Preparing a Bid Construction is a critical process that demands detailed planning. The more thorough you are, the greater chances you will have of getting your bid approved. In simple words, bidding in construction is the process of creating a proposal. This proposal will demonstrate that you can efficiently carry out the construction project.

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An Explicit Explanation of Bidding in Construction

It is the process of estimating the complete costs associated with a construction project. The overall costs are determined with the help of information provided by a client and an assessment of construction documents.

These bids are usually created by contractors with the occasional help of a cost estimator for accurate bid development. So, when a client outsources a construction request, the contractor will prepare a bid estimate for that construction project.

Elemental Constituents of Bid Estimate in Construction

Now that you have a brief overview of what bidding in construction is, let’s learn about what core elements of Bid Estimate in Construction.

Direct Expenses 

The most basic element that is included in a bid estimate is known as direct costs. These are the costs that will be directly attributed to the physical construction process. These costs encompass the following:

Subcontractor Costs

A bid estimate is typically created by a general contractor. The first thing they do is include the cost of specialist subcontractors. Depending on their need, it can be for MEP systems, drywall, roofing, etc.

Construction Materials Costs

Each component that will become part of a building will be classified as a material. In addition to all the materials costs, the cost of MEP systems will also be added in a bid. A contractor may acquire the help of material takeoff and MEP Estimating Services.

Cost of Labor for Construction

The next step in preparing a bid estimate is to determine the cost of labor. This cost is determined by evaluating the scope and time duration of a project. Determining these two will help you to deduct the total labor costs.

Equipment Cost for Construction

To assess the cost of equipment for a construction project, the first thing that needs to be done is to know the construction scale. This is because the machinery needed for a commercial property is completely different from a residential project. Where a commercial project may require heating machinery, thus adding more to the expenses.

Also, if it is a commercial project, then it is appropriate to get expert Commercial Estimating services. They will devise a structured plan by evaluating many factors, one of which is to know what will be more effective between owning and renting equipment. 

Indirect Expenses

These are the kind of expenses that are not directly associated with the physical construction process. This is because they act as a support to the direct expenses. 

While preparing a bid estimate, it is essential to add these expenses. This is because excluding them would significantly compromise the prospects of desired profitability for a contractor.

Here are a few examples of indirect expenses that will help you gain a better understanding:

• Administrative
• Temporary site facilities
• Safety gear
• Insurance
• Permits
• Inspection and Quality Assurance
• Transport and fuel

Also, in construction, an unexpected event can occur at any time. So, to deal with such events, a contractor includes a reserve fund that helps tackle any unforeseen situation.

So far, we have provided you with the information about what are the essential components that must be included in a bid estimate. Now, let’s explore the most common classes of bid estimates.

The Classes of Construction Bid Estimate 

The following are the most commonly used classes of bidding used by contractors:

Stipulated Bidding

In this bid estimate, the contractor will provide a total fixed cost needed to complete the project.

Cost Plus Bidding

This bid estimate involves reimbursing the contractor for the actual cost with an agreed-upon fee.

Unit Price Bidding

The most detailed bidding estimate in which a contractor will provide the price of each category of construction element is installed.

Now, coming to the second part of the topic at hand!

Why Bid Estimate Matters in Construction?

The discussion ahead will explain why a bid estimate holds such great importance in construction.

Bid Estimate for Contractors

This will help contractors in the following ways:

It Makes You Prominent

A bid estimate prepared comprehensively will make you stand out among the competition. Thus, increasing your chances of winning.

It Boosts Profitability

The estimate will help you achieve the desired profit margins for your business growth. Note that if a bid is too low, then a contractor will surely lose money, and if it’s accurate, then it can lead to desired profits.

It helps in managing resources

The more detailed your estimates are, the more efficiently a contractor can manage resources in construction.

It elevates risk management

Bid estimate also contributes greatly towards strategic risk management. It will help you identify any potential risks, thus leading to informed decision-making about whether pursuing an objective would be feasible or not.

Bid Estimate for Owners

Here’s how bid estimates help project owners:

Budgetary preparations

Bid estimates will help owners to understand how much financing is required or will be enough to carry out the construction.

Contractor comparison

An owner with multiple bid estimates can choose the contractor who offers promising results with the most cost-effective approach.

Spending Limit

Depending on which bid estimate is chosen, it will become the spending limit for a construction project. Thus, it gives more control to the project owner.

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End Notes

Wrapping it all up, a Bid Estimate is more than just a proposal document. It is an in-depth evaluation of how much a contractor understands the project. Also, construction is that type of work where risks are higher and can happen without warning; bidding is becoming a necessity. Furthermore, with the help of this article, you can gain insight into some of the most useful information about what goes into preparing a bidding estimate for a construction project.