Using Technology to Fix the Construction Bidding Process
Understanding the problems with the construction industry's bidding process is crucial to finding out why the industry's profit margins are so low.
Low margins and financial fragility in the construction industry are infamous - and many offer reasons as to why they exist. But in reality, owing to the deeply flawed nature of construction tendering and bidding, many projects will see financial failure before they even start.
Due to time constraints from the very beginning of a construction project, tender and bidding documentation is frequently incomplete or incorrect. This was proven in our recent survey, where we asked construction professionals what were their main challenges when it came to participating in tenders. ‘Insufficient time’ and ‘incomplete information’ were the two most common answers.
The final project can end up being radically different to the one proposed in the tender documentation - with every ambiguity and contradiction in the original documents potentially amounting to delays, disputes or both. This contributes significantly to the adversarial spirit which characterises the construction industry, first noted in the Latham Report nearly a quarter of a century ago.
The poor quality of bidding information, and the manual processes which underpin construction tendering and bidding, means that construction companies often bid for work they’re ill-suited to, and can’t deliver on, simply because they have no way of knowing otherwise. It’s incredibly difficult (if not impossible) for companies to accurately determine which projects are worth bidding on, since working with inadequate models and information takes up so much time. And so, they bid anyway - frequently under-pricing their work - simply to try and compete.
Impact on Cost of Construction
This all means that the cost of bidding is phenomenally high, with 1 in 5 companies reporting costs of over $100,000 per bid - owing largely to the amount of time spent on bid preparation. Some contractors have reported win rates as low as a paltry 1 out of 35. And, considering that over a quarter of companies work on just 1-4 projects per year, it’s clear that the whole industry is desperately in need of a better way of working.
Check out the video below to find out how Kreo supports the bidding process...
BIM-based Tendering & Bid Pricing from Kreo
We’ve designed Kreo to deliver that alternative. Part of our revolutionary software is an online tendering and bidding platform. It allows bid managers to price bids and get pre-tender estimates within days - breaking the whole project into work packages, and grouping activities by trade. They can then adjust this information quickly and easily.
Kreo's online platform can launch RFQs, RFPs and tenders - and you can invite bidders by email.
After receiving the bids, Kreo compares and ranks them - then allows you to shortlist and notify winners all within the portal. You can even check the impact of the winning bid on the project master schedule and cost budget.
And it creates a number of significant benefits for contractors and subcontractors in particular, including:
- Enabling you to be more selective about the work you bid for - basing decisions on real intelligence about the full extent of the work and its scope.
- Enabling you to price work properly and fairly.
- Giving you more time by using automation to suggest more changes to optimise the project.
Read more about how Kreo's automation will solve the problem of 4D & 5D BIM in our ebook (below), or get a free trial of Kreo Plan.