Bidding 101

BIDDING 101

Construction firms are faced with the task of how to bid a job almost immediately.

So how do you bid a job?

Basically, a construction job should be based on your needs/goals for:

• Labor - Compensation for yourself (what you would be paid as an employee for your work as a contractor) and employees. Also, don't forget to include sub-contract labor, as well.,
• Overhead expenses to cover your non-job related business expenses like the employer's share of FICA taxes, administrative staff expenses, office supplies/utilities, internet/phone charges, advertising & marketing, insurance, office rent, vehicle expenses, etc.,
• Materials costs and other job-related costs like renting tools or equipment, and
• Profit, which is designed to recoup your investments in fixed assets and to provide a return on the use of your capital in your small business.

I would recommend arriving at a type of billing rate to cover your direct labor for the job, the overhead and profit. Remember, to divide by the anticipated number of hours worked on jobs for the chosen period, not the total number of hours worked! This billing rate will be multiplied by your estimate hours for the job plus direct materials and other job-related costs. The bill rate can be used for all jobs unless there are significant changes to direct labor, overhead and the desired and realistic profit estimated. Unlike professionals, who use their billing rate when quoting rates to clients, a construction company can and often should use more discretion.

Also, a range of "billing rates" can be used from a ceiling to a floor. The floor rate may be used on a short-term basis to get experience and cover costs in lean times while the ceiling rate is at your premium rate for work you like and do the best!

Then after bidding a job, it is important to "check" that against what the market will bear and also your billing process will likely need to be tweaked after you determine if you are getting jobs too easily or if you aren't getting any. Your costs may frankly be too high, your estimate of expenses could be wrong or profit may be too fat or thin.

A few resources to help are:

• The Contractor's Group at www.thecontractorsgroup/lets_start_bidding.htm
• A solid, but short guide on submitting a construction bid can be found at www.wikihow.com/Write-a-Construction-Bid.