Should contractors price every project?

Many contractors submit bids for literally every project that crosses their desk. This often means the estimating team works long hours, and bids are poorly put together with errors, poor presentation and little thought into ways to make the bid more attractive to the client. In addition contractors may end up winning the wrong project.

Contractors should focus on bidding for the right project, and then put all thought and effort into submitting a winning bid.

So what is the right project?

There are many factors to consider which include:

The client – some clients don’t pay well or are difficult to work for. Contractors should put their good clients first.

The size of the project – some projects may be too big while others may be too small for the company (the contractor may not be able to obtain the bonds for a large project, they may not have the resources or they might not have cash reserves to service the cash flow).

The project location – the further away or more remote the project, the more effort and time it takes to manage.

The proximity to other projects – if the contractor is working on other projects near-by there may be possibilities of sharing resources.

The resources required for the project – the contractor may have staff available, but not qualified or experienced for the particular project.

Payment conditions – can the contractor sustain the cash flow for the project (some projects hold large retention amounts or have lengthy payment terms).

The project schedule – can the contractor complete the work in the time specified.

The bid or tender procedures – The contractor should target projects where the client negotiates with the contractor or where they request a select number of contractors to tender. Open tenders, where any contractor can bid may result in dozens of contractors submitting a price which makes the tender process very competitive and difficult to win.

The current market conditions – if there is a general shortage of work the contractor may not have a choice on what to bid for.

The project’s risks – Does the contractor understand the risks and can they take mitigating action to prevent the risk happening, or sustain the risk event should it eventuate.

The complexity of the project – complex projects have higher risks, and usually take more management time.

Can the contractor make money on the project?

Many companies have been destroyed because they won the wrong project at the wrong price.

Sometimes the contractor should decline pricing a project.

Read ‘Building a Successful Construction Company’ for more on this topic.