If you want to build homes, you have to make residential construction bids. It’s really that simple, but actually winning the projects is anything but simple. You face stiff competition from home builders all over your area. How are you supposed to get ahead and actually get the jobs?
We have some ideas to make it a lot easier. Read on to learn everything you need to know about how to make more winning residential construction bids.
Residential Construction Bid Process
Before we go too deep down the rabbit hole of how to make winning bids, we need to understand what exactly goes into making the bids in the first place. Here’s the residential construction bidding process in a few steps:
Client: Bid Solicitation
The owner of the property or project kicks off the bidding process by sending out a request for proposals (RFP) or invitation for bid (IFB). In these requests, the owner describes the project parameters, type of contract and various other critically important details.
Contractor: Bid Review and Walk-Through
This is the part where you get involved. After reviewing the RFP, you start putting your bid documents and information together. Importantly, however, you do not actually submit your bid for the project just yet. First, you have to do the pre-bid job walk. This is a field trip for all interested bidders to actually walk the proposed site of the project to ask questions, get a sense of the surroundings and clarify any important information from the RFP.
Contractor: Bid Submission
If you still want the project after the job walk, it’s time to actually submit your completed bid. The bid you submit will contain much more than just your protected costs and profit. It will also contain your detailed plans for managing and delivering the project, as well as information about your past work and project delivery metrics.
Client: Contractor Selection
Because residential construction bids are typically for private home building projects, the rules for selection of a contractor are much less stringent than they would be for bids on government work. For you, this means that the lowest bidder doesn’t always win. Sometimes, other factors, which can be as specific as the client’s own preferences, will determine who wins. In the end, however, winning bids for residential construction projects will usually be competitive on price but also demonstrate solid past work on similar projects.
Client and Contractor: Contract Formation
If the project owner chooses you to complete the project, you can’t do any work until you and the client have a legally enforceable contract in place. This is your final chance to get clarity on any details of the project that remain a little murky, as well as make any final negotiations for price changes. The end result of this step is a detailed contract that both parties have agreed to for the project.
Contractor: Project Delivery
This is the part you know best: the construction part. After the contract is signed, you get to work on the home.
10 Tips to Win Residential Construction Bids
A solid understanding of the residential construction bid process is a great place to start, but it doesn’t guarantee that you’re going to win any of the work your business needs to not only stay afloat, but grow and thrive. To actually win the bids, you have to go the extra mile. To help, we have put together 10 tips to win bids for residential construction:
1. Understand the Process
We covered the bidding process in the previous section for a reason: It’s critically important that you understand it well. Why? Because you will be able to be on time for every step. For example, you won’t miss the pre-bid job walk and have to read about it — you’ll actually be there on site, speaking face to face with the project owner. That can be incredibly valuable, and it shows that you know what you’re doing.
2. Submit Your Bid Quickly
Remember — residential construction bids aren’t like bids for government jobs. There are almost no rules for how to decide between two residential construction bids. And a significant portion of residential clients are so excited about getting their home built that they pretty much just want to get the bidding process over with. That means they are more likely to choose a bid that comes in early. So, meet them at that place: Submit your bid as quickly as possible while still being detailed and accurate.
3. Estimate Your Costs With Accuracy
You can actually get into legal trouble if you knowingly underbid a project and then change the story on the client once you’ve already been awarded the contract. That means you need to accurately estimate your costs unless you want to risk taking a loss due to unexpected expenses on the project — whether that loss is to your revenue, your reputation or your business itself. Be extremely detailed in your cost estimates, and don’t forget to include a healthy margin for your profits.
4. Be Selective About Projects
Not every residential construction project is a winner for your business. Sometimes, it’s just not a good fit, and you really shouldn’t pursue it. That’s because you can actually end up damaging your business if you pursue and win contracts that aren’t actually a good fit for your services or capabilities. Be selective about your projects, choosing those that are within your skill set and are likely to be profitable for you.
5. Don’t Bid for Projects That You’re Unlikely to Win
If you’re a three-man construction company pursuing residential construction bids for multimillion-dollar mansions or giant apartment complexes, you’re unlikely to win those bids. What are you left with, then, at the end of the bidding process? Nothing but a bunch of wasted time, and that’s time you could have spent pursuing projects you actually had a shot at winning.
6. Bid On Jobs In Your Specialty
You don’t have to specialize to be successful as a residential contractor, but it certainly can be helpful. And even if you don’t actually specialize, you will likely find that you end up performing well on particular kinds of projects. Those are the projects you should prioritize bidding on. That’s because you can show your excellent work on these types of projects and give yourself a much better chance of winning.
7. Understand the RFP
You may skim the morning paper or the instructions on a new appliance, but you should never skim the RFP for a residential construction project you’re bidding on. Instead, you need to read and study every word closely, and then you need to do it again. RFPs can be quite dense and contain a lot of detail. And seemingly minor details can make a project much more expensive or time-intensive than you initially thought. If those expenses and hours aren’t reflected in your residential construction bid, you are going to have a problem if you actually get the project.
8. Communicate Your Value Proposition
What does your company bring to the table that no one else brings? Or what do you do better than your competitors? Whatever the answer is to those questions, you need to make absolutely sure that it shines through clearly on your residential construction bids. This is your value proposition — your “why” in the answer to “Why should I give this project to you?”
9. Establish Trust With Stakeholders
If you’re bidding on a project you care about — one that could be good for your company in terms of profit, reputation, your portfolio or some other important consideration — you need to take the time to get to know the stakeholders. These are the project owners. A great way to do this is to go to the job walk and communicate openly and often about the RFP, bids and any other areas of concern throughout the bidding process.
10. Ace Your Bid Presentation
When you make your presentation to bring the details of your bid to life, you are having a make-or-break moment. This is often when the client decides who is getting the project. If you want that someone to be you, you need to ace the presentation, and you can do so with stunning visuals that show exactly what you can do. Using powerful floor plan software like Cedreo, create detailed 3D renderings that show every detail and decoration so the client can’t help but choose you.
9 Residential Construction Bid Mistakes to Avoid
Mistakes can cost millions in the world of residential construction bids. That’s why you need to avoid these common bid mistakes:
1. Failing to Thoroughly Review the Bid Package
The bid package is the sum of all of the documents and information you are gathering in order to submit your bid. One of the biggest mistakes you can make is getting all of that information together and then failing to actually look at the final product before you submit it. At best, you will miss something the RFP asked for. At worst, you will significantly underestimate project costs and get into a sticky financial situation.
2. Bidding on a Project Outside of Your Organization’s Skill Set
Let’s say you see an RFP come through for a huge apartment complex. You have some room in the schedule and decide to submit a bid, although you’ve only ever constructed single-family homes. To your surprise, you get the bid. Then what? You have an enormous project on your hands and very little idea of how to get it done. Your reputation could suffer if the project fails, and you could even find yourself facing legal liability.
3. Not Visiting the Site Before Submitting a Bid Proposal
Go to the pre-bid job walk. It’s not an official requirement, but skipping this step is one of the key mistakes you can make in the residential construction bidding process. That’s because the job walk is your chance to actually see the construction site before you bid, as well as ask important questions that could inform your opinion of the project.
4. Creating an Inaccurate Estimate
An inaccurate estimate can actually make you much more likely to win a residential construction contract — if it’s lower than all of the other bids. But if it’s inaccurate, you are going to have to spend more to actually build the home. That’s going to either upset the client or absolutely wreck your bottom line.
5. Calculation Mistakes
If you make a mistake, you can run into the same issues you would if you intentionally estimated your costs lower than you should have, and you will face the same effects: lost trust from your client, damage to your reputation, potential liability and more.
6. Failing to Review Subcontractor Bids
What if you put in a residential bid with an idea of the average subcontractor bids for these kinds of projects only to find out later that you were way off. Perhaps the cost of certain materials has skyrocketed, and now you have subcontractor bids that are destroying your profit margin. Make sure you review your subcontractor bids before you submit your bid.
7. Not Qualifying a Bid When the Specifications are Unclear
If you have questions about a project, make sure you have them answered well before you submit your bid. The answers to seemingly minor questions can make or break your ability to complete a project within specifications and budget.
8. Submitting an Unrealistically Low Price or Short Timeline
It’s understandable — you need contracts for your business to survive. But undercutting contracts on time or budget just to get an unfair win is a bandage — not a long-term solution. Eventually, going unrealistically low on price or timeline will come back to bite you.
9. Failure to Provide a Deadline for Acceptance
You need to know whether you have the job. If you don’t know, you may continue to submit bids and suddenly get word that you’ve received four or five contracts — way more than your team can currently handle. That’s why you need to include a deadline for acceptance of the bid. That way, you know when the window of opportunity is closed and you can safely move on to the next bid.
Save Time, Reduce Costs, and Close More Deals With Cedreo
The process of submitting residential construction bids isn’t easy, but you can make it much easier if you arm yourself with the right tools. Cedreo is one of those tools. An innovative, powerful and user-friendly floor plan software with built-in estimating software from CostCertified, Cedreo allows you to complete in minutes what used to take days when you were creating bid presentations.
Stun your future clients with 3D walkthroughs of their dream homes, and get more jobs, more revenue and more security for the future of your business. You can do it all with Cedreo.