Since the coronavirus pandemic arrived in the U.S., contractors have been increasingly nervous about maintaining and building their backlog of work as jobs in some areas and sectors are put on hold or canceled.
To build their books, many firms are bidding on more projects than usual. This is increasing competition, with more contractors vying for the same project.
Contractors accept risk whenever they take on a construction project, and that's especially true in light of COVID-19 challenges. However, there are ways contractors can mitigate risk before they have even won the job, and that entails avoiding errors when submitting a bid. Here are seven of the most common:
The simplest errors to overcome involve miscalculations when compiling a bid, i.e. overlooking some elements of the scope of work, using inaccurate footages or board counts or just plain mistakes in basic math functions like addition and multiplication.
These mistakes do happen from time to time, said JD Summa, CEO of Kings Capital Construction Group Inc. in Tarrytown, New York, but many types of computer programs and estimating software, as well as skilled staff, can help reduce them.
Oftentimes for general contractors, subcontractor proposals make up a significant percentage of the overall bid, so it’s important to make sure the subcontractor has the requisite experience and has submitted a solid, complete bid.
The general contractor should check subcontractor proposals to make sure they include the full expected scope of work, said Caitlin Cappa Nunez, a project manager with national commercial real estate firm Transwestern.
If the subcontractor has left something out but specified it as an exclusion, she said, then a general contractor should account for that item through its own scope of work or in another subcontractor’s bid.
“[The general contractor] should make sure … there are no scope gaps,” Nunez said.
It’s also critical to make sure the subcontractor or vendor can handle the project, Summa said.
General contractors often have longstanding, successful relationships with certain companies, but they should make sure the subcontractor or vendor in question has the capacity to take on the work, especially if the project will have higher than normal production or manpower demands.
There is also a chance that a favorite subcontractor might not be ready to make the leap to a new kind of project that is outside its wheelhouse, Summa said.
Not qualifying a bid when there is not a full set of drawings or specifications
It is far from an ideal situation when a contractor must submit a bid without access to a full set of construction documents, but it happens. These bids still can lead to successful projects, Summa said, as long as the contractor doesn’t make unverified assumptions.
The first step, he said, is to submit a Request for Information but those aren’t always answered.
“In that situation,” he said, “you have to qualify your bid. We have to be very clear if we excluded something or if we assumed something. We want to make sure we’re on the same page going in.”
Submitting an unrealistically low price or short schedule
Sometimes contractors will shave too much money off their proposal price or too many days from a project timeline in order to secure a job, said attorney Phillip Sampson Jr. in the Houston office of law firm Bracewell LLC.
Neither strategy is a good one, he said.
Contractors that take this approach sometimes believe they can make up the shortfall with change orders, claiming extra charges for things like delays, new material pricing or scope changes, but this is a risky strategy and can end up creating mistrust with the customer, Sampson said. Not to mention that there might not be any change order avenues, leaving the contractor with an all but certain loss.
The same goes for the schedule, he said. Once it is apparent that the estimated timeline is not achievable, it casts doubt on the contractor’s capabilities.
“It makes the GC look [flaky] because they were either not honest and transparent, or they just didn’t have a clue what it was they were supposed to be doing,” Sampson said.
Owners today, he said, are more likely to evaluate bids for overall quality rather than just low price. Having confidence that the bid is honest and realistic is very important, especially on large, meaningful projects.
Failure to make a site visit
Contractors can glean a wealth of critical information during a visit to the project site, Summa said.
Publicly funded projects are more likely than private projects to host a mandatory walk-through as part of the prebid process, he said, but, even so, bidders should take it upon themselves to visit the site. Google Earth has become a popular substitution for an in-person visit, he said, but those images are not always up to date.
“Walk the jobsite,” Summa said. “How large is the jobsite? How are you going to phase the project? What are you going to use for staging? If it's a very small site, but we're going vertical, do we need cranes? Are you on a very busy road? Do you need police to shut down the road? Do you need special permits?”
For a renovation, Nunez said, it’s also important to understand the existing building’s regulations and factor those into a proposal, particularly as they pertain to accessibility.
Noise restrictions could force contractors to rearrange work schedules for which they might have to pay overtime or double time, she said. Loud activities like framing and mixing concrete are not typically off-hour tasks but could be made so if the work cannot be performed during normal business hours.
Failure to provide a deadline for material pricing
Contractors should always include in their bids a deadline for acceptance, Sampson said, because material suppliers tend to only guarantee pricing for a certain period of time.
“That’s an easy way to make sure that you don’t get stuck with pricing that is unrealistic,” he said.
Along those same lines, contractors should also make sure that they have included taxes, shipping and applicable tariffs on materials in their bids, Nunez said. These items are subject to change, so estimators must stay on top of current pricing.
“Stay in communication with suppliers,” she said. “Make sure that there are no surprises.”
Failure to include contingencies for material prices or delays
If the owner hasn’t selected finishes or other materials before contractors turn in their bids, Nunez said, sometimes contractors base their proposals on the assumption that it is safe going with a midrange-priced product.
Before finalizing their bids, she said, contractors should verify that using a midrange price is correct or make allowances for the possibility that the owner will choose a higher-end, more expensive product. Availability could also become an issue, forcing an owner to be left only with higher-priced material alternatives or having to pay an extra fee to expedite the original product.
“Again,” she said, “it goes back to keeping in touch with suppliers.”