Hard Bid Is Dead: Why You’re Not Getting Bids

Earlier Involvement with a GC Can Prevent Major Frustrations

Out in the world, there’s been plenty of talk of recession and economic downturn. New technologies are shaking up industries, and the workforce is shifting. But against this backdrop of uncertainty, we’re also seeing a tremendous amount of demand for projects in New Mexico.

Our special projects group has been tapped to help with the state’s need for multi-family housing, and government dollars are flooding in for infrastructure projects. We’re seeing enough demand that we can be selective with the projects we choose, and that’s a great place to be. More and more, we’re avoiding hard-bid jobs in favor of those that bring us in at the pre-construction phase, and we’re not the only contractors who are doing this.

If you’re an owner who’s still putting projects out for hard-bid, you might not be getting the response you’re hoping for. Here’s why – and what you can do instead.

Understanding the Different Delivery System Methods

There are three main ways a job can go from concept to reality:

• Design-Bid-Build, also called hard-bid, is the traditional method everyone is familiar with. Here, the owner hires an architect or engineer to design the building. Once the design is finalized, the project is put out to bid, and a contractor is hired to begin executing on the design.
• Design-Build, where the owner engages a single entity to manage both the design and construction. Most of the time, this means hiring a construction manager who will subcontract an architect and oversee all of the project from design through execution.
• Construction Manager at Risk (CMAR), also called CM/GC, uses a general contractor as a construction manager who is brought on board during the design process. The construction manager assumes risk by providing a cost and schedule commitment, including the guaranteed maximum price (GMP).

Both design-build and CMAR are forms of preconstruction, meaning the contractor is involved with the project before ground is broken.

Where Hard-Bid Fails

The problem with hard-bid jobs is they represent a significant risk, especially during times of uncertainty in pricing. A common scenario is that an owner will have a particular budget pre-approved, and will bring their ideas to an architect to design without any input from a boots-on-the-ground builder.

Since the design team’s expertise is in design rather than building, architects and engineers may overlook practical factors that can affect the final price – things like labor availability, supply chain issues, and cost of materials. Once the project goes out to bid, the initial estimate may be obsolete, and the plans may need an extensive redesign before the original budget can be achieved, delaying the start of work.

All of this results in further delays, which can impact the budget more, which in turn leaves you spinning your wheels with a project that can’t seem to get off the ground.

Advantages of Preconstruction

The sooner Jaynes can get involved with a project, the sooner we can begin planning. We have great working relationships with subcontractors throughout the Southwest and will often have a few in mind at the outset who would be the right match for a project. We’ll usually put the project out to bid to select subs so they can prove their experience and value to the owner, allowing us to line up workers more quickly than if the bid request were sent out cold.

Our experience working in the hard-bid model has made us experts at scheduling and working within the confines of a budget. We bring that same expertise into precon, which allows us more power and flexibility for getting a job completed. For example, when we work closely with the architects and engineers in the preconstruction process, we can identify which elements of design need to be finalized to allow us to procure equipment or labor forces early on, while the finer details of the design are being finalized.

We can also build allowances into the budget, creating a GMP with flexibility for changing circumstances. For example, our estimate may include room for inflation and materials cost increases. If those prices don’t go up, the funds could be used instead for added “nice to have” items, or simply revert back to the owner. If a design is made for a particular budget without those types of considerations in place, that flexibility will be missing.

Delivery Solutions that Work for Us All

Many owners are simply unaware of how CMAR and design-build work, or might not realize they are options available to them. Even when you’re working in the public sphere, there may be more flexibility in your procurement than you realize.

If you have any questions or would like to learn how to put precon to work on your project, reach out to our team. We’ll be happy to talk it through with you to help you understand what’s available and what will work best for your project, even if you don’t end up hiring Jaynes in the end. Because the faster a project can go from plan to reality, the sooner our community can enjoy the benefits of that new building, and the more jobs and opportunities will open up for all of us.