How Contractors Can Begin Bidding on Bigger Projects

The construction industry is one of the most volatile and competitive industries in the world. Companies find themselves competing head-to-head, bidding on jobs to see which company will have the privilege of completing them. For small construction businesses that are just starting out, finding appropriately sized bids that fit their abilities can be a challenge.

For those that have been in the industry a while, it can be difficult to know when it's time to start competing for larger bids. How can business owners know when it's time to take the leap?

What Makes Large Projects Different?

First, what makes large projects different from the small ones that new companies may have been tackling up to this point? Here's a hint: It's not just about the size of the project.

Large construction projects have more players with their fingers in the pie. For small projects, companies may only have to deal with the owner’s ideas, requests and demands. Large projects leave construction businesses contending with owners, stakeholders, city planners, zoning boards, investors, engineers and architects, to name just a few.

More players make decisions take longer, and every change to the design or the bid has to be approved by a committee before it can be implemented. These projects also have higher stakes and higher penalties for mistakes and missed deadlines, which can cut into the company's profit margins. So when are small construction companies ready to start playing with the big boys and bidding on larger jobs?

Take Care to Understand the Costs

One of the first things companies need to consider is whether they truly understand the cost of putting one of these large projects together. Most companies—even large ones—don't. More than 40% of construction companies don't track their costs or even understand them, which will jeopardize more bids than simply being underbid by a competitor.

This tip doesn't mean small companies need to spend more time at the calculator. Instead, it means they should focus on reducing costs by improving productivity. Reducing overall costs by just one percent can improve your ability to win even large construction project bids.

Managing Equipment Needs

Next, companies should be asking themselves if they have all the equipment necessary to complete the job. Purchasing new equipment for a single bid will cut into the project's profit margins, making it difficult to keep the company in the black as it explores larger bids. Renting specialty equipment or equipment the company hasn't purchased yet can help preserve profit margins while giving the business the ability to complete the project.

Right now, nearly half of all construction equipment is rented—even those being used by the big companies. Don't disregard the idea of renting equipment when bidding on larger projects. If a company is on the edge, review the project and calculate the predicted utilization rate. Experts recommend purchasing machinery only if a business can use it for at least 60% of monthly working hours.

Sometimes renting short-term equipment can make all the difference, allowing small companies to bid on big projects without worrying about drowning in equipment dept.

Don't Just Focus on the Largest Customers

Don't make the jump from small, single-customer projects to ones for large corporations. Doing so will lead to disappointment, as most of the big companies already have contracts with the competition. Instead, focus on the middle market and underserved customer segments. Many of these clients are supporting large projects but are overlooked because they aren't as big as some of the large companies waving their project details in the breeze.

Don't overlook the potential in these middle-of-the-road clients. They can be a great way for small companies to preserve profit margins while building a portfolio.

Mind Any Mistakes

Nothing will destroy a small construction company's chances of landing a bid with a big client faster than mistakes on either the bid or the jobsite. Before any company starts making bids on larger projects, they need to make sure all their ducks are in a row.

Take the time to create a database-driven catalog of all project-related costs. Having a digital database will make it easier to estimate potential costs for any given project while keeping potential errors to a minimum. It will also make it easier to spot any mistakes before the bid gets sent to the client, saving the company untold embarrassment and preventing a simple typo from costing them a bid.

Don't Give Up on Bigger Bids

Making the leap and bidding on larger projects might seem intimidating, but once a company has the team, the means and the equipment to handle these new construction projects, bidding on them is the next logical step. Don't give up, don't just focus on big companies and don't make any mistakes if possible. Bigger projects come with bigger risks, but they also offer bigger rewards and better profit margins, so it's a leap that any company should be happy to take.