Getting the Most Out of the Bidding Process, by Corinne Maddox, CCM, CFM

Competitive bidding is the quintessence of America's free enterprise system; however, to get the best results from construction contractors, some basic points need to be considered:

Prequalification: Except for certain public sector institutions where bidding is open to anyone, no bidder should be on the bid list who could not be awarded the project. A good bid is costly for bidders to prepare. Prequalifying reassures bidders that they are seriously being considered, and they will work harder to improve their bid as a result.

Evaluation Criteria: Look at experience in similar size and type projects, current workload, key staff qualifications, proposed team and references. Because general construction contractors must carry job costs, their credit history (or bonding capacity) should be checked. Usually best results are achieved by using smaller contractors for smaller projects, and larger contractors for larger projects.

Number of Bidders: Between 3 and 5 bidders is ideal. If contractors are busy, 1-2 more should be invited, because some bidders may drop out or submit a high number without taking time to do complete estimates. The larger the bid list, the lower the interest and effort by bidders, since their chances of winning are lower.

Bid Documents: Provide 1 set of specifications and 2 sets of drawings. One set of drawings is adequate if reproducible documents are sent to a local printer for their use, or if the set is small enough to easily reproduce.

Communication: Bidding protocol is that all bidders receive the same communications. It is best to require all bidder questions to be submitted in writing, and all bidders should be notified in writing of all questions and responses. Email is great for this purpose. A job site walk through at the time Bid Documents are issued is very effective in responding to questions and jump starting the bid process.

Bid Period: Small projects (less than $25,000) should allow at least 10 calendar days. Larger projects should allow at least 2-3 weeks. To get started, it will take bidders several days to preview documents, reproduce, sort, package and distribute to subcontractors (subcontractors must go through this process for their suppliers and subcontractors also), and several days at the end to receive, evaluate, clarify, negotiate and document subcontractor pricing. If addenda are issued, this process is repeated, which requires that much more time. Bid periods that are too tight will result in higher pricing and more misunderstandings and change orders.

Bid Acceptance: Notify bidders of the exact day and time bids are due. Monday bid dates are not desirable, because suppliers and subcontractors are not open on weekends. Generally, later in the week and later in the day are best. Requiring sealed bids assures bidders that their bids will not be "leaked out" to competitors or other improprieties. Generally, faxed bids are considered acceptable, and make it easy for the last minute subcontractor and supplier quotes (often the lowest and best) to be included. Since fax machines may be tied up and Houston traffic is unpredictable, usually bids are accepted if they are received a little after the due time.

Bid Award: It is best not to announce bids upon receipt. Bids must be carefully reviewed to validate completeness, understand exceptions and comments, and obtain clarifications, if needed. Often the apparent low bidder is not low after factoring in missing items. Factors other than bid price should be considered in awarding the bid. The quality of key team members and the bidders' reputation regarding change orders can significantly affect final project cost. Award should be made as quickly as possible to make the most of contractor momentum, and all bidders should be notified of the winner.