Bidding a Project
Construction projects are bid at the convenience of the owner. The list below gives an idea of the process that could be expected of a bidder. Remember, often a general contractor is providing a bid to the owner with input from many subcontractors who, in turn have given their bids to the GC.
- Lowest bidder - this method is typical for most public projects, saluted for its ability to keep public bureaucrats from "hand-picking" contractors with political alliances
- GMP - Guaranteed Maximum Price - this type of approach is meant to protect the owner from "low bidders" that rack up pricey change orders? throughout the project, however contractors assume a high risk, so this is not popular among contractors
- Best Value - this process allows an owner to contractually take into account both value and price offered for the delivery of a project
- Design/ Build - this method sometimes requires the contractor to find an architect to suit the owner's needs; otherwise the owner will have a schematic design for the contractor to bid on
Factors of a Bid
There are many factors that affect whether or not a subcontractor will bid a project. First off, can the sub be bonded for the size of the project? A bonding company will usually be required, should the subcontractor become financially unable to complete the job. The bonding company holds the sub accountable, and assures that the correct parties are paid upon completion of work.
Based on a sub's ability to pay for the bond, they will determine if the project is within their means. A sub has to pay a small percentage of the bond in order to qualify for the project. For example, if a drywall subcontractor is bidding the drywall on a project, and the estimating team prices the work at 17 thousand dollars, then the cost of the bond would be a percentage of the subcontractor's scope. Bonding fees are also based on past performance of subcontractors, similar to credit ratings for individuals.
Note: A bond is not always necessary. Sometimes a general contractor will foot the bond for small business enterprises in order to meet goals of SBE, WBE, DVBE, etc. for a project. Other times, an incentive plan can be put in place as a sort of insurance. For example, some General Contractors will award a fee if a subcontractor meets their expectations laid out in the contract agreement.
Project Types
The type of project will likely determine whether subcontractors will bid a project. Workers that are accustomed to work in one field may have trouble adapting to another. Consider loose safety rules of a residential housing track compared to stricter rules enforced while working in a hospital. Construction can easily be divided into several self-explanatory sectors. Typically a contractor will specialize in one type of construction. Here is a list of how owners would describe a project, based on its future function:
The IBC has another way to categorize construction projects, defined by its building elements.