Bidding for a major construction project is a huge commitment—the larger the project, the greater the exposure to risk. Companies capable of delivering on time and on budget can profit immensely, but missed milestones can quickly add up in the form of liquidated damages that eat into profits, and leave a project deep in the red. Risks left unaddressed in the bidding process can easily result in enormous losses. How can general contractors and developers bidding for big projects reduce their exposure to risk? Here are five tips for navigating this perilous process and for laying the groundwork for successful bids.

Identify potential risks from the start

It should go without saying, but creating an accurate bid hinges on the identification and prioritization of potential risks. Incomplete construction documentation, accelerated timelines, site conditions and safety concerns should all be factored in from the start. Potential change orders, delays or increased material costs should also be considered. Once identified, those risks should be assessed for probability of occurrence and potential impact to the project. For example, in a geographical area where hurricanes are likely, delays due to weather would be categorized as high-probability/high-impact. Prioritizing potential risks from the probability/impact perspective will highlight areas of focus critical to creating an accurate bid.

Accurately forecast the financial impact

Before moving forward, calculate the potential impact to project costs, should any of the identified scenarios occur. How much time, money or manpower might be required to effectively manage each risk? Using an artificial intelligence-based tool for construction project management can help general contractors run the numbers for each scenario, and accurately assess the impact to project cost. The insights gained from this approach will not only inform a more accurate bid, they can be used to sidestep projects which may be doomed from the start—or proactively reveal the best approach to risk management or mitigation, before a contract even begins.

Proactively mitigate risks

Armed with the information gained above, general contractors can proactively determine the best approach to inherent or potential risks. Are there areas in which risk might be effectively avoided, eliminated or transferred back to the project owner? Can accepted risks be reduced, mitigated or proactively managed through careful planning? To use a simple example, if extreme shipping delays from an inexpensive international supplier are a high probability/high impact risk, a general contractor might assess the impact of delayed delivery to the project timeline against the impact of sourcing through a more expensive domestic supplier—and then build the expected costs into the project bid. By leveraging today’s AI-driven technology, general contractors can proactively assess alternative approaches at record speeds, identifying actionable pathways to managing or mitigating potential risks, before a contract even begins.

Build contingencies into the bid

To call back the example above, a delay in materials shipping might be unavoidable, but a delay to the project timeline may not be. A contingency plan built into the project bid might allow for local sourcing of materials at a premium rate, when delays of a certain length occur—or allow for adjustments to liquidated damages, when shipment delays occur due to extenuating circumstances (such as those experienced during COVID-19). Accurate costing is critical, so using the right tools to forecast financial impact and draft your approach is key, but the use of an AI-driven solution can reveal hidden costs quickly and easily.

By incorporating contingency planning, general contractors can not only deflect the financial impact of risky scenarios, they can emphasize their expertise and value to project partners. Integrating risks and uncertainties into the project bid provides a clear overview of their impact to timeline and cost. Detailing possible project challenges, paired with plans for addressing their potential impact, demonstrates a general contractors preparedness to handle issues as they arise.

Track project costs

Embrace technology that supports accurate and effective tracking of costs from project to project. This will not only streamline the bidding process, saving valuable time and resources, in future—over time, it will provide a comprehensive, birds-eye view which can inform future strategy. Does a particular subcontractor tend to fall behind schedule? Which suppliers might deliver ahead of schedule? With the right technology in place, tracking project challenges and their impact to cost across an entire portfolio reveals deeper insights and details.

Armed with accurate, comprehensive data regarding cost and completion, general contractors can quickly and effectively identify the challenges most likely to occur on specific project types, estimate and prioritize their financial impact, and determine best practices for use in future projects. Those with an excellent track record of project completion can include hard data with future bids, proving their ability to execute on time and within budget—no matter the risk.