Construction bidding is the process through which a general contractor (and, sometimes, an architect) is selected to work on a construction project. In some cases, the only thing that matters in the construction bidding process is presenting the lowest price to the owner; in other cases, the contractor’s qualifications are just as important—if not more important—than having the lowest dollar amount. Knowing how to bid construction jobs can make the difference between success and bankruptcy for a construction contractor.
Construction Bids vs. Estimates
Customers sometimes use the terms “bid” and “estimate” interchangeably. Contractors, on the other hand, often attach specific meanings to each word. The two definitions correspond to different parts of the process of calculating a contractor’s internal costs and defining the final price to be charged to the customer. If your construction company is aiming for larger projects or public sector construction work, the following information on estimates and bids can help.
Preliminary Estimate: Also known as a “ballpark estimate,” this helps you to assess the basic feasibility or interest of a project. Some projects may turn out to be the wrong size or involve a risk that you prefer not to accept. If so, the preliminary estimate tells you that you can turn your attention to other more attractive projects.
Square Foot Estimate: If the project looks “doable,” the next level of estimation may be to use industry-standard unit costs per square foot, multiplied by the number of square feet (or metric/square meter equivalents.)
Assembly Estimate: This refines figures and calculations by considering each separate component of a construction project. Foundations, flooring, roofing, windows, and sanitation, for example, may each require different levels of resources, compared to the general ‘one-size-fits-all’ approach of the square foot estimate above.
Final Estimate: This has the most detail and accuracy. It may involve getting written commitments from partners and subcontractors. It can then form the basis of a firm or official commitment that you make to your customer (see ‘Construction Bids’ below).
For a project to go ahead, you will need to make a firm offer to your customer. This is your construction bid. In it, you commit to providing your customer with a specified construction at a given price and often by a given date too. If the customer approves the bid, you are then expected to honor your commitment and carry out the work as described in the bid. Clearly, you need the most accurate cost estimates available in order to put the right price into your bid and make a satisfactory profit on the job.
When it comes to construction for your business, RE Smith knows how important it is to get the job done fast and get the job done right. From retail stores to banks, from industrial buildings to warehousing, our people are here to build your business. At RE Smith Construction, your business is our business.
To learn more about RE Smith Construction and the services we provide, please call our office in Joplin, MO today.