Scope of Works Designed for Apples-to-Apples
Contractor Bid Price Comparison and Analysis
Scope of Works Designed
Contractor Bid Price
Comparison and Analysis
by: BidForms Organization
Reprinted with permission
Are you buying one contractors approach (out of a group of approaches) with the lowest price, or selecting the best bid from a group prices for the same scope of work?
Structured Pricing offers construction buyers the infrastructure and means necessary to perform detailed analysis of contractor price proposals. The analysis of construction price quotes starts with a defined scope and deliverables that separate performance requirements for comparative analysis.
Establishing a Structured Pricing format begins by dismantling broad stroke scopes of work and redesigning the RFP (request for price) into project components that can be properly compared. This includes defining standards of performance, sometimes methods, techniques and options so contractors are pricing the exact same deliverable(s).
More often a construction scope of work is written as a collective of tasks buyers want to be priced. In the absence of details or a standard to follow, contractors define project performance requirements from their interpretation of the clients expected deliverable.
Unless instructed to provide rates for A, B & C, each contractor proposal will include a different description of work (the scope) and a price. Proposals may include multiple descriptions and prices and/or present an alternate description of work (alt scope) with a price for consideration.
These written descriptions must be analyzed, compared and possibly categorized before their respective prices can be considered. Equally, prices must be analyzed by comparing like materials, methods and techniques for the approach of each proposal. These mean values are necessary to accurately compare the collection of contractor proposals for the construction project.
The point is contractors are free and actually forced to define materials, methods and techniques. This also opens the door for subsequent change orders in a non competitive pricing environment for items ‘not included’ in the ‘lowest bid’.
“when deliverables can’t be compared, buyers resort to the lowest price”
Public entities are famous for using the ‘collective of tasks” (all construction work) approach wrapped under a single price. This is the most dangerous approach and one preferred by many contractors who believe the lowest price offers opportunity.
The preference of such contractors is that prices can’t be scrutinized, understood or accurately compared to competitors. The marketing adage for this technique is, “when deliverables can’t be compared, buyers resort to the lowest price”.
Unfortunately, when multiple work items and options are wrapped under a singular price ‘the lowest price can’t be determined’. Not without significant time, effort and manpower which is scarce to most construction buyers.
It’s best to structure contractor bid submissions before distributing an RFP. Buyers can easily accomplish this objective by leveraging a minimalist approach to writing the scope of work in combination with detailed documentation, a list of line items and addendums where necessary.
The latter ‘addendum‘ is widely used to address typo’s, make clarifications, adding item and responding to contractor questions during the pre-bid jobsite walk (onsite review). Line items remove ambiguous and indefinite item prices from the base bid rate while highlighting variations and possibly proficiency of contractor work, methods and material options.
The primary scope of work should be defined and priced as a base bid inclusive of minimum quality performance requirements, expectations, specifications, approved details and related documentation. This collection of reference works defines construction accountability standards.
Separating the cost of work performed outside normal business hours is also highly valuable strategy for analysis of contractors and construction bid rates. This cost artificially inflates the base bid rate and standards by which they are analyzed. Moving this expense to a line item or base bid option facilitates accurate apples-to-apples comparison of contractor quotes for the primary scope of work.
Structured pricing follows best practices and is recommended as standard operating procedures. Notwithstanding, construction projects with multiple options, tasks and when the potential of hidden items exist are where structured formats simplify contractor and bid price analysis.
“ The difference between Bid Prices & Price Quotes . . .
is who defined the Scope of Work and what’s included in the pricing! ”
“ The difference between
Bid Prices & Price Quotes . . .
is who defined the Scope of Work
and what’s included in the rates! ”
I. Strategically Align Construction with Accountability References
- . . .
II. Isolate Pricing into Comparable Tasks
- . . .