In the world of competitive construction bidding, there’s no consolation prize for a losing bid. With that being said, there is value in the lessons contractors can learn after failing to submit a winning bid package. In this article, a Memphis contractor lawyer will explain how contractors can improve their bidding strategy to improve their chances of being awarded lucrative bids.
Understanding the Concept of the “Delta”
According to Construction Business Owner, “the difference between first and second place is measured in dollars.” This spread, otherwise known as the “delta,” is vital to understanding why your bid failed and the winner succeeded. Losing a bid is disheartening. It takes time to put together a competitive bid package, which means every bid you lose is worth the amount of time you and your team put into it. If it only took you a few hours to put together a bid for a routine project, your investment would be relatively minor. On the other hand, if you sunk 40 hours into crafting a “perfect” bid that lost, you would be justified in thinking that bidding on projects is a waste of time. To be clear, bidding on projects isn’t a waste of time, as long as your pursue feasible opportunities and don’t get in over your head.
When examining the delta, you might find yourself baffled by the numbers your competitors are achieving. In many cases, the math won’t check out and you’ll be left wondering how they pulled it off. Have they unlocked some secret to construction that you aren’t privy to? Doubtful. In reality, they may have simply bid at or below cost. Construction Business Owner recommends performing the following litmus test:
“A great litmus test is to have three estimators within one firm bid the exact same project. If you want to make it interesting, normalize certain aspects (e.g., labor cost, material prices) and examine the outcome. Without a doubt, there will be three dramatically different prices.”
After performing this litmus test, you should figure out the reason for these price disparities. What methodologies were used? How did their crew sizes differ? Did they have access to vendors or technology that your firm did not? Answering these questions can prove to be highly enlightening, especially when you’ve failed to procure a bid in months.
Important Questions to Consider
The delta can be used for a wide variety of applications. How you decide to use this information is ultimately up to you, but you should consider the following:
- How often do I win bids?
- Why am I winning bids?
- Am I always the lowest bidder?
- Is my firm being selected for the right reasons?
- How does my bidding strategy affect my reputation?
- Are the profits generated from awarded bids significant enough to warrant future bidding?
- Am I effectively controlling overhead costs?
- Am I providing top-quality service?
- Does my bidding strategy affect my rates moving forward?
When it comes to bidding on projects, contractors are faced with many tough questions to answer and obstacles to overcome. Sometimes, the best way to increase your winning percentage is by scrutinizing your process and making changes. In other cases, working with a Memphis contractor lawyer is the preferred solution. At Cotney Construction Law, our Memphis contractor lawyers are well-versed in bid submissions and bid protests, allowing them to help you navigate both sides of the bid process with ease.
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.