The Competitive Bid Strategy
The Competitive Bid Strategy is CIY’s preferred bidding strategy.
Its purpose is not simply to collect several prices.
It is to create fair and balanced competition in which qualified contractors price the same defined project under the same conditions.
The principle is simple:
The Scope drives the Price — The Price does not drive the Scope.
How Competitive Bidding Works
The basic process is straightforward:
- Identify and pre-qualify potential bidders.
- Give each bidder the same Bid Package.
- Hold a pre-bid walk-through when appropriate.
- Answer questions and provide clarifications.
- Give important new information to all bidders.
- Collect the bids.
- Evaluate and compare them.
- Make an objective selection.
The process requires more preparation and attention than simply asking contractors for estimates.
That preparation is what makes the resulting prices useful.
Competition and Consistency
For competitive bidding to work, every contractor must have the opportunity to price the same project.
That does not mean the Scope cannot change during bidding. Questions may reveal missing information. A contractor may identify something you overlooked. You may have options you want to explore.
The important thing is that when information changes, every bidder receives the same information.
Otherwise, you slowly stop comparing prices for the same project.
Competitive bidding therefore relies on two forces working together:
Competition creates pricing pressure.
Consistency creates meaningful comparison.
And the effect of competition on construction pricing is measurable.
One study of construction bidding found that increasing competition from one bidder to six was associated with a 24% reduction in the low bid, with the benefit of additional bidders beginning to level off beyond that point.
Research specifically examining 1,350 renovation contracts also found that competitive bidding tends toward tighter pricing, reducing the spread between the winning and next-lowest bids.
The exact results will vary by project and market. But the principle is well established:
Qualified competition affects price, and consistent information makes those prices more meaningful.
When the Bids Come Back
Receiving the bids is not the end of competitive bidding.
It is the beginning of evaluation.
Even when every contractor receives the same information, their bids will not be identical. Contractors have different labor costs, supplier relationships, workloads, overhead, estimating practices, interpretations, and appetite for the project.
Some variation is normal.
Large or unexpected differences, however, are information.
A low bidder may have missed something.
A high bidder may have included something the others did not.
Your Scope or Diagrams may contain an ambiguity.
An allowance or assumption may be different.
Or your own Estimate may simply have been wrong.
This is why you do not immediately select the lowest number — and why you should not panic simply because the bids are higher than you expected.
You investigate the differences.
The Market Is Giving You Information
Competitive bidding does something your Project Estimate cannot do by itself:
It tests your project against the actual market.
If several qualified contractors independently arrive at similar prices, that tells you something.
If their prices are dramatically different, that tells you something too.
If they consistently identify the same missing information or problem, your Project Plan may need refinement.
And if qualified bidders consistently price the project above your Budget, the market may be telling you that the project you defined costs more than you planned to spend.
That does not mean the process failed.
It means the process worked.
You discovered the problem before signing a construction contract.
You can now revisit the Scope, Budget, and Schedule, make changes, and retest the project if necessary.
Competitive Does Not Mean Lowest Bid
This distinction is critical.
The Competitive Bid Strategy uses competition to help establish market pricing.
The Lowest Bid Strategy uses the lowest visible number as the primary objective.
They are not the same thing.
Competitive bidding gives you several proposals so you can evaluate price, Scope, assumptions, qualifications, and the contractors themselves.
The objective is not to force every contractor toward the smallest possible number.
It is to create enough structure and competition to identify the best bidder for the project you actually intend to build.
Competition establishes the market.
Comparison helps you understand it.
Evaluation helps you decide.