When people are given a chance to take part in building a home or a commercial building, many simply grab it with both hands without giving it much thought. This doesn’t happen very often, though. People tend to see the big picture and how the project will affect them long-term. A commercial real estate project may be one of those. Commercial real estate projects include office buildings, apartment complexes, shopping centers, industrial facilities and the like. What makes such large projects distinct from the smaller ones that newer businesses might have been undertaking up to now?
First, just what makes big construction projects so different from the smaller ones? Big construction projects have even more prospective contractors bidding on the job. The reason for this is simple: The project has a bigger scope than the smaller one does. Each contractor has their own idea of how the project should be executed and managed. Since there are a lot of them out there looking for work, each of them has their own ideas on how things should be done, as well as their own budgets.
It’s important for the management to keep track of all these contractors’ bids, and it’s even more important for them to keep track of the lowest bid. But if the project goes over budget, how should they deal with it? Most bids are usually set a few months before the actual bidding date. But there are some projects that go out of budget even before the bid date. Management should therefore look into these cases and prepare a contingency plan to deal with it.
This brings us to the next aspect of bidding: The management should make sure that the lowest bid is not the highest. After all, the last thing they want to do is raise the price to cover themselves. But what they also need to do is not to lower their original bids. Contractors tend to think that lowering their original bid will help them get work. In most cases, however, this will just increase the number of contractors working on the project, making things more difficult.
To prevent having inflated costs on a large project, management should never give big contracts to the first bidder who comes in. They should instead put limits on how much they’ll pay for labor and only award a percentage (or sometimes a set amount) to the true highest bidder. These limits should be made in writing so there’s no misunderstanding about these terms in the future.
Management should also carefully examine bids from new contractors. There may be some problems on paper, but there are probably also hidden issues. A good project manager will ask any potential contractors for their business cards, for example, and then follow up with them for several weeks to check whether they are up to the task.
After having examined all the bids, the project manager should make the final decision about which one to award. The two key factors that influence this are cost and schedule. Each contractor has a different cost structure that he or she must stick to. On the other hand, the schedule of the project is something that can be changed at any given time. Management must make sure that the contractor is capable of sticking to it.
Although many contractors want to receive the work, they also need to realize that it’s their reputation on the line as well. Management can have its cake and eat it too, by choosing to award the contract to the best bidders at every opportunity and ignoring the rest. This way, it’s possible to reduce the number of contractors working on the project, saving money in the process.