Bidding mistakes are made in the summarization and submission of the bid. An incorrect estimate maybe complete, but it could be based on an incorrect labor column and incorrect labor mix.
The estimator should strive to avoid large mistakes. Several small mistakes can have an impact on an estimate.
Estimating and bidding are two distinct functions of the estimator. When the estimator tries to do both functions at the same time, mistakes are inevitable. Estimating is quantifying and is handled during the takeoff process. Bidding is the summarization of the estimate.
The second most important responsibility of the estimator is to provide all the necessary information to the chief estimator that the project may be properly bid.
Once the estimator is confident the takeoff is complete and accurately priced and labored, it is time to focus on bidding the project.
Here are the most common bidding mistakes:
- Voluntary price cuts
- Incorrect wage rates
- Ignoring obvious risks
- Missing permit and inspection costs
- Missing equipment rental costs
- Failure to include supervision costs
- Missing allowance(s)
- Per diem and travel expenses
- Labor factors ignored – overtime, weather, multi-story, shift impact
- Improper bid forms
- Incomplete bid forms
- Forgetting to sign the bid documents
- Vague scope letter
- Chasing a competitor’s price
- Too much optimism
- Failure to review timely
- Misunderstood project duration
- Failure to include labor escalation costs
- Failure to review a previous similar project
- Insufficient overhead & profit
- Unrealistic labor class ratio
Helps to prevent bidding mistakes:
- Avoid interruptions.
- Review the Instructions to Bidders carefully
- Know the scope of work well
- Be sure to understand the schedule and completion date
- Know is phasing requirements of the project
- Obtain quotes for all equipment packages, avoid using budgets if possible
- Use a realistic labor mix
- Use a master list of bid clarifications and exclusions and modify for the project.
- Have all necessary forms, bonds, etc. ready 24 hours before the bid is due.
- Prepare scope letter well in advance
The consequences of errors and omissions are borne by the contractor, not the estimator. The true cost of a project is not known until the project is complete. If the estimated cost is equal or greater than the actual cost, then a profit is realized. If the estimated cost is less than the actual cost, then the project loses money.
The estimator has a tremendous responsibility and must strive to perform his or her duties at the highest level. Every time a contractor submits a bid, they are taking a risk, many times, a huge risk. The first line of defense in minimizing risks, is an accurate estimate and complete bid summary.
Remember, estimating is expensive, poor estimating is costly, but quality estimating is profitable.