My View on Top 10 Bidding Mistakes

Construction Cost Estimating – Top 10 Bidding Mistakes

Bidding mistakes can disrupt a company in a very serious way. Learning to identify and how to avoid them is fundamental for any construction business.

If you have been working as a cost estimator for a considerable time, chances are you found a mistake in one of your cost estimates. If you did not, consider yourself lucky. It is almost unavoidable. The important thing is to recognize that mistakes can and will happen and how to minimize the chances of making them. I heard some say that cost estimating is an art. It might be, combined with science and the right approach.

I would categorize the bidding mistakes into two categories:

1. Mistakes due to poor estimating procedures;
2. Mistakes due to poor implementation of estimating procedures.

Let’s look at the first category. Most construction contractors have a cost-estimating methodology in place. Such methodology includes, among the detailed steps in developing a cost estimate, the company’s philosophy on bidding. These are the bidding mistakes that I would include the poor estimating procedures:

Mistakes due to poor estimating procedures

1. Bidding the wrong projects. How do we define a wrong project? It is a project that falls out of the expertise area of a contractor, the tender requirements are too restricting or unclear, the competition is very stiff and, chances to win the bid are very low, the timing is not right for the contractor (too much workload already), the engineering on the project is done by a firm who does not have a good reputation, the client is too difficult to deal with (from past experience), they are not enough available resources for estimating, etc. There are many reasons a project can be the wrong one at a specific point in time. Making the decision to bid on such a project can be very costly.
2. License requirements. Some projects require special licensing for the contractors to qualify for bidding on a project. Failing to recognize such requirements can lead to wasted time and resources in preparing a bid that will not be compliant.
3. Setting up a cost-estimating schedule and resources. Proper cost estimating is done when the right resources are assigned to the task of estimating. It is important to set up a schedule to include the dates for cost estimating review(s), establish the approach to subcontractor bid management and coverage, and determine which parties will participate in the cost estimate reviews. Many times after analyzing this in detail, it becomes evident that the project is not the right one to bid on. It is not uncommon for management to decide, sometimes hours before the bid closing, that there will be no bid submission. And for good reasons. Some estimators consider that it was time wasted on their side if a decision not to bid is made after a considerable effort was put into estimating the project. I never looked at it that way. I considered it a sound business decision instead.
4. Submitting an incomplete bid. Gathering and preparing the documentation required to be included in the bid submission can be a job on its own. It is important to be realistic about the amount of time required to prepare the bid submission documentation. Struggling to put it all together hours before the tender closing creates a lot of stress and opportunities for making mistakes that can lead to the tender documentation being not compliant and the bid being disqualified.

Mistakes due to poor implementation of estimating procedures

1. Inaccurate take-offs. Mistakes in measuring the quantities are not all about errors in making such measurements. Such errors are not very common, from my experience. Certain measurements are often omitted due to a lack of understanding of construction procedures. The estimator should do the first review of the cost estimate with field supervisors and project managers who have experience in delivering similar work. Any missing quantities will be caught, and the potential mistake will be avoided.
2. Not issuing requests for clarifications to the bidding authority. The tender documentation often leaves room for interpretation or is not seen as complete. It is the cost estimator’s responsibility to seek clarifications every time there is insufficient clarity.
3. Failing to visit the site or make the proper observations at the site visit. Most contractors have a template for the estimator to fill in during the site visit. Many clues can be observed and later addressed in the cost estimate, which cannot be seen unless the cost estimator has a proper checklist.
4. Not using the correct production rates, type of resources and lack of proper understanding of construction schedule. Production rates are among the most common mistakes in cost estimating. And rightly so, how can someone know if the performance on a past project can be replicated on a future one? Weather, site conditions, and other project-specific conditions must be properly identified and discussed with the cost estimate review team. Another area where mistakes are made is the project duration. Costs associated with project duration can easily be under or over-allocated. It is essential for the cost estimator to master the skill of preparing a preliminary construction schedule and developing all duration-related costs based on such a schedule.
5. Failing to properly review bids from subcontractors. Closing a tender is hard work, and when you work against the time, it creates stress that can lead to missing important information on bids received from sub-contractors. Ask subcontractors to submit their bids without pricing before tender closing is good practice. This can give the cost estimator the time necessary to adequately review the inclusions/exclusions of each sub-contractor and adjust the cost estimate accordingly. It is also common on bid closing on larger projects to have a team working with and assisting the cost estimator.
6. Failing to develop a risk and opportunities register. Risks can be easily overlooked and opportunities missed. Identifying and pricing risk is initiated by the cost estimator and reviewed and finalized by the cost estimate review team. Opportunities are following the same path.

Preparing and submitting a tender is not an easy task. It requires a lot of guided effort, attention to detail, the ability to remain focused, and keeping high performance under stress. Making mistakes in a bid proposal can devastate the company and the person who makes them. This is why following good practices reduce the risk potential and increases the probability of winning the right project at the right price.

What is your experience with bidding mistakes? What other causes of making mistakes can you identify?

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