Most construction contractors land their jobs through competitive bidding. One common step that precedes competitive bidding is the invitation to bid or a proposal request. An invitation to bid is significantly different from a request for proposals, and this article will share the information you need to know concerning an invitation to bid.
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What is an invitation to bid?
An invitation to bid is a call by clients to contractors to provide specific products or services that meet product specifications. The idea behind an invitation to bid is to give all interested bidders standardized information about the project scope, duration, required warranties, service standards, and minimum qualifications. This information makes the bidding process fair and truly competitive.
Providing project details also help the client select the best bidder at the lowest qualifying price. Giving the project details in an invitation to bid also gives the clients a detailed understanding of their need to perform.
After contractors receive the invitation to bid, they submit their bids in sealed envelopes which are then publicly opened for transparency.
How to identify an invitation to bid?
As a contractor, you probably already understand the importance of a successful response to an invitation to bid. However, an invitation to bid does not mean that your company is the one exclusively invited to bid on a project.
Almost all invitations to bid have the following specifications:
- Project overview
- Project deliverables
- Schedule summary
- Project costs
- Project scope
- Project management
Receiving an invitation to bid means that you have the capacity and knowledge to offer a particular service as you have registered yourself in a contractor marketplace. The marketplace can be a Government Service Agency (GSA) or a Business to Business marketplace.
Even if a company bids on a project that they are perfectly qualified to deliver, it does not mean that they will secure the winning bid. Winning a bid means that your company offers the correct project costs, has ways to meet project deadlines, and has the proper skill set to complete the task deliverables.
When are invitations to bid used?
There are several instances where it might be plausible to use an invitation to bid. Specific industries such as government organizations and academic institutions use invitations to bid more than other industries. This promotes high levels of transparency and helps curb corruption and favoritism.
Clients mostly use invitations to bid on predictable projects to clearly understand the processes and requirements necessary to complete the project. Some clients may also use an invitation to bid in cases where there is no significant difference in the varying products and services offered by the contractors, and the price ends up being the most critical evaluation criteria in such instances.
Unlike a Request for Proposal, the contractor does not offer additional solutions to the client's procurement and management processes. With this in mind, the contractor should understand the client's requirements and follow through with them instead of introducing new concepts. The contractor must know what exactly is expected of them.
Invitations to bid mostly end up in fixed-price contracts. Contractors are pressured to bid as low as possible, but it is essential to understand that underbidding might make it hard to cover your operating costs. An unreasonably low bid might also make it difficult for a contractor to follow all the contract requirements. As much as low prices can help you win bids, it would help if you were transparent about your expenses with the party offering the request.
Invitation to bid vs. RFP
As discussed earlier, an invitation to bid is used when the client knows what they want in a project. On the other hand, a request for a proposal is more demanding and complex. In a request for proposal, the client knows the end product they want, but they do not know the methods and specifications to be used in the project.
The RFP describes the required end product and gives out proposals on the specifications and proposed criteria for analysis. The bidders then offer the client different methods and price points to evaluate.
Since an RFP requires a lot of technical expertise, the contractor has more leeway for introducing new concepts and ideas on methods for completing the project or performing a service. Projects under an RFP lead to superior service and have a longer selection process. The evaluation process for each proposal can be tedious and drag out longer than expected. However, this front-end time spent leads to better innovation and lower overall costs.
Unlike in Invitation to Bid, price is not the only deciding factor in requesting proposals. Clients heavily weigh the quality and experience of the bidders.
After an RFP is awarded, the winning contractor is invited for further price negotiations to negotiate the best possible price for the best quality.
The most common contract type when using RFPs is the design-build contract. This is because the contractors have a hand in proposing different ways of tackling problems in the project.
How to write a bid invitation?
When looking for new contractors, writing a good bid invitation is imperative. The bid invitation should outline the client's expectations and clarify key project details such as scope and deliverables.
The bid invitation should start with the project name and the bidders' email addresses. It also includes the bid number, the bid opening, and the closing date.
The next step of the bid invitation is to list the purpose of the project and the critical project components. One should also write how the invitation is to be delivered. Primarily the bids are delivered using sealed envelopes. The bid forms should be signed and appropriately authorized by the bidders.
The invitation should also remind the bidders to bid only on the items in the designated scope of work as all additional tasks are considered separate bids.
The last step is notifying the bidders on how you will contact them if they win the bid. Usually, this is done through the bid award notice that advises the contractor about the project kick-off meeting's date, time, and location.
Receiving an invitation to bid shows that you can handle a project. Your bid proposal will act as the resume to sell your skills and make a first impression on the client. As the construction industry is very competitive, you should understand how the construction bidding process works.
An intriguing first impression to the client will make it easier for you to win more bids. Using the right tools and strategies will make your bid like a winner and help you position yourself as a competitive player in the market.