Most construction contractors land their jobs through competitive bidding. One common step that precedes competitive bidding is the invitation to bid, also called a proposal request. An invitation to bid is significantly different from a proposal request, 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.
Steps of an Invitation To Bid
Invitation to bid follows steps that allow contractors to submit a proposal that enables them to carry out construction for an available customer. The bidding process involves the following;
Bid appeal is the first step, where the owner asks for bids after providing project specifications, documents, and drawings to interested contractors.
All contractors interested in the construction project must submit their bids to the client in sealed envelopes and then await review. A contractor should only accept some calls to bid but must ensure that their bid aligns with the client's requirements.
The purpose of a contractor or a bidder is to convince the owner that they are the perfect candidate for the construction project. After receiving all the bids, the owner reviews them to select the contractor that suits the project requirements.
In some construction projects, the general contractor can acquire bids from subcontractors to get the most profit out of a project. The general contractor will come up with a construction submittal for the subcontractor. This process happens after winning a bid, where the general contractor can choose whether to involve a subcontractor or not.
Contract formation: This is the final phase in the bidding process. The contractor and client finalize the legal grounds for the project and enter a contract.
How To Win an Invitation Bid
Contractors can be quite competitive when bidding to owners. To increase your chances of winning a bid, a contractor should;
Understand the bill appeal
All contractors should understand the call to an invitation by going through the requirements given by the owner on the construction plan. Contractors should read bid documents and check for drawings to have the correct cost estimates.
A contractor can ask questions if they need any clarification. This enables them to have a clear guide of what the client wants.
Conduct an assessment of the construction
After receiving an invitation to bid, a contractor should assess the project's size and needs. They should opt for another bid if the project exceeds a contractor's expertise and resource scale.
The trick to winning a bid is ensuring it aligns with all the construction project requirements without compromising quality.
Do an estimate of the price.
Perform a comprehensive cost estimation by breaking down your costs and optimizing your profits. A contractor would rather lose a bid than get one to incur losses. Do the math and make sure you don't underbid.
When submitting your bid, note whether you will subcontract or not. Subcontracting reduces your average costs, which can help you increase your chances of winning the bid.
How to identify an invitation to bid
As a contractor, you probably already understand the importance of successfully responding 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 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 they are perfectly qualified to deliver, it does not mean it 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 deliverables.
When are invitations to bid used?
There are several instances where it might be plausible to use an invitation to bid. Certain 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. The price ends up being the most critical evaluation criterion 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. If you're transparent about your expenses, it will help you win bids. The pressure for contractors to bid as low as possible might make it hard for them to cover operating costs. An unreasonably low bid might make it difficult for a contractor to follow all contract requirements.
Pros of an Invitation To Bid
Below are some of the pros of an invitation to bid:
- An invitation to bid allows contractors to be part of construction projects. It saves time as clients and construction jobs are available.
- It bid allows owners to choose the most suitable bid from different contractors.
- It simplifies the procurement process since the client can directly acquire bids for the construction.
Cons of an Invitation To Bid
An invitation to bid has a few downsides. They include;
- In most cases, bidders with the lowest bids always get construction jobs. This can influence contractors to use cheaper and low-quality material that does not meet the client's requirements.
- The bidding process takes a lot of time, from bid appeal to contract formation. This can discourage upcoming contractors from submitting their bids.
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 need to 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 to introduce new concepts and ideas for completing the project or performing a service. Projects under an RFP lead to superior service and a longer selection process. Evaluation for each proposal can be tedious and drags out longer than expected. This front-end time spent leads to better innovation and lower overall costs.
Unlike Invitation to Bid, price is one of many deciding factors 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, opening, and closing date.
The next step is to list the purpose of the project and the critical components. One should also write how the invitation is to be delivered. The bid forms should be signed and 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 how they will be contacted 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.
- An invitation to bid is a way for an owner to get as many bids from contractors as possible for a construction project desired.
- Steps of an invitation to bid include; bid appeal, bid submission, bid selection, subcontracting, and contract formation.
- A request for a proposal is more complex than an invitation to bid.
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 a winner and help you position yourself as a competitive player in the market.