Choosing the right general contractor requires looking beyond the bottom-line price on their bid. Afterall, a lower bid price doesn’t mean anything if the bid doesn’t adequately cover all of your project requirements. Instead, it’s best practice to conduct an in-depth comparison of bids through a multi-step process commonly referred to as ‘leveling’.
In this article, we’ll take you through that process and teach you how to assess potential risks hidden in bids. By the end, you’ll be able to choose a partner for your commercial build-out with confidence.
Why Choosing the Lowest Bid is Risky
To start, let's briefly cover why you can’t just run with the lowest bid you receive.
Sometimes, in order to be the lowest bid, contractors leave out or significantly underestimate important project requirements. They may try to mask these gaps with unclear scopes so that at first glance they aren’t apparent. But once work gets underway, change orders and scope creep will send costs soaring.
Avoiding this fate requires a more detailed evaluation of your bids, comparing all relevant factors, including projected timeline, work quality, and relevant expertise. To show how to do that, we’ll break down the evaluation process into its three key steps.
Step 1: Preparing a Standardized Bid Package
The first step in comparing commercial construction bids is to solicit those bids in a way that makes them as easy to compare as possible. That’s best done with something called a bid package. This is the collective term for the documents that an owner shares with potential bidders to outline the project’s scope and the bid specifications.
Providing a high-quality, consistent bid package to all potential bidders is critical to securing the necessary data to make apples-to-apples comparisons. Here are the key elements that a comprehensive commercial bid package should include:
- A cover sheet with basic info, including:
- Company name and address.
- Project name and project address.
- Contact information.
- Bidding instructions, including:
- Submission guidelines.
- Deadline for submission.
- Site visit information.
- How to submit RFI inquiries.
- Bid evaluation criteria.
- Contract award timeline and procedures.
- A scope of work that:
- Concisely summarizes the project.
- Specifies the work you’re soliciting bids for.
- Details the practical and administrative responsibilities of each stakeholder.
- Defines the standards and quality expected of the work.
- Details any special circumstances regarding the site or project.
- Construction drawings of:
- The existing site.
- Architectural plans.
- Structural plans.
- Systems plans.
- Any specific format that should be used when submitting bids.
Step 2: How to Level Construction Bids
Once you have your bids in front of you, the next step is to level them for easier comparison. The simplest method for leveling is via a table or spreadsheet, where all of the bidding companies are laid out on one axis, and all of the relevant work items are on the other.
There are also several dedicated programs that can be used to automatically generate a matrix and display a side-by-side summary of each bid.
Regardless of which method is used, the result is a true apples-to-apples comparison of your options.
Below is a simplified illustration of how a bid levelling table works:
| Millwork | $25,000 | $24,000 | $10,000 |
| Electrical | $10,000 | Not Included | $9,000 |
| Carpentry Hours | 100 | 110 | 30 |
| Plumbing | $15,000 | $17,600 | $6,000 |
| Total Cost | $50,000 | $41,600 | $25,000 |
This method is superior to a simple price comparison in numerous ways. Most notably, it:
- Lets you easily highlight what’s missing from a given bid, like the electrical missing from General Contractor B’s bid in the example table. This helps shed light on exactly what’s been excluded in potential lowball bids.
- Shows differences in estimated labor hours, such as how General Contractor C appears to be underestimating compared to the other bids in the example table. This can help you spot bids that are off-the-mark in their calculations and likely to require change orders later on.
- Shows differences in allowance numbers, like how General Contractor C appears to be underestimating the scope of plumbing compared to the other bids in the example table. This makes it easier to flag bids that may be under or overestimating a given line item.
Step 3: How to Choose the Right General Contractor
Once all bids have been leveled and you’ve got your top choices in front of you, the final step is to factor in the differences between the contractors themselves.
Evaluation criteria during this step can include:
- Do they have a portfolio of projects of similar complexity?
- Do they have a portfolio of projects of a similar type?
- Is their Experience Modification Rate (EMR) 1 or less?
- Is the firm financially stable?
- What types of risk management & pre-construction services do they provide, such as:
- Constructability reviews?
- Utility checks?
- Site logistics planning?
- Do they provide lender-grade cost reporting?
Minimize Risk with a Well-Vetted Bid
The fact of the matter is that when you choose a general contractor, you’re always taking a risk. But with a robust bid vetting and comparison process, you can whittle that risk down to almost nothing. That’s because the process will systematically expose bids with unrealistic or dishonest projections, making it easy to identify a general contractor that knows their stuff and will handle your project right, right from the start.
At Diversified Construction, we are devoted to transparency, accuracy, and quality at every stage of the building process, from initial bid to final punch list. Contact our team today to find out what we can do for your next commercial build or renovation.
