A Matter of Dollars and Sense
The Construction Bidding Process
As the old saying goes, “there is no substitute for experience,” but when it comes to the bidding process for large construction projects, there is something to be said for combining firsthand knowledge with today’s technology to create cost estimates and timelines that are not only accurate, but realistic.
As professional construction estimators know, accurate resource costs and calculations are the foundations of properly planning an estimate, not only for the firm bidding on a project but for labour and suppliers. All resource costs, including labour and subcontractors (comprising wages, workers’ compensation, benefits and burden/operating expenses), materials, equipment, and costs associated with equipment such as logistics, fuel consumption, gas, and taxes must be considered. From framing to foundation, excavation to electrical, and concrete to cabinets, all costs must be carefully calculated to create accurate estimates.
Governed by a number of professional bodies, such as The American Society of Professional Estimators, trained estimators work on projects ranging from small residential jobs to multi-storey condominiums, shopping malls, and other large-scale works. No matter the size of the project, as time progresses, a greater number of estimators entering the workplace will learn the fundamentals through higher education. A number of courses are available through institutions such as The Construction Institute of Canada, covering subjects such as Blueprint Reading and Estimating (Level 1, Level 2), Best Practices for Estimating, Planning and Scheduling, and Microsoft Project for Construction.
Construction industry veterans – many with decades of hands-on knowledge – are skilled at breaking down costs to create accurate estimates. With skills learned both on the job and through courses, building estimators must be able to determine the price of both labour and materials required for a construction project. Using sophisticated construction estimating software, a calculation of a bid price for a construction project is created weeks and, in many cases, months before it is submitted and a building contract is awarded.
While many estimators still use handwritten spreadsheets known as “green sheets,” many use customised software or commonly available programs such as Microsoft Excel. It is critical that all data be entered accurately to prevent cost overruns and other errors. Specifically designed for estimators, these programs feature built-in cost databases, takeoff software for measurement and plans, and estimating worksheets which support calculations. Along with these features, many professional programs also allow for activities to be divided and sub-divided, and to include mark-ups, detailed overhead, reporting, exporting, job history, and of course, calculations and resource costs.
In the area of construction estimating software, there are literally dozens of programs available in a range of prices and functionality. Some focus on specific trades, such as carpentry, concrete, or plumbing. The advantage of all-in-one software is that it not only helps estimate material and labour costs, but allows contractors to keep an eye on budgets in a single area.
The benefits of construction bid software are substantial. Using software programs that develop budgets and establish cost baselines, general contractors are able to keep track of a project’s financial status on a daily or hourly basis. All budgetary information is stored in one location and is easily accessed, in contrast to when it was manually placed in separate files. The likelihood of errors is also far lower than it would be if the computations were done by hand. Having people and machines that know how to bid construction projects is a major step in ensuring commercial success.
In order to make successful bids, builders need to not only accurately estimate all costs, but work with quantity surveying and price extension in advance of submitting a bid. Under the bidding process, the prime contractor will incorporate both subcontractor and vendor costs for labour, or a combination of labour and material.
Successfully bidding on projects
While contractors have different methods when it comes to bidding, the most important consideration is to be thoroughly prepared with the most accurate cost estimate possible. While submitting a low bid can be a wise gambit, so too are the qualifications and years of construction industry experience of the company submitting the bid; the lowest bid does not always mean the best deal for the customer, if the construction firm is unable to meet its obligations. A well-planned bid – one based on information from experienced estimators, software, and sometimes input from architects – makes all the difference between being accepted or rejected.
While the approach may vary depending on contractor and client, often architects or designers are retained by the client or property owner to create drawings or blueprints for a structure or project. Once these designs have been approved by the client, bids for construction are initiated. Some bids are for construction alone, while others are design and build bids, which combine the expertise of an architect with the builder at one price. As competition in the industry increases, more construction firms are providing design and build solutions. For building firms, this enables them to offer more services to customers. For clients, a design and build package often saves them the time of finding an architect and coordinating with a builder, and often results in lower cost for the overall project package.
While bids vary in nature depending on size, complexity of the job, and client – projects for governments have their own sets of specific requirements, for example – many parameters remain the same. Bids for projects of all sizes are presented on templates. In some cases, bids are submitted under a Construction Manager at Risk, or CMAR, where the contractor and architect work independently yet the contractor acts as a liaison.
There is no denying technology has impacted many industries, construction being one of them. Since the introduction of estimating and bid software programs, the process has become faster and more effective, particularly when it comes to calculating labour and materials costs, and comparing those costs to the bid about to be submitted. Instead of reams of paper, many bids are now submitted electronically, directly to the client, often through a webpage specifically designed for this purpose.
Based on the combination of a skilled estimator, modern-day technology, and a wealth of knowledge of the construction industry, bidding on large construction projects has come a long way in recent years – yet the need for accuracy and transparency from start to finish remains the same.