Construction bidding a tricky business

Bidding for a construction job is a good bit more than adding up the direct costs — the sticks and bricks — and throwing in a profit margin.A truckload of other factors are involved, such as the costs of portable toilets, temporary electricity, crane time and trash containers, factors that contractors call "indirects."
While indirects are only estimated costs, they can make up as much as 10 percent to 15 percent of a total bid, said Terry Rutterford, chief estimator for Hensel Phelps Construction Co., a 60-year-old company headquartered in Greeley that builds nationally and internationally.
Probably the company˜s most visible projects in northern Colorado have been the Eastman Kodak Co. plant in Windsor, Poudre Valley Hospital in Fort Collins and North Colorado Medical Center in Greeley. It also built Elitch Gardens and the Colorado Convention Center in Denver.
Experience and knowing the best subcontractors help in estimating the indirect costs, Rutterford explained, because "theoretically, you can count how much carpet there is from the plans. But how much crane time do you need?"
Because of the presence of indirect, or estimable, costs, only 85 percent to 90 percent of a bid can be decidedly determined, Rutterford said, and that˜s only if you have "a good set of drawings," or drawings that are specific about the needs and intents of the owner or architect.
Drawings can also be "bad or ugly," Rutterford said, meaning that they can have varying degrees of ambiguities, which can affect the bid total by as much as an additional 20 percent.
For example, a set of specs may say that all the ceiling panels have to be a specific name-brand — or equal to it. Such wording leaves the choice of panels up to analysis and interpretation, which will vary among the bidders, Rutterford explained.
"So, depending on the quality of the documents (drawings and specifications), you could get up as high as 35 percent of a job where you aren˜t bidding apples for apples," he said.
That much weight can tip the scale and make what might have been a high bid, a low bid, and vice versa.
Yet, contrary to what many people think, the low bid doesn˜t always get the job, Rutterford said, particularly in the case of a private owner.
"Not all low bids are good bids," he said, "I˜ve seen where (private owners) have their reasons for not taking a low bid."
In most cases, contractors submit a "hard bid" for a job that has been "put on the street," Rutterford said. A hard bid, or turn-key or lump-sum bid, incorporates all the costs for a project.
At other times though, "An owner may pick a contractor, maybe on fee or general conditions or a piece of the job, and then work on a cost-plus basis to do the rest of the work," Rutterford said.
Or an owner may get a contractor involved before the drawings are done and ask him to set a guaranteed maximum price, a GMP.
"In that case, the contractor will build in a contingency fee that allows him to finish the drawings and get the remaining details on the table so everybody can finish pricing the job," he said.
When it comes to state and federal government projects, procedures can change yet again.
"The biggest difference in bidding a (state) government structure is that there˜s a lot more paper work involved," said John Sinnett, project manager and estimator for Sinnett Builders Inc., a family-owned Fort Collins contractor.
Sinnett˜s most visible projects in this area are probably Foothills Fashion Mall and the Linden Hotel renovation in downtown Fort Collins.
The company has also built a number of projects for the state. Presently, it is working on a new $3 million science classroom office building at the Larimer campus of Front Range Community College and is remodeling the existing student center at Colorado State University.
When it comes to bidding on state projects, "You have to submit qualification statements, make sure you˜re a contractor approved by the state and you have to show effort that you˜ve tried to solicit the (women, minority and disabled business enterprises) as subcontractors," Sinnett said.
Too, it takes more time to prepare a bid for a government job, "but that˜s the nature of the beast," Sinnett said. "You just have to be sure you˜re dotting all your i˜s and crossing all your t˜s."
On the other hand, there aren˜t as many ambiguities to deal with when bidding on a government project, Sinnett said.
"They are very thorough in picking products, in the engineering, in methods of construction. Their specifications manuals are quite thick and detail everything they want done," he said.
For contractors that build federal projects, the bulk of the work probably comes through common bidding practices.
But sometimes, the government will set aside a project for one specific minority-owned firm, said James Woody, corporate secretary and estimator for Growling Bear Co. Inc. in Greeley, a minority-owned firm that gets up to 70 percent of its business from federal projects.
Growling Bear is owned by Kevin Shironaka, a Japanese-American. The company, which has held a minority-owned status for seven years, has built several projects at Peterson Air Force Base in Colorado Springs and at F.E. Warren Air Force Base in Cheyenne.
It recently began a $4 million remodeling project at the 35,000-square-foot visiting-officers˜ quarters at the Air Force Academy in Colorado Springs, Woody said.
When the government pinpoints one particular minority-owned business for a project, the price is negotiated, making "the element of competition a little less," he said.
"However, we still get at least three bids from subcontractors to try to get the government the best deal possible," he added.
Woody said a primary reason that Growling Bear focuses on federal work is because "they aren˜t going bankrupt. They may be a little slow, but they always pay."
In the end, the name of each bidding game is Win the Bid.
Rutterford said that winning boils down to having a good estimating team that takes the time to understand the job, mentally builds the entire project, can closely evaluate the indirects and the ambiguities and thoroughly reviews each element of the bid before submitting it to the owner.
That two-to-three-week job is "what makes us not only competitive, but makes a good bid," Rutterford said.