In the construction bidding process, clients have to make several interdependent decisions based on the limited information on a contractor. There are different bidding strategies in construction projects, and the client needs to know how to analyze the bids appropriately and choose the best-qualified contractor.
Refining the bid analysis process helps clients find the best contractor for their projects. Let's explore.
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Bid analysis involves examining bids after the tender submission deadline. It helps identify the most suitable offer that meets the client’s needs.
When conducting bid analysis, the client should consider their objectives and project-specific criteria such as safety, security, maintenance, and durability. The bidding parties should present clear and organized bids to make sure their proposals are comprehensible and improve their chances of success. The evaluation process has many components, and the client needs to combine various standards into one evaluation scale.
Projects aim to add value. Bid analysis can help you identify a company’s contribution to a project. Evaluating a bid involves considering metrics such as expected project quality and projected cost.
The lowest bid isn’t always the best option. It’s wise to go through the bid evaluation process to get the most value from a bid.
The bid analysis process takes place in four stages. These are:
The client’s team will evaluate each bid during the preliminary stage. They will check if the bid is signed, has the necessary security, and contains no omissions or errors. Additionally, they will assess if the documents meet all legal and tax requirements. Bids that do not meet these conditions will not advance to the next step.
The second stage is to assess if the bid meets the technical requirements for the project. These include the material quality, delivery timeline, scope of works, warranties, and the bidder’s experience. The technical specifications vary depending on the project.
The next step is price evaluation. Here the main evaluation point considered are costs and their influencing factors, such as unit pricing, labor rates, labor hours, overheads and profits, price lock (the duration price is guaranteed), material costs, quantities, and quality.
The panel takes provisional sums and discounts into consideration. If the bids are in multiple currencies, they are converted to a single currency based on exchange rates from one source.
The evaluation team arranges the bids from highest to lowest price. They also create a price analysis to determine if the bid prices are reasonable in relation to the current market.
The last step is post-qualification. It only applies to the winning bid. The evaluation team must do their due diligence to ensure the bidder provided accurate information and met all prequalification requirements.
After receiving the solicited bids, you can start the bid analysis process. The bid analysis process has various evaluation criteria depending on the type of bid. Below is a breakdown of the bid analysis process:
Project owners break down their projects into packages and then advertise for bids. They usually require bidders to submit proposals in two parts – a technical and commercial bid.
The technical bid analysis evaluates the bidder’s documents to see if they meet the client’s technical requirements. These include quality, experience, operating costs, specifications, execution capabilities, performance penalties, and other requirements such as compliance checks, licences, and workforce sources.
The engineering team and the consulting engineer assess the technical bids and decide whether to approve or reject them. They list the specification requirements and attach the bids’ technical queries, deviations, and justification lists. The client’s team evaluates the deviations and issues the technical bid analysis for final approval.
Once the engineering team determines the acceptability of the technical aspect of the bid, they move on to open the commercial part of the bids of the technically qualified bidders. This process of exchanging information between owners, engineers, and vendors is called technical evaluation or technical bid analysis.
After approvals, the qualified bidder is issued with the finalized contract specifications.
Commercial bid analysis helps you get the best cost-effective deal for your project. The assessment is based on several criteria, such as price analysis, delivery schedule, and proposed contractual terms and conditions.
The client’s cost consultant, quantity surveyor, or architect is responsible for checking if the bidders meet all the evaluation categories. This assessment ensures that all costs are adequately covered according to the bid documents. It also verifies that the bids are comparable and currency conversions are accurate at the bid time. Any price escalations or alternative methods for meeting specifications are identified and logged separately.
The evaluation team also logs extra costs such as insurance, customs, delivery fees, testing, and inspection charges. They further evaluate retentions and terms of payment.
The assessment criteria above provide an overview of the cost components to consider. If the size or quality of the project changes, bidders may need to submit a new bid.
In addition to quality and cost, the commercial evaluation of a project also considers its social value. This term refers to the additional benefits a project brings to a community. In the past, only quality and cost were taken into account, but the social value has become an integral part of a successful bid.
Economic assessments of social value may include job growth in the local area, voluntary work, and training opportunities.
Once the tendering process is complete, the winning bid is awarded the contract, and work can begin.
Below are the top basic tips for winning a bid.
Construction bidding can feel like a gamble, but you can use data to make smart decisions. Knowing the bid analysis process helps you follow the rules and increase your chances of winning the best projects.
Want to maximize the value of your digital bid management solutions? Download our eBook, “3 Keys to a Better Bidding Process” to learn how.
