If you read our related article, 7 Bid Blunders Construction Firms Don’t Want to Make, you know that there are a variety of ways construction firms can make a major gaffe when submitting a bid proposal. Some of these mistakes invalidate bids, eliminate bids from consideration, potentially bankrupt a business, or result in the need for a Brandon construction attorney from Cotney Construction Law.
When you are assessing a request for proposal and putting together an estimate, there’s a lot of elements at play related to the plans and specifications of a project. Naturally, accounting for all of these things is daunting for inexperienced contractors looking to procure government work. Moreover, in some cases, the bid you place can’t be withdrawn without a significant penalty.
For these reasons and more, seek the assistance of our Clearwater contractor lawyers for all your bid work. As an added bonus, the experienced attorneys at Cotney Construction Law can protest a bid on your behalf or defend you against a protesting bidder. If you don’t take the advice of our knowledgeable Clearwater construction lawyers, your bid may be susceptible to one of these common pitfalls:
1) Your Labor Costs Weren’t Accurate
Acquiring and managing a workforce is one of the toughest challenges facing construction firms. As if a skills gap isn’t enough of an issue to combat, construction firms bidding on projects also have to factor in labor costs for all of their workers (and subcontractors’ workers) for the duration of a project. There are a variety of factors that can impact labor costs, including:
- Employee turnover
- On-the-job injuries
- Sick time
- Overtime pay
Any of the above workforce issues can slowly eat away at your allocated budget for labor costs. Of course, estimating the productivity of the workforce and the scope of work required for a project isn’t exactly a walk in the park either. If you find that you need more experienced workers on the jobsite partway through a project, labor costs will increase and profitability will be impacted. Before you submit a bid on any project, seek the advice of our Brandon construction attorneys for any questions related to employment law.
2) You Overlooked Local Wage and Hour Laws
The U.S. Department of Labor’s Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor laws. Federal wage and hour requirements are a great place for employers to begin to learn more about wage and hour laws; however, in the majority of states across the country, the prevailing wage amount is actually governed by the state. In other words, for minimum wage pay, the higher wage total of either the state or federal amount is considered the prevailing amount the employer must pay.
Here are a few things employers must consider with prevailing wage laws:
- If you own a construction firm that works on projects around the country, you need to always be mindful of the labor costs in every state you have a project in. For example, in Florida the minimum wage is $8.46, but in Georgia it’s $7.25, whereas the minimum is $11.10 in Colorado. Clearly, the difference in wage amounts in each of these states can dramatically affect the labor costs on a project for contractors.
- For overtime pay, an employer is required to pay their workers one-and-one-half times the standard rate for any additional time worked over 40 hours in a workweek. Some management-level employees and workers with special skills may be exempt from overtime pay; however, you should confirm that an employee is exempt with a Brandon construction lawyer before making any risky decisions. Keep in mind that you will need to factor overtime pay into your bid proposal’s budget for labor costs.
Related: Defense Against Overtime Claims
3) You Overestimated or Underestimated Material Prices
Material pricing can see dramatic changes for a variety of reasons. For example, tariffs on common construction materials can impact a project’s budget — one of several factors that can affect material costs. Here are a few things contractors must consider when they are compiling their calculations for material costs:
- Material pricing can vary greatly depending on a project’s location
- The price of supplies sees significant change in market value in the blink of an eye
- Material pricing may be contingent on connections you have with suppliers
- Material waste is one of the most common issues running projects over budget
- Insufficient materials can impact profits as workers wait for resources on the jobsite
- Storing materials on the jobsite is another expense firms must consider
It’s important to have a firm understanding of the building materials and specifications that will be required for the project and to confirm what materials can be potentially substituted, depending on certain circumstances. If material specifications aren’t made clear by the agency, the construction firm’s Lakeland construction attorney can seek clarification before submitting a bid.
4) You Failed to Coordinate Equipment
As Lakeland construction attorneys, we know that many of our clients have to weigh the benefits of buying, leasing, or renting construction equipment. These equipment investment decisions will impact important aspects of a business, like available cash flow, working capital, and whether or not a firm has access to resources for specific projects. Regardless of what’s right for your business, managing your equipment takes serious coordinating efforts. Here are a few common questions that need to be considered for equipment costs when you are putting together bids on projects:
- Will any equipment be rented out to other companies during these months?
- Can you store the equipment on the jobsite long-term?
- Will you need to transfer equipment a significant distance?
- Will every project have access to the equipment they need?
- Will additional equipment need to be rented or leased to meet the demand?
- Are there any significant maintenance and repairs costs projected during this project?
- Have you factored in other prices like the price of fuel for the equipment?
Failure to properly coordinate equipment costs can lead to a variety of other problems, including either overspending to access equipment when you’re in a bind or falling behind schedule because equipment isn’t available when you need it.
5) You Relied on the Wrong Subcontractor
When you’re putting together your bid package, one of the most important things to accomplish during this process is to effectively communicate with your subcontractors to ensure their pricing estimates align with the scope of work. You also need to be confident that the subcontractor can deliver their portion of the work effectively. Just as you need to have a clearly defined scope of work for the project you are bidding on, it’s equally important that you communicate this information to the subcontractors you will rely on to complete the work
Successful firms have a prequalification process for selecting subcontractors for projects. Just like the government agency you’re trying to procure a project from, your business can also receive bids from several subcontractors that can also provide you with similar work experience. With a prequalification process in place, you can select the most qualified subcontractor that’s willing to do the work at the best value. Remember, when you hire the wrong subcontractor, it can have a dramatic effect on project success. Whether it’s a construction defect, OSHA violations, or a missed deadline, a subcontractor’s mistake can result in your need for a Lakeland construction lawyer.
Related: 10 Signs of a Bad Subcontractor
6) You Didn’t Perform a Risk Assessment
You must always have a system in place to identify risks and determine how to manage these issues through every phase of a project, including during the bid proposal. Before you begin to work on any project, you have to consider the potential risks associated with the project. This includes safety, environmental, and financial risks, among other challenges associated with the project. Depending on the likelihood of the risk and how severe the consequences would be if the risk occurred, you can determine whether or not the project is worth submitting a bid on.
A risk assessment should also be performed at the jobsite of the project if you can access it. Before you bid on a project, you should visit the site, assess the conditions, and factor in any transportation costs for materials and equipment. If any concerns are uncovered during this process, they need to be factored into your bid. Moreover, you should be proactive and seek clarification from the agency funding the project about these concerns during pre-bid meetings. At the end of the day, it’s better not to win a project because the potential risks would have been too detrimental to your business instead of winning a bid and hoping for the best.
Related: Understanding Risk Assessment
7) You Didn’t Partner With a Construction Lawyer
To avoid any of the above problems, construction firms should partner with an experienced Sarasota construction attorney for all of their bid needs. Creating a bid proposal is an extremely difficult process that requires coordinating and managing a variety of things related to the scope of work and project specifications. Creating a competitive bid requires a lot of knowledge, experience, and commitment. As we’ve discussed throughout this article, bid mistakes can lead to a myriad of issues for a business.
When you partner with the Sarasota construction attorneys of Cotney Construction Law, we can help you through every stage of a project, including:
- During the bid preparation process, we can help your firm determine whether or not the project’s requirements adequately align with your business qualifications.
- We can help you compile a competitive bid package that is in compliance with the agency’s rules and regulations and uniquely sets your bid apart from your competition.
- We can represent your best interests in any agency meetings. If another entity is awarded the project, we can assess the agency’s selection process and protest the decision on your behalf.
- Conversely, if your company is awarded a project and a protestor challenges this decision, we can offer defense against a protestor to ensure project retainment.
Selecting bid work is a critical component of the success of a construction business. Once you secure a project from a federal, state, or local agency, you will need legal assistance with a variety of other important tasks. To effectively grow your business and win more government projects, consult the knowledgeable and experienced attorneys at Cotney Construction Law.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.