lowest or most competitive price. On public projects, government rules often require that the lowest bid wins.
Because contractors submit bids in a variety of different formats and with a wide range of prices, the bid solicitor will typically go through a process called bid leveling. During bid leveling, the owner will attempt to standardize the bid formats as much as possible, enabling them to compare the similarities and differences between them. This process enables the owner to compare “apples to apples” to make a more informed decision about the right contractor for the job.
After the owner selects a bid, they work together with the contractor to form a construction contract that both parties will eventually sign. While the type of contract (e.g. fixed-price, time and materials, etc.) is generally predetermined by the owner, contractors still have leeway at this point to negotiate the terms of the contract, as well as the final pricing structure.