How to Decide Which Construction Jobs to Bid On: A Subcontractor’s Framework for Choosing the Right Projects

Quick Answer

Decide to bid on construction jobs based on a combination of project evaluation factors, including whether a project would offer a profitable return based on the amount of effort you put in, and if you have the time and capability to bid on it. 

Why Not Every Job Is Worth Bidding

Understanding that not every job is worth bidding is a responsible business decision. While it may feel beneficial to bid on as many projects as possible, the real position of leverage lies in the ability to prioritize the bids that you are most likely to win. Knowing which projects to bid first and which ones to bid later if you have capacity remaining ensures you spend your time wisely on the bids most likely to yield a win.

Having a strategic, repeatable process for how to decide which construction jobs to bid on is important for the strength of your business so you aren’t expending more resources on bidding than you will actually return from winning the project. The most effective construction contractors have a strong project evaluation process, knowing which projects are worth bidding on first and which to bid later to preserve time and resources for bidding opportunities that might be even better. 

It’s critical to make decisions based on meaningful business outcomes and established criteria for project fit, not gut feel. Establishing clear criteria for bid/no-bid decisions empowers you to move faster and win more bids, and the right tool can help you get quicker answers on how well a project fits your preferred bidding criteria.

The Real Cost of Preparing a Bid

Because the costs of preparing a construction bid are often difficult to quantify, bidding can feel like an abstract process rather than one with tangible business costs. However, if you are consistently spending resources on bids that don’t win work, that money is a lost opportunity that could have been more effectively allocated to another bid that was a better fit.

Consider these expenses:

• Time costs – The amount you are paying for the labor hours spent on bidding.
• Software costs – If you use a subcontractor bid management software to help you, it’s important to consider the costs (although the return on investment may outweigh the costs).
• Opportunity costs – The energy you spend on any given bid is energy that you could be spending on another, so it’s important that you use your time on bids that are the most relevant for your business.

For example, if an estimator costs $60 per hour and a bid coordinator costs $30 per hour, and each spends 5 hours preparing an accurate bid and estimate, the labor cost alone is $450. Scaling this to 10 bids that are not the right fit can result in $4,500 in wasted labor — before factoring in the opportunity cost of projects your team chose not to pursue.

Cost of a bid = (Estimator hours x Hourly rate) + (Support hours x Hourly rate) + Opportunity cost

Build a Repeatable Bid/No-Bid Framework

A bid/no-bid framework is a consistent internal decision-making process used to assess whether a bid opportunity is worth bidding on. A shared set of consistent criteria allows you to make an impartial and consistent decision about what to bid on rather than making decisions based on emotion, gut-feel, what you found first, or pressure to find work.

Establish your project evaluation framework with clear criteria, such as the project scope, inclusions & exclusions, contract terms, the relationship with the general contractor, your team’s capacity, and the value of the bid. Then log your decisions to determine whether they paid off and assess whether your framework is accurate for future projects, or if there are elements you should add or modify. And you may need different evaluation checklists for different types of projects, and/or layers of checklists for different categories of evaluation.

PlanHub’s Project Fit feature allows subcontractors to set up multiple checklists of custom questions that get pre-answered for every opportunity, so you can see the answers ready and waiting for you when you open any project. With a majority of the research done for you, you can make swift decisions and start on the bid opportunities you feel are a better fit for you.

The 6 Factors That Should Drive Every Bid Decision

Having a consistent foundational project evaluation checklist streamlines your decision-making process and allows you to quickly measure each opportunity for business fit. Knowing which factors to review up front helps you quickly decide which projects to bid on and which to pass on to maximize success.

1. Trade & Scope Match

You can choose to be even more thoughtful by considering not just trade and scope, but also what types of projects exist in your team’s wheelhouse. Perform a brief plans & specs review to ensure that the project aligns with the types of jobs your business performs well. Being thoughtful about bids protects your margin and your reputation, ensuring you are only aiming for work in your wheelhouse.

When your bidding team finds its stride, you can stand to only bid on the jobs that meet very specific criteria. Your experience in such jobs and the ability to perform them well will support a consistent workflow, even if you aren’t submitting the highest volume of bids. 

2. Client & GC Relationship

Evaluate your relationship with the client or general contractors to determine whether you might have an advantage due to pre-existing relationships. Review any past historical interactions with the bidding general contractors to review the following before bidding:

• Payment history, whether there are payment delays or payment disputes 
• Communication style and history
• Your historical win rate and communications with the general contractors
• The number of other subcontractors bidding

If there is a history of good working relationships with the contractors, the there is likely a higher chance for you to win the project.

3. Your Capacity & Backlog

Team capacity to manage your bid is an underrated but crucial consideration. Even if you win a bid, being unable to staff the project may result in subpar work, which may not be the win you were hoping for. Be mindful of your crew’s strength and availability when deciding if a bid is right for you at this moment in time.

Consider the following factors as you estimate construction costs: 

• Schedule overlap
• Key-crew availability
• Necessary overtime
• Necessary team member substitutions
• Supervision availability and capacity

Weighing opportunities against the capabilities of your team is important for self-monitoring and ensuring you can adequately follow through on the projects you pursue. A win you can’t perform well is a masked loss.

4. Profitability & Margin Potential

Revenue does not always equal profit, so make sure you have a clear picture of everything you are investing. Review scope clarity, the risk of change orders, and mobilization costs to build a complete assessment of project profitability.

Consider some of these factors that may affect your profit margins:

• Out-of-market travel costs
• Per diem costs
• Supervision overhead

Be mindful of each of these factors before investing in a full estimate and committing to a complete bid. In fact, a large revenue project with a thin profit margin may end up less favorable than a smaller revenue project with fewer expenses once you crunch all the numbers.

5. Contract Terms & Risk

Reviewing contract terms is a crucial part of construction project evaluation. While the project details may be enough to justify submitting a bid, it’s important to review the nitty-gritty details to ensure it is worth your time to submit a bid on.

• Pay-if-Paid Clauses: These clauses state that subcontractors are only liable to payment if the general contractor is paid by the project owner, not guaranteeing payment for work completed.
• Indemnification Clauses: Indemnification clauses transfer risk away from the general contractor and onto the subcontractor, but it’s important to ensure these clauses are limited to protect subcontractors when the general contractor or property owner is liable.

Contract terms that expose the subcontractor to risk may often be sufficient to justify prioritizing other projects with more favorable terms. Depending on the clauses and the business risk assessment, it is often safer not to put the business at risk, even if the project’s costs are favorable.

6. Competition & Win Probability

The level of competition engaged in a project and your likelihood of winning the project based on what your business brings to the table is an important part of project evaluation. If a project type is likely a better fit for a competitor than your business, then it may not be worth bidding on. 

PlanHub offers market intelligence features that allow you to see competitive analytics for each project, including how many views, plan downloads, and bids it has in your trades, to help you be more selective and boost your win rate.

7. Adaptability

Not all bids will conform to the same criteria, as you may have different questions depending on the type of bid and trade. Establish your own custom evaluation factors based on how you do business and what factors are important to you. Even include different questions for various project types/categories, such as renovations or rebuilds, or public works or government projects.

Having custom, reusable checklists can help you evaluate a variety of projects more quickly. PlanHub’s Project Fit feature provides pre-run answers to multiple trade-specific evaluation question checklists. It also offers the ability to Ask AI, so you can receive cited answers and make quicker decisions on any opportunity, regardless of the specialty or project type.