How Do You Estimate Costs for Construction

How Do You Estimate Costs for Construction

Do you feel in over your head when you bid for a construction contract with a government agency?

Every year, I work with literally hundreds of minority and women small business owners, each of them pushing to make their MWBE into a huge success. And I firmly believe that one of the best ways to make an MWBE sustainable is to bid on government contracts.

Of course, this is easier said than done. It can be a complicated process from start to finish, requiring an incredible level of detail with accurate estimations of costs. It’s the reason why I work with the NYC Department of Small Business Services to teach women and minority, small business owners how to make successful bids. And a key part of this is providing these agencies with detailed cost breakdowns. 

If you’re focused on the construction industry, then one of the most important parts of this cost breakdown will be your estimated construction and construction-related services costs. If you have never handled this part of your business before, there are many different components that you will need to become familiar with before bidding.

Preparing to Bid

Regardless of what kind of contact you are bidding on, you need to make sure that you fully understand what the agency is asking of you. 

This means that you need to read all request-for-proposal documents in detail, leaving no stone unturned. Remember, the more information you have at your fingertips, the better you can make your bid. In that spirit, once you’ve finished reading the RFP, turn back to the first page and reread it. 

Remember that you not only need to provide accurate quotes for the work but also for the costs that aren’t billable. These can include travel, meals, benefits, record keeping, and admin costs. These will all be impacting your bottom line, so you need to know about them before you bid.

Understanding the Scope of the Work

The first time an MWBE makes a bid for a government contract, they might not have a full understanding of the scope of the project. It may look simple on paper, but, in practice, there are more moving parts than you would suspect.

For example, you need to know all of the brick & mortar trade costs (otherwise known as hard costs), as well as all of the soft costs such as free, expensive, overhead, and rates. 

Price to Win

Pricing to win might be the trickiest part of coming up with a brilliant proposal for a construction project.

You obviously want to provide the agency with accurate numbers and cost estimates, but you also need to separate yourself from the pack. If everyone is quoting approximately the same amount, government agencies will likely go with the more experienced MWBEs. To break into this work, you need to price your bid to win!

It’s a balancing act, for sure. You don’t want to give away the farm. You still need to have a healthy profit margin and not under-priced your services. It really comes down to the project you’re bidding on. Pricing to win is a topic that I focus on with many of the women and minority small business owners I see in workshops. It can make the difference between a successful bid and yet another pass.

Learn From Your Mistakes

The first few times you bid on a construction contract, you will likely not be successful. And that’s ok!

Successfully landing a government contract isn’t easy, so after your unsuccessful bid, you want to get as much information as you can about why you didn’t win. Ask for a debrief and obtain all pricing information from the other bidders on the project. This info will help inform your future bids, teaching you how to be competitive while still making money. 

If you want to build a reputation with government agencies that will ensure more work in the future, you need to play by their rules. That means you need to provide incredibly accurate estimates for all of your services, including construction. 

To ensure you are providing accurate information about the scope of projects and their costs, be sure to sign up for the free Cost Estimating for Construction and Construction-Related Services workshop. We will be holding this free virtual workshop on November 18th, from 10 AM to 12 PM. But be sure to register now because space is limited!


Author Since: July 7, 2021

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