Construction Information Technology Blog

What does it cost an Owner to receive a bid?

The cost of the bidding process for owners of construction projects is significant when you consider all the aspects of managing it. Once the project documents (Drawings and specifications) are complete there are a number of steps required before prices can actually be received and analyzed. Errors or omissions in these activities can have serious consequences including non-compliant bids, claims for delays or extras or litigation relating to the bidding process itself. Some of the key activities include:

• Preparing the bidding instructions
• Preparing the bid form
• Selecting a list of potential bidders
• Advertising the opportunity
• Issuing Invitations to Bid
• Issuing bid documents to interested bidders
  • Making adequate numbers of copies
  • Checking for completeness of the bid sets
  • Packaging bid sets
  • Staff time to organize and log sets that are picked up by bidders
  • Preparing waybills and calling couriers
  • Receiving bid set deposits if required
• Responding to questions and clarifications requested by bidders
• Issuing addenda and tracking who got them and when
• Checking time clocks for accuracy prior to closing time
• Logging bids as they are received and recording the time
• Receiving amendments that arrive via fax or other means
• Matching amendments with the correct bids
• Opening the bids
• Evaluating the bids for completeness and compliance
• Reviewing that the required bid security is compliant
• Tabulating the bid results to prepare them for analysis
• Receiving and organizing returned bid sets if required

While this list is not exhaustive it is indicative of the amount of detail that must be dealt with in order to properly manage the bidding process. The actual cost will of course vary with the size and scope of each project ... but big or small the steps to manage the process are very similar. Hard costs include items like paper copies, long distance calls/faxes, packaging and couriers. The cost of the staff time required to undertake these activities is substantial and is certainly not the highest and best use of valuable human resources. The biggest indirect cost arises after the fact from potential process based litigation or claims for delays and extras resulting from missing information.

In a previous post I discussed the digital site of record approach to managing all of these activities that offers tremendous potential to reduce or eliminate most of the costs of managing the bid process along with reducing most of the risk for problems after the fact.

It’s all about getting a Bid

At some point in the preconstruction phase of a project figuring out what its cost will be and who is going to do the actual work has to be done. Whether it is Design-Build, Construction Management or a typical hard bid contract there are still a number of key activities that have to be performed to determine the cost. The list of activities includes:

• Preparing a list of Trades and Suppliers to request prices from
• Phoning, faxing or emailing out Invitations to Bid to get Trades and Suppliers working on a price
• Printing (or receiving from the Design Consultant) and distributing the drawings and specifications
• Distributing any subsequent Addenda or supplementary information
• Tracking and recording all the interactions using transmittals, waybills, logs and other records
• Receiving the bids by phone, fax, email or hardcopy
• Recording the bids and all the related details to prepare them for analysis and selection

Traditionally, each of these steps in the process has been done separately using phone, fax, email, snail mail, excel spreadsheets, paper files and a variety of other mechanisms. New technologies are enabling all of these tasks to be accomplished online. A key consideration when looking at moving these tasks online is making sure they all integrate and work well together as a seamless system. There is no point using FTP to distribute documents electronically if you have no effective audit trail to prove who had access to what information should there be a claim. You might just as well go back to preparing transmittals and waybills and distributing paper. The risk of claims and delays from having gaps in your electronic process is too high. If all of these processes are about ‘getting a bid’ then your preconstruction technology needs to enable you to actually receive the bid and know with confidence that there is no risk of costly errors or omissions related to it.

Preventative legal advice

One of the most commonly given pieces of preventative legal advice for construction professionals is “document everything”. Clearly this is very good advice ... but it is not always given the attention it deserves. If you’ve ever been involved in a claim or suit you are well aware of the costs of putting together the story of what actually happened. The bill can be thousands of dollars or even tens of thousands for significant claims. Ensuring a properly documented ‘audit trail’ as I call it can be a time consuming effort but it is like buying insurance ... you don’t expect a problem ... but if it arises, you are prepared.

Good document control technology automates the majority of the documentation needed to know with clarity and ease who saw what and when. The best part of this is that simply having the systems in place can avoid the escalation of an issue to a claim or a lawsuit right up front. A number of our clients have reported on situations where someone states they didn’t receive a particular document or piece of information and as a result expect that they are entitled to compensation. An easily generated activity report showing the information was fully available can often lead to an immediate resolution of the issue. For example, a log report from our system stating that “[Person] from [Company] on [Date] looked at page 1, 7 and 10 of Addendum number 6”, was conclusive enough evidence to avoid the time, costs and potential bad relationship of what was a six figure claim for an extra.

Best practices today not only ensure a proper audit trail but they also contribute to significant reductions in the time and cost associated with generating it. Manual creation of distribution logs, transmittals, waybills, email records and other means of proving your case are completely automated. Given the tools and efficiencies that are available today it might be worth taking a second look at how your firm is addressing that piece of very good legal advice.

10 Years Later ...

This week we had a small celebration for our team and our other colleagues and friends in our building to mark two important events. The first is the launch of PlanSource FT – File Transfer our latest new technology solution for the construction industry. The second reason was to mark the achievement of 10 years of bringing practical and user friendly software to the construction industry. 

We launched this company in 2000 just as the dot.com bubble was bursting. We had two customers and one product designed for construction association planrooms. Over the course of our 10 year journey we have grown to be an innovative leader in on demand construction software for construction professionals. Our client base has expanded to include Planroom Operators, General Contractors, Architectural firms, Developers as well as Public and Private Owners. We now have three distinct products that deliver effective solutions for a dozen different functional requirements for our clients. We’ve hosted documents and delivered services for well over 100,000 projects, have tens of thousands of people who have used our services and have delivered millions of pages of documents and project information online. We know all about being on the leading edge of the technology adoption curve and have successfully reached this 10 year milestone.

I hope you will forgive me for this very public celebration of our team’s accomplishments but I am very proud of the company we have built and the continuous practical innovation we have managed to bring to the industry. Our product development roadmap includes a number of exciting new innovations that will complement the core services we have already introduced. The evolution of online bid submission and the integration of technologies like BIM into everyday workflows offer tremendous opportunities for the future. I am excited with the direction the industry is moving and look forward to continuing to participate in building a better construction industry.

Social Media for Construction?

In the last few weeks I’ve had several emails extolling the virtues of social media for the construction industry. Despite my many years of involvement in the industry and in particular the years spent introducing new online construction technologies; I have to admit I think it is still too early for it to have much utility as a construction related business activity.

Some of the available options are clearly more useful to a business than others and we are still in the early stages of figuring how they can be of value to our clients and our business. Twitter, Facebook, YouTube and Linked In are some of the more notable options to connect and share information about you and your business. Our company has videos on YouTube to help people find us and learn more about our products. I get that. I have an active Linked In account and I find it a useful way to stay connected to colleagues, particularly those that I don’t see that often. We also have a corporate page on Linked In, again to help people learn about our company. So, I get that one too. Facebook is more of a mystery at this point. If your business requires a lot of networking then maybe there is value here. Twitter is the high profile option that seems the least likely of all to have any real use for construction related businesses.

I have had a front row seat on the willingness and readiness of construction professionals to use online tools and technology for their businesses for over 12 years. Based on that experience I don’t expect a mad rush in the industry to sign up for Twitter accounts and start tweeting each other. I’d be interested to hear from others if you are using any of these technologies and how they are helping you in your business.

To scan or not to scan

I was asked the other day by someone if I thought they should buy a large format scanner to scan construction drawings. They are increasingly receiving digital files but still have lots of paper documents flowing through the office. The scanner and printer combination they were looking at was many thousands of dollars. My very helpful answer was “maybe”.

When we first started this business in 2000 virtually every page of drawings and specifications uploaded to our system was scanned. At that time design consultants and owners were still wary of sharing digital files and scanning was the only way to get the information digitized. There has been a radical shift in the last few years and the concern over distributing digital files has been far outweighed by the efficiencies and cost savings that the consultants and their clients achieve. Happily that means less scanning. Today, 85% - 90% of the documents uploaded to our system are received in digital format.

For others who are considering this question there are several considerations.

• When you receive paper sets of documents are your personnel requesting digital files? Almost every document today is created digitally.
• Do you need the convenience of having the files immediately scanned in your office or can you efficiently outsource it to a local reprographer or scanning service?
• Do you want your personnel spending the time it takes to learn and then operate the scanner?
• Are you prepared for the maintenance bills? We recently replaced the glass on one of our machines. It is $700 just for the glass.

Ultimately the person I spoke to decided that the convenience of having immediate access to both printing and scanning was worth the investment. In a few years this may well be a moot point as more and more information is being exchanged digitally. In the mean time it may well be worthwhile to consider having conversion technology in your own office.

Is your website done?

A number of years ago when we first launched our company I was very happy to put a tick mark beside website in my to do list. Little did I know that between then and now we would revise it dozens of times and do three complete rebuilds of the entire site. This past week we launched our latest iteration. 

I am very fortunate to have a great team to work with here at Infinite Source. Not only did we release our new website but at the same time we launched a completely new online service offering called PlanSource FT – File Transfer. The new website is also part of the introduction of our tiered service offering business model which is designed to help people more effectively select and implement from among our many software solutions. You can imagine the effort it takes to get all three of those achievements synchronized into a launch on a single day. Happily our team pulled it off and I can put a check mark beside website in my to do list. 

Or can I?

What is Online Bidding?

I was doing some research related to some marketing we are planning for our online bid submission software for the construction industry and discovered that my assumptions about what bidding means is quite different from what many others are searching for in Google. It is an interesting challenge for marketers today to try to figure out what terms people search for that are relevant to your offerings.

The page one Google results:
“Online Bidding” – Predominantly online auction sites
“Online Bidding Sites” – More online auction sites
“Online Bidding Software” – Online auctions and one construction planroom application
“Online Bidding Software Construction” – Now we are closer but virtually all are estimating and planroom software

I had a novel idea. How about searching for exactly what we are introducing:
“Online Bid Submission Software” – all results relate to search engine optimization
“Construction Online Bid Submission Software” – more estimating and planroom applications

How about the more Canadian term of Tendering:
“Tendering” – mostly Canadian and UK government bid opportunity sites
"Construction Tendering” – more estimating software and a UK provider of bidding services for general procurement but not constructions services

The conclusion to the story is – a great deal of searching reveals the fact that there is almost nobody in the English speaking world who has the type of technology we have that spans the entire bidding process from invitation to bid through to bid reception. It speaks to our claim that we are innovators in the industry because the same thing was true for our planroom software when we started the company 10 years ago. Today there are numerous players in the planroom space. It appears we were right about our vision for managing construction bidding (tendering) documents online. Given the initial positive reaction to our online bid submission software it seems the only challenge we have left is to figure out how to connect with all the ‘Googlers’ in the construction universe.

Is 18 Bidders enough?

In a recent meeting with contractors the conversation turned to the current state of the market in their region. Several of them stated they were making the business decision to no longer bid on projects with “more than 10 bidders”. To reinforce how challenging the current market is they noted that many recent projects have had as many as 18 or more bidders. It would seem to be a hyper competitive market for contractors but an ideal time for owners to be buying construction. Or is it? No doubt it is better to be the buyer of construction rather one of the bidders in what is essentially an auction. The risk management antennae need to be way up for both parties in times like this.

For Owners their bidding process needs to be squeaky clean or the risk of legal action from disgruntled bidders is increased. There is no shortage of case law in the construction industry flowing from the bidding process and I would venture to say that much of it arises from times when the market is very competitive and bidders are unhappy with what they expected to be fair bidding processes. While there have been many attempts over the years to develop front end language to the contrary, it is generally held that the Owner has an obligation to treat all bidders fairly and equitably.

That being the case there are several fundamental steps an Owner needs to take to protect themselves from claims of unfair treatment or other problems arising from the bidding process:

• All bidders need to be provided with the same set of bid instructions, drawings, specifications and addenda.
• Keep accurate records of what documents were distributed, who received them and when they were distributed. This also helps avoid problems and claims arising after the contract is awarded.
• Make sure addenda are distributed to all bidders in a timely fashion. Addenda issued close to closing time can result in someone receiving it late and not incorporating it into their bid. 
• Use complete transmittals and obtain delivery receipts for all information distributions. This avoids situations where a bidder claims they didn’t receive a document.
• Make sure the closing time and method of determining that time are explicitly clear. ‘Up to 2:00’, ‘Before 2:00’, ‘At 2:00’ all seem to be the same but there is case law on when is 2:00? Is there a time clock in the closing location, someone’s watch or some other more or less precise way of determining the actual time? 
• Make sure the process for bid amendments is clear and practical. There are many examples of problems that have arisen from faxed amendments that didn’t arrive in time. 
• Non-compliant bids that for example do not include a mandatory requirement, no matter how small it is, are fraught with potential for trouble. Despite any language in the documents giving the Owner discretion, the interpretation of that discretion is generally very narrow if not nonexistent.
• Transposing and incorporating information from bid amendments into the bids results requires great care as errors or omissions can lead to an incorrect evaluation of the bids. 

These are just a few examples of the potential problems that can and are likely to be challenged in a more competitive environment when every project is hard won. The good news for those who are looking for ways to avoid these types of issues is that technology can go a long way to avoiding or even eliminating many of the issues identified above. Online bidding systems that completely integrate document distribution and bid submission are far more efficient than the traditional paper process. They go a long way to protecting the Owners and Contractors interests by making sure that no matter how many are bidding on a project, none of them will be let down by errors in the process.

Lost Submittals and Shop Drawings

I was copied in on some recent correspondence between one of our clients and an architect they are working with on a project (details removed for privacy).

The conversation is illustrative of the reason so many construction professionals are looking for better ways to manage some of the traditionally paper/courier based processes like submittal and shop drawing review.

ARCHITECT:	See attached for submittal review. Thanks.
CONTRACTOR:	Thanks [Architect], Do you know where the first Mechanical shop dwgs are? They were submitted a month ago. See attached transmittal
ARCHITECT:	Hi [Contractor]. The first package came in a box with another submittal, and I did not realize they were in there. I found them late last week and rushed them to [Consultant]. If it’s okay, I’ll have them returned via email. That will be faster. Have you used PlanSource? Would it be more efficient?
CONTRACTOR:	Yes we have been using PlanSource for tendering for about 5 years. They have been trying to get us to use it for shop drawing process but have yet to find an architect to agree. Have you used it before? Would you like to explore it for [Project]. There is a cost so if [Project Architect] agrees we can use the Contractors Contingency Allowance.
ARCHITECT:	Let’s talk to [Project Architect] about it tomorrow. I am not great at the whole distribution and courier/tracking system. I find that submittals come in and then get buried on my desk. I wouldn’t mind trying it.
CONTRACTOR:	Hi [PlanSource] Can you put a quick estimate or proposal together for [Project] for the shop drawing review process and documents so I can present it to [Client]. [Architect] is keen on using it. [Project] is a 12 month project with about 25-30 trades and 10-15 consultants. Let me know if you need any further info.

There are many benefits to online submittal review and tracking not the least of which is no more missing documents. Faster turnaround time, single copy mark-up and review and automated logging and tracking of the review process make it a better process for everyone.

Just to complete the story, the answer to the cost question on this project was “$300 per month or less depending upon actual usage”. The decision was to use the system for the project.