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.

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.

The most effective way to manage your construction documents efficiently

We are back! Our blogging activity has been curtailed over the last couple of months as we have been very focused on completing our latest innovative new solution for the construction industry called PlanSource FT – File Transfer. I am excited to tell you about it. 

Our existing technologies are widely hailed as delivering significant time and dollar savings to those who use them while concurrently reducing project risk and environmental impact. We were one of the first companies to see the potential of internet technologies to deliver these kinds of benefits to the construction industry. Ten years ago there was no shortage of sceptics who thought that managing and distributing construction documents online was a bad idea. “I need to have the entire plan laid out in front of me to work on it” was a familiar refrain. Changing something as ingrained and iconic as the traditional roll of drawings is a slow process that will only happen if the benefits are substantial. Good news – the benefits have proven to be substantial and the process is changing rapidly. 

When we first started this company (100,000 plus projects ago) virtually every drawing, specification page or addenda uploaded to the system was scanned from paper originals despite the fact that they were all created digitally. About two years ago the transition away from distributing paper sets accelerated as design consultants became increasingly comfortable with the idea of sharing their documents in digital format (typically .pdf or .tiff). Today, only 10% – 15% of the documents uploaded to our systems are scanned, and even that number is declining. 

For the most part the design consultants have used FTP sites (File Transfer Protocol) as the mechanism to share and distribute their digital files with their design team and more recently with contractors. While this mechanism works, it is by no means the best way to accomplish the task. Managing the sites, maintaining security, organizing and working with the files are just some of the challenges presented by FTP.

In response to those challenges we have taken the opportunity to leverage some core elements of our very powerful PlanSource applications to provide the industry with a dramatically better solution to managing and transferring construction files online. That solution is PlanSource FT – File Transfer as mentioned earlier in this article. It is specifically designed for construction and is fast, easy and secure. Users can set up an account and in minutes be viewing documents, sharing them with others, printing them directly, downloading the files they need or even sending orders for copies directly to their own reprographer. It is very inexpensive and will even offer a completely free and fully functional version to those who only have a limited amount of activity.

As digital files have become more commonplace, everybody including Architects, Engineers, General Contractors, Trade Contractors and Suppliers all have an increased need to be able to efficiently manage and work with these files. Whether the files are on a CD, DVD, downloaded from FTP sites or are from an online planroom, PlanSource FT provides a tremendous way to use a single system to effectively manage all of them. We anticipate this great new tool will be released in May and look forward to once again delivering an innovative solution that solves a widespread problem for the construction industry.

A four step estimating tune up

Construction estimating is a complex and time consuming process. A good estimator truly understands how a project is managed from start to finish and is able to translate every step into a dollar amount. Estimators today have some very powerful tools available to help them put together the best and most accurate numbers upon which to base their final price. If you are not already doing them here are four ideas that might help you fine tune your process:

1. Help your Trade contractors and suppliers be more efficient
   On a recent and very large project the General Contractor decided to distribute the drawings and specifications on Dvd’s. There were hundreds of pages of drawings and the cost of distributing paper would have been significant. The information on the Dvd’s was poorly organized and very difficult for anyone to work with and find what they needed. Many opted to simply get it all printed out at significant expense just to figure it out. This was simply a short sighted exercise in transferring the cost and effort on to the Trades and Suppliers. It is hard to imagine how that kind of approach which essentially says ‘I don’t care about your time and expenses to give me a bid’ can ultimately result in that Contractor getting the best price from that Trade. If your attitude up front is that you don’t care, why would it be any different when you get on the site? Given that a significant portion of any bid is usually made up of bids from many Trades and Suppliers it would only make sense to demonstrate that you are good to work with and that you are interested in doing what you can to help them make money as well. A better alternative to the Dvd’s (and subsequent addenda) which still took time and cost money to produce and distribute would have been to make them available in an online planroom like PlanSource for fast and easy access by everyone who needed them. It would have cost less than the Dvd’s, taken less time and would have been far better for everyone involved.
   
   
2. Make sure the right people know when you are looking for pricing
   Sending out Invitations to Bid is essential. There is no doubt that for critical Trades and Suppliers you will still need to have a conversation with them but why not give notice that you are working on the project and let them view the documents in advance of your call to make the exercise more efficient. There are countless stories of how one price from one particular Trade or Supplier made the difference in getting the project. Even for a Construction Management or negotiated contract it is still essential to let people know as soon as possible that you are looking for them to spend some of their time and resources to work with you to put pricing together. Adequate notice simply helps them plan better. PlanSource has excellent Invitation to Bid and messaging functionality that can make the process fast and easy.
   
   
3. Get your database of Trades and Suppliers in order
   We are in a position to see lots of company databases of their Trade and Supplier contacts. Obviously, a key resource for any estimator is the list of contacts they have available to gather pricing from. It appears to be a big challenge for many Contractors to maintain and keep accurate as people and companies come and go. The task of “cleaning it up” is often a once a year exercise for one of the administrators that can take a lot of time and effort to get done. There is a better way. Once again there is software available today that virtually eliminates the need to maintain the list. It can be automatically managed and updated using the management tools available in PlanSource . Add in the available prequalification tools and you have an easy way to screen prospective new contacts to improve and expand your available bidders.
   
   
4. Use On Screen Takeoff software
   Accurate quantity takeoffs are of course a critical element of a good bid. While there is certainly nothing wrong with a scale rule and estimating pad there is no question that good onscreen takeoff software can help you get the work done faster, more accurately and with more options for analyzing and refining your numbers. In addition to the takeoff tools available in PlanSource, there are many options in the market but one well worth looking at can be found at www.oncenter.com .

In a market like the current one where every tender is highly competitive it is more important than ever to make sure you are doing all you can to be efficient with your own time and expenses and to reduce the time and expenses it takes Trades and Suppliers to work with you. Better systems yield better results and ultimately improve your odds of being the successful bidder.

Free stuff from PlanSource!

We are nearing the final stages of developing a new secure online technology that is simply the fastest, easiest and most efficient way to share and distribute construction documents.

Do you receive digital files from others? Do you have access to an online planroom or an FTP site? Do you need to then share or exchange those files with other contractors or suppliers? PlanSource FT is designed to be the most efficient possible way for you to do that. It is like an FTP site on steroids. Unlike a typical FTP site where you can only transfer files, PlanSource FT allows users to instantly view, print, download or order paper copies of documents. It is easy to use and requires ZERO training. There is no software to buy or hardware to install. Just sign up online and in minutes you are ready to go.

PlanSource FT is the latest development from one of the construction industry’s most innovative and successful technology companies. Our experience in delivering online planroom technology to over 15,000 users on over 100,000 projects has positioned us with the technology platform and industry knowledge to develop this breakthrough on demand service for the construction industry.

We will be making Version 1.0 of PlanSource FT available early in 2010. If you would like to be one of the first to benefit from using it we have a great offer for a limited number of participants. The first 50 companies who sign up to use this great new software service will receive 6 months of service free. Simply click on this link to sign up. You will be provided with complete details of all fees (which only apply if you continue to use the service after the first 6 months) and of how the service works prior to the launch date. This offer is only available until December 30th 2009 so we encourage you to take advantage of this no cost, no risk offer and be one of the first to start saving time and money.

The ‘Site of Record’ approach to tendering

The process to obtain a price and enter a contract for construction work is complex in part because virtually every project is unique. Over the course of years construction tendering standards have evolved and been shaped by best practices and changes in the law. The advent of new internet technologies offers a new way of integrating the entire process to eliminate some of the more common issues and problems that typically arise through the tender period of a project.

The following are just a few examples of typical issues that arise during the process:

• Missing documents or information
• Trade contractors having different information than the Prime Contractor
• Late issuance of Addenda
• Incorrect document versions
• Unclear closing times
• Incomplete tender submissions
• Missing schedules or attachments
• Missing tender security (bonds)
• Late submission of tenders
• Busy fax lines precluding bid amendments from arriving on time

These and many other related issues can be managed effectively using a Site of Record approach to tendering. All tender activities, information and documents are made available to all bidders in a single secure online site. The Site of Record is the only official set of information made available to bidders leaving no chance for errors in the production, distribution or tracking of hard copy documents. Every bidder who accesses the information is automatically included in the distribution list for any addenda. The tender form is made available to Bidders electronically with all requirements clearly defined for the bidders. It cannot be submitted with missing information which ensures a complete tender submission. At the instant the reverse countdown clock reaches the closing time bids are no longer able to be submitted or edited. At that same instant the results of all properly submitted tenders along with any required bid bonds or other attachments are all immediately available for review either individually or in a spreadsheet format. All of the activities in the process are logged ensuring that all the key elements of the process are verifiable should the need arise after the fact.

Using a Site of Record approach to construction tendering saves time, reduces costs for all parties and most importantly it significantly reduces the risk of problems or claims arising from errors or omissions in the tendering process.

File Transfer – Building your own solution?

There is an undeniable trend happening in the construction industry towards greater use of the internet for moving drawings, specifications and other documents. The use of FTP (File Transfer Protocol) by Architectural and Engineering teams is widespread. Contractors and Suppliers are receiving more and more information in digital format that they still need to share with others.When working out how to resolve this issue some are looking at the option of building their own in-house solution.

When considering this option it might be useful to ask yourself a few key questions:

• Are you confident that the solution you plan to spend time and money to build has a high probability of delivering the desired results?
  
  
• Are you confident that the actual working solution can be completed within the timescales for development and implementation that are initially predicted?
  
  
• Are you confident that the fully functional solution will be implemented for a cost that is controllable and acceptable?
  
  
• Are you confident that once implemented the cost of maintenance will not be an uncapped drain on your IT Department’s resources?
  
  
• Are you confident the solution will meet your requirements for speed, simplicity and security?

The harsh reality is that in many cases the actual solution finally provided will probably not achieve the original business objectives or savings in costs which made the project valid in the first instance. The inescapable conclusion is that where an existing solution exists, it should be used unless it can be demonstrated that it cannot handle the majority of the required business process. Few companies have the resources and energy it takes to build a fully functional solution. Wasting time, money and people resources on a non-core business activity to implement what seems like a fast and cheap solution is unlikely to make your business better.

 

To FTP or not to FTP

The fact that printing and distributing the masses of paper it takes to construct a project is time consuming and expensive is undeniable. However, the reality in the construction industry is that this paper based distribution system is the industry standard and has been deeply integrated into the way projects are managed.

The evolution of IT infrastructure and new software developments are driving changes that are causing new challenges such as when someone sends you a set of digital drawings and specs. How do you get that information to the people you need to see them? Take them to a reprographer and print copies, burn them to DVD’s and ship those out or possibly put them on an FTP site and let people download them and do whatever they want. 

Let’s take a closer look at what the FTP option is and what it can do. FTP refers to File Transfer Protocol, the protocol for exchanging files over the Internet. FTP is most commonly used to download a file from a server using the Internet or to upload a file to a server (e.g., uploading a drawing file to a server). It is relatively fast and simple to use but it definitely has its limitations. Typically, FTP services are part of your internal network. They are a favourite target for hackers looking for ways to get into networks. If you are concerned about security, and you ought to be, then you have to be particularly careful to manage your FTP properly. FTP services are little more than a digital box that people who have access to them can use to exchange files. There is no viewing, document ordering, access control or other important functions. Administering even a simple site requires someone to issue and manage passwords for every user. An administrator has to pay close attention to what is actually posted as there is no version management and people can end up with the wrong files. Properly organizing and managing the files for a project takes diligence and there is no record whatsoever of who has accessed particular information.

Typical FTP sites are a simple tool but do not in and of themselves constitute a system for document control.