Importance of the Bidding & Negotiation Phase

Bidding

On any project, one phase that does the most to serve as a check and balance between budget and cost is the Bidding & Negotiation Phase or B&N.  Competitive bidding helps owners to obtain realistic, and with a little luck, complete bids from general contractors who will perform the work.  Without the competitive bidding environment, there is little to no incentive for general contractors to submit to an owner the leanest representation of the costs of construction.  Additionally, there is then also no way for Architects & Engineers to perform a due diligence review of the proposed costs, should an obtained bid be higher than expected.

Typically, once construction documents are completed, a bid advertisement is submitted to local newspapers, or more likely in today’s electronic world, to plan rooms and other online resources.  The length of time a project must be advertised varies from state to state and sometimes the type of project, but in most cases, two (2) weeks would be a good baseline minimum, with four (4) weeks being more realistic to allow enough time for proposed bidders to obtain and review the construction documents which will, in turn, help the resultant bids be more realistic.

About mid-way through the advertisement period, a pre-bid meeting is held on the advertised date.  The purpose of this meeting is to give the Architect & Engineers the opportunity to provide clarity to the bidders by giving a brief overview of the more critical and/or complicated aspects of a project, as well as provide the proposed bidders an opportunity to ask clarifying questions.  All questions are documented by the Architect and responses are then distributed to ALL proposed bidders to ensure there is no bid impropriety.  If the questions posed are significant enough to warrant modifications to the construction documents to respond to, a Bid Addendum or Bid Addenda are produced by the Architect & Engineers and issued to all proposed bidders.  This typically does not extend the bid due date but should be evaluated on a case by case basis.

Once all bids have been received, opened, and read, they are evaluated by the Architect and the owner.  Typically a minimum of three (3) bids are required for an accurate evaluation, however, an owner can choose to waive the minimum and proceed with any of the bids received. It should also be noted that this often comes with a bit of increased risk of cost overruns.  The Architect then takes all received bids and generates a Bid Tabulation or Bid Tab which lists all bidders, their respective bids, and any qualifying items in tabular form and makes a recommendation to the owner as to which bid to accept.  While it is often common for owners to simply accept the lowest bid received, that is not usually the best option.  Best practice in most cases is to set aside the highest and lowest bids and then choose from those in the middle which, if the documents were well-produced, will in all likelihood be fairly close to each other in value.  Owners always have the final say over which bid is accepted, however, it should be noted that accepting the lowest bid does not always provide the best value as they typically come with higher than average cost overruns via change orders throughout construction.

As Architects & Engineers, it is our duty to educate and inform clients on their options and the best way to ensure that their project is a success.  Making a Bidding & Negotiation Phase an integral part of all projects as a standard is one of the best ways to achieve that goal.

B&N matters can be pretty involved. If you would like a consultation, feel free to contact us.

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