The Cost of Bidding

Cost of BiddingThe cost of bidding any given project is more involved than most people might imagine. There are great risks involved with investing time and money in a bid, but the potential reward for being awarded a project is much greater than the risks involved.

A company may invest a month or more estimating a particular project, yet still have the potential to not receive the final award. It is the company’s decision to invest the time and money in an estimate in hopes that the initial investment pays off. The individual in charge of any given project is not required to pay any of the contractors who submit a bid for their project, which is one of the potential risks of bidding. However, the risk can be significantly lowered by attempting to be the company to provide the lowest electrical bid for the project. Ultimately, the company who provides the overall lowest electrical bid will be the company awarded the project.

Effective communication is crucial for meeting the quick turn-around process associated with bidding projects. Different companies have different departments involved in the bidding process; from the initial contact of finding out about a project, to the team of employees who will each be involved in each opportunity. The departments involved could include anyone from estimators to project managers, marketing, safety, contracts and risk management, company executives, or even the owner of the company. In addition to all of the above members, an administrative assistant is critical to the success of a project. He/she is typically responsible for funneling all incoming calls regarding a given project to the proper party.  

Another expense for the company is obtaining the actual bid documents. These documents require a fee. In previous years, these bid documents were either a refundable deposit (if the project was not awarded to the company), or they were paid by the company that would be inviting a bid on the project. An invitation to bid may include receiving an e-mail with a link to the documents involving the bid opportunity. Management is then responsible for downloading and reviewing the files to determine whether the company will bid on the project. If the company decides the bid is worth pursuing, then an individual in the estimating department would need to plot out the plans and specifications of the project’s overall cost.

This process can be quite costly depending on the project size. Some projects can have drawing counts in excess of 1,000 pages, and specification books the size of multiple phone books. Outside suppliers would then receive the project’s bill of materials from the company’s estimating department, containing the list of materials needed to complete the project. The bill of materials is an expense list for the suppliers who have to price up items such as: the light fixtures, switch gear, generators, fire alarm systems, etc.

The industry average of being awarded a project is approximately one out of every ten bids. Therefore, the bottom line is to enable the company to consistently bid on potentially successful opportunities.