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Posted by: Phil Fogliani on 12/17/2014

Five Factors in the Contractor’s Decision to Bid on a Project

Five Factors in the Contractor’s Decision to Bid on a Project One of the toughest decisions a contractor must make is whether or not to bid on a project. It is also one of the most important decisons. The temptation for a construction contractor is to go ahead and place a bid on nearly all projects in order to keep adding to the pipeline and to keep work coming in. After all, idle time does not pay the bills for a subcontractor.

However, bidding on a commercial construction job that is not suitable for your company can result in costly consequences. The ramifications are not limited to only financial either. Your company's reputation is on the line, and you do not want to risk hurting your credibility. That could be more painful than the initial financial consequences.

Passing on a project bid can sometimes be the best decision. So how does a hard working contractor know when not to bid on a job? As you may have expected, there is no black and white clear cut answer to this very important decision. However, there are some things you should consider after you review the project and have the bidding documents in your hand.

The first thing to look at is the competition. Do you know of any other companies that might bid too? How many bidders are there likely to be? Who are the bidders and how big are there companies? Lastly, are there some smaller contractors that have lower overhead/ Knowing who your competition is will play a big part in the decision to bid or not.

After reviewing the competition, the next step is to consider the nature of the job. Does your company have previous experience doing the same work? If not, is the company capable of completing the project? If there is previous experience, what can be learned from it as it pertains to this project. For example, what would you do differently to improve efficiency? Lastly, are the company's project managers prepared for the project and all that it will entail?

The third determining factor should be the current market conditions. For this, considerations should include how long the project is expected to take and what potential unknown factors could cause problems. Also consider labor rates and other prevailing economic conditions as well as cost of materials.

The next step is to consider your company's experience with this owner or architect. If there has been previous work completed for them, was it a positive experience with a satisfactory outcome. How is the relationship and who are the key players? Is your company obligated to at least submit a bid due to the past relationship. Don't overlook these things when making your decision.

The fifth consideration is the almighty cost. How much would preparing a proposal cost? Is the likelihood of winning the bid worth the time and cost involved in submitting a bid? What are the realistic chances of winning the bid, and will it be a profitable project? Although some of this information is subjective, it is still critical to consider it all.

These five factors should all be considered and weighed by a contractor before spending the time and money to prepare a bid. The earlier these factors are considered, the sooner a sound decision can be made. The more time you can give to the estimating staff, the better the chances are for an accurate and timely bid.

Giving careful consideration to these five main areas of the decision process can literally be the difference between making the right or wrong decision. A successful project always begins with making a fair and accurate proposal. Making the right decision to bid or not is quite possible the single most important factor in the success of a contractor's business.

If you are a contractor looking for a powerful way to expand your business with some free advertising, take a look at CMD First Source. At CMD First Source, you can list your company for free and get maximum exposure in the contractors section of this construction directory. This is a good way to have more projects available to you. Just remember to go through the information in this article during your decision making process so that you can make the right decision on whether to bid or not to bid.