What is a Construction Bid?

Before entrusting a contractor to their project, it is common for homeowners to seek residential construction bids from several remodelers to compare prices, products, timelines and other  aspects they view as key in helping them make their choice. 

Speedy delivery of  residential construction bids that anticipate and answer clients questions and concerns provide remodelers a competitive advantage over other bidding companies.

What is the Difference Between a Construction Bid and a Construction Estimate?

Too often terms are used interchangeably within the residential construction business even though they have different meanings, causing confusion for professionals and clients alike. This commonly occurs with construction bid and construction estimate, and mixing up the two can be costly. Be sure to have clarity around these definitions, and provide the same clear message to your potential clients. 

• A construction estimate is an informed guess of the cost of the project, often based on some, but not exhaustive research into the cost of materials, labor, life of the project, and more. To avoid misunderstandings any time a contractor provides an estimate, they should include the caveat that this is only a ballpark figure and offer to provide a more detailed bid. 
• A construction bid is a commitment to the price you would charge for a specific project within a certain period of time. It is a detailed, written document that includes the price bid, and breaks down the cost of materials, timeline and other factors discussed above. This means that it should be based on information that you have nailed down and more certain than an estimate. If you previously provided an estimate to the homeowner, the bid may be higher or lower than that because it is based on more specific and detailed information such as the number of labor hours needed for every subcontractor involved in the project, or the exact cost of the lumber required to build an addition. Making these prices as accurate and realistic as possible avoids costly mistakes because when you are lucky enough for the client to accept and sign the bid, it essentially becomes a contract.

Why are Construction Bids Important?

In the residential construction business, the construction bid is a crucial piece of the success pie because it determines who gets the job. And, when that job is won, it often serves as the roadmap through the life of the project. If it is done well, it can help keep a project on schedule, save money for both you and your clients, and simplify the project journey.

What Should a Construction Bid Include?

Now that you understand the importance of having a well-oiled construction bid process, let’s explore the specifics of creating them. Here’s a list of the necessary components that should be included in every construction bid. 

• Project Name Make this specific and not generic so that you, your team members and sub contractors will know exactly which job it refers to
  
• Job Location Include the specifics of where the project is located.
  
• Estimated Start & End Date This details when you will receive approval to start work on the project and when you promise the project to be completed. Also note here how delays caused by factors such as weather, supply chain disruptions or permit delays will be handled and who will be liable. 
  
• Client Information Include the name, address, phone, email address and any other pertinent contact information. Determine who will serve as the main point of contact to streamline communication and reduce misunderstandings.
  
• Construction Company Information Include everything the client needs to reach you, Google your company, find your website and reviews from happy past customers. Make sure your logo is also there for a professional look. Provide a similar ease of communication by designating a main point of contact from your company and how to reach that person.
  
• Scope of Work This should be quite detailed and explain all the services your construction company plans to offer. Include the materials, proposed schedule, equipment on the worksite, additional crews, site visitation rules, and other relevant information. 
  
• Cost This is the total cost  of the project and a breakdown of relevant sections such as materials, labor, and other pertinent costs. Provide details on what costs would be incurred if the requested work goes beyond what it detailed in the bid and ultimately, the contract. Include the terms of payment throughout the life of the project, listing the milestones needed to be reached for each. 
  
• Materials and Services Not Included Anticipate client questions with a list of some of the common services that will not be part of the scope of your work. 
  
• Agreement of Terms Decide how long your client has to accept the offer and what percentage of the project cost will be required as a deposit and when. Add any other terms that are relevant. 
  
• Your Signature At the end of the bid, add a line stating your intent to provide these services and this cost and timeline. Then, sign and date the intent before submitting the bid. 
  
• Client Signature and Date Include a line for the client’s signature and date so that when the time comes, they can easily add their signature and accept your bid. Have a method available for electronic signatures to make it convenient for clients to approve the bid remotely. 

What is the Process of Submitting a Construction Bid?

Understanding the steps of how a construction bid is submitted eases the process. Here is a step by step look at the seven stages:

1. It Starts with a RFP  A client submits a Request for Proposals or an IFB (Invitation for bids). The homeowner typically describes the scope of the project, type of contract they are seeking, preferred length of the project and other pertinent details. 
2. Contractor Reviews & Visits Job Site Some RFPS can be extremely detailed so review it closely and more than once to clearly understand what the clients are seeking. Then, gather information, ask questions and seek clarifications at a walk-through on the job site that is usually held for all bidders. 
3. Contractor Research, Coordination with Subs If after the site visit you determine you want to submit a bid, do the heavy lifting of any further research you need to nail the costs, timeline and materials. This includes contacting the necessary subcontractors to determine availability and labor costs. 
4. Contractor Submits Bid Once reviewed a final time for accuracy, typos and thoroughness, the contractor submits the bid and presents it to the client.
5. Client Selects Winning Bid The bid a client picks for a residential construction project is not always the lowest one because the rules are different from bids submitted for government work. Nevertheless, the bid  price should be competitive. Clients also often base their decisions on a company’s  impressive track record so include past projects and reviews in the bid.  
6. Client & Contractor Formalizes Contract Congratulations! You won the job. Now, it is time to draw up a formal contract and scope of work incorporating the bid. Clarify anything that is unclear and then sign away. 
7. The Work Begins Once the contract is signed, the work can begin and it is time to carry it out according to that bid which started the whole process. 

Why Use a Construction Bid Template?

Many residential contractors use a construction bid template to simplify the construction  bidding process and to save money and effort. With a suggested format which you can customize as needed, a template cuts the time it takes to compose a bid.  And, because you can save the template for future use, there is no need to start from scratch every time you draw up a new bid.  

And as your team grows, a construction bid template that streamlines your bidding process also helps make it consistent and can serve as a how-to for your employees who are creating bids. 

9 Tips for Better Residential Construction Bids

Here are some more suggestions for how to create competitive residential construction bids:

1. Be fast and first The faster a residential contractor delivers their bid to a client, the higher their chance of winning the project. Balance speed with the thoroughness and accuracy that your customers expect.
   
2. Avoid undercutting costs Submitting a deliberate under bid can be dangerous because you may end up absorbing the cost overruns if you cannot find other areas to cut. Plus, contractors can face legal troubles if it is discovered that they intentionally tried to undercut the bidding process. Clients do not always go with the lowest price. They weigh other factors. Learn what is important to the client you are bidding to. 
   
3. Bidding software avoids manual errors To err is human so let bidding software help you avoid the mistakes and headaches that come with cutting and pasting and figuring things manually.  
   
4. Bid on the right jobs Everyone wants to stretch, but overreaching too much or taking on a job that does not fit your capabilities or the aspirations of your company hurts both you and your client. Not every job is a good fit so decide when it is better to take a pass so you can focus on jobs that meet your goals.
   
5. Provide an Insurance certificate This assures the client that your company is professional and will not be liable if something goes wrong. Explain to clients the types of situations that are covered by your insurance. 
   
6. Nail your bid presentation How you present your bid is as important as how it is written. Wow homeowners with stunning visuals and find the balance between providing detail and not going too deep into the weeds. Remember, you can always go back and clarify if a client seeks more information about certain aspects of your presentation. Make sure your agenda includes enough time for them to ask questions. Your demeanor and the rapport you build with them helps homeowners predict what it would be like to work with you and your team. 
   
7. Track bids within your CRM  By organizing all your bids in one place, your CRM, you can better track them, categorizing them by each stage, and use that information to plan. Knowing the number of bids that are near approval, for example, can help you forecast the resources you will need to carry out these projects over the coming weeks and months. Or, if you know that there are several bids waiting to be written, you can then plan to allocate more resources in that direction.
   
8. Prioritize bids based on impact and profitability Put more emphasis on the work that is going to have the most impact on your firm, whether it is the benefits of taking on a high profile project, or one that will provide a higher profit margin. If you are lucky enough to have many RFPs, consider saying no to those of less impact. 
   
9. Provide clarity about your terms Spelling out your terms and conditions clearly for clients will avoid misunderstandings down the road. Make certain your bid includes a separate section for that information, and highlight it during your presentation. 

Learn More 

Submitting construction bids is a key part of the residential construction life cycle and doing them efficiently and effectively will help you win more projects and scale your business. Up next: learn How to Do a Construction Quote.

Houzz Pro is an all-in-one management software that can help ease the burden of the bidding process. Its Takeoffs and Estimate Builder can be helpful tool for submitting professional, client-wowing bids quickly and accurately.  Sign up for a free trial.