If construction firms have an established track record of success with their projects, they are often the possibility of bidding on bigger projects. However, bigger projects be more risky. If your business has been successful in completing a number of projects of $10 million, and you are contemplating a bid for 100 million dollars there are many aspects to take into consideration prior to submitting a bid. It is since bidding on a project that is not the right one could put you out of the business. “When a contractor bids a larger project, there is a greater financial risk,” says Tim Holicky, a senior executive underwriter at The Hartford. There are more subcontractors to oversee and a variety of additional materials to purchase and this all results in more risk to the financial side. If a contractor is unable to complete the project, it could have devastating consequences, such as bankruptcy, Holicky says. “A large, unprofitable job is the quickest way to go out of business,” Holicky says. Prior to bidding on a bigger project, Holicky suggests reviewing the list of ten things to think about. “This list gives contractors a good idea of what to think about when bidding larger jobs,” Holicky suggests. If you’re not sure whether you should submit a bid Holicky offers the following advice, “A contractor should have at least five of these items locked down before considering a large bid.”
Determine if the Project Is a Good Fit
Experience will guide the kind of large-scale project that you offer. For instance, if you have completed a bridge with a distance of two miles and are contemplating the possibility of submitting a bid for the 10-mile bridge, consider the things your company has accomplished in the past to build the experience and capabilities of its employees. “We encourage contractors to look thoughtfully at their past experience and reflect on the progress of successful jobs to ensure this leap isn’t too big,” He advises. Can that level of success be scalable for the project that is being considered? He also warns that in the current economic climate that a typical-sized construction job will appear bigger due to the rise in inflation. “What you once did will not be the same price. Inflation is causing the price of bigger projects.”
Assess Your Capabilities
Consider your personal strengths as a leader and what you can offer your business prior to submitting a bid for a larger project. “Don’t bite off more than you chew,” Holicky advises.
Consider the Project’s Impact on Cash Flow
The larger projects can affect the flow of cash for a company and affect existing projects. The expenses of a bigger job will likely to be higher than the costs your company is used to. Your company will have to cover the cost before they are paid for, he adds. “Help plan for that impact by increasing working capital, securing a bank line of credit or increasing the borrowing limit of your current line of credit,” he advises.
Evaluate Internal Controls
The larger projects will require more sophisticated financial and management platforms. Before you submit a bid for the larger project, you must make sure your organization is equipped with the technology and tools to allow for the expansion of the larger scope of work. For example, your business may require a higher degree of financial oversight to monitor the budget and check for variations as close to real time as is possible.
Review Standard Contract Agreements
Prior to bidding on a bigger task, you should review your contracts with subcontractors to decide if they should be updated to reflect increased limits on insurance. “You’re relying on others to fulfill your contractual agreement with an owner and if one of those subcontractors fails, it’s a bigger problem for you,” Holicky clarifies. Another thing to take into consideration is whether the construction site is in an urban area with greater potential for exposure to passersby. For example, if 1000 people per day pass through this construction area, then your business might require more insurance to safeguard itself from risk.
Secure Multiple Subcontractor Bids
If you are bidding on the price of a major project it is recommended to solicit bids from a variety of subcontractors in order to estimate the cost of the project. “If you only have a single bid on a subcontracted scope, you are running the risk that you’re not pricing the job correctly,” Holicky claims. “But if you have five bids within a few dollars of each other, then you know you have the right project costs.”
Determine if Existing Subcontractors Still Qualify
If you’re bidding for more extensive work and the subcontractors that you usually use may not possess the expertise or knowledge to finish a big job. Holicky suggests that you requalify the subcontractors you normally depend on to ensure they are able to meet the demands of the job.
Ensure Your Team Leader Is Committed to the Project
Occasionally, contractors hire new personnel with specific expertise prior to bidding for an even larger task. If the ability of your business to complete a major project depends on the project team’s new members ensure that the team members will remain with your company throughout all of.
Evaluate Existing Commitments
Before you bid on a larger project, ensure that you have the resources available to finish your current contracts. It is crucial to evaluate your ability to decide whether it is appropriate to bid on bigger projects while sustaining the requirements of the work that is contracted.
Be Careful Not to Under Price the Work
Larger projects require more time and there are a lot of possibilities to think about. Are you able to scale up your company to accommodate the requirements of more complex and long-term projects? Risks to your project may not be present in the early stages of a project. They could be discovered around eight or ten months after the start of a project due to the fact that it was priced according to the price of labor and materials nearly one year before. Inflation and disruptions in supply chain make it harder to estimate the cost of large jobs. “Large jobs take time and you’re essentially pricing the future,” Holicky declares. Clients looking to capitalize on the opportunities that arise from a greater knowledge of the trends that influence our world economy, The Hartford Global Specialty Insights Centeris uniquely placed to offer assistance. We are uniquely positioned to offer support. Hartford Global Specialty Insights Center is a unique research hub that provides analysis on macroeconomics, geopolitics, and sectoral risks. It provides data that goes far beyond general headlines in the world and provides useful information for underwriters and clients alike. These documents are created to give international businesses an advantage, leaving them better equipped to meet the obstacles and capitalize on opportunities across the globe. For more information about the construction bond, go to www.thehartford.com/bond. The information in these documents is intended to be general and ad-hoc in the sense that it is intended to be general and advisory in. This information is not considered as legal advice. The Hartford cannot warrant that the application of any opinion or recommendation included herein will (i) bring about the removal of hazardous conditions in your premises or related for your operations and (ii) be in line with business or legal procedure. The Hartford does not assume any responsibility in the management or remediation of risks or compliance with the law in relation to your business operations, and the views and suggestions that are contained in these documents do not be deemed to constitute an undertaking on our part on your behalf or in the interest of anyone else, to establish or guarantee that your business premises, operations or locations are healthful or safe or in conformity with any law or rules or regulations. For those who wish to address specific safety and legal issues or issues related to the information in these documents should consult their safety expert and/or attorney, and business advisers. All information and claims that are contained in these materials are current up to date as of May 2023.
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