How to compare contractors’ proposals to find the best one

Written by LetsBuild

How to compare contractors' proposals to find the best one | LetsBuild

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As a project manager or owner, a lot goes into ensuring successful construction projects. Every stakeholder, from the designer to the supplier, plays a crucial role in ensuring a seamless project lifecycle, quality deliverables, and reduced risk.

As a result, it’s imperative to compare contractors’ proposals to get a reliable contractor for a job and the best value for your money. The focus is not just on lowering the cost, but getting quality and value and building long-term relationships with great contractors.

Every proposal is unique, and there’s a reason contractors give different quotes for the same scope of work. It’s essential to understand each listed piece and item on the proposal and compare them with all contractors to make informed decisions during the review.

Note that a detailed proposal doesn’t reflect a contractor’s workmanship, experience, and track record. Hence, the importance of a keen comparison of contractors’ proposals to pick the winning bid, and here is how you can do it.

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Define your criteria

While each proposal is unique, they must all be subjected to the same evaluation criteria. This means you must identify and define the crucial factors a winning bid must meet while ensuring transparency and fairness and removing subjectivity.

The criteria may include cost, compliance, technical capabilities, track record, financial stability, project management plans, schedule, environmental sustainability, etc. It’s vital to create merit criteria that suit your unique needs and highlight the strengths of each contractor.

Work with all the key stakeholders to have clear evaluation criteria that ensure high-quality RFP responses. For example, depending on the unique elements of your project, typical evaluation criteria may look like this:

  • Technical experience: 25%
  • Capabilities: 40%
  • Data security: 10%
  • Human resources: 10%
  • Diversity and sustainability: 15%

Great evaluation criteria consider every key factor and assess how a contractor will execute their role. For example, it’s essential to know how the contractor manages disputes and claims, the experience of their personnel, their ability to secure insurance, etc.

Aim to pick a partner who is committed and can deliver the project within the budget and on time. More importantly, they must have the experience, capacity, and technology to do so. So, be sure you have included your criteria in the solicitation documents to guide potential contractors.

Generally, when defining your criteria, it’s vital to consider the project’s requirements, scope, and priorities. Also, avoid discrepancies in evaluation by having a standard scoring system to guide scorers. Scorers can interpret questions differently, and this can impact the review process.

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Use a scoring matrix

Once you have clear evaluation criteria, you can use a scoring matrix to compare proposals to find a contractor that matches your needs. This tool allows you to document and organise the scores and reviews for each proposal based on your criteria.

A scoring matrix provides a standardised evaluation process for all proposals to ensure fairness and transparency. You can use a web-based platform, software or spreadsheet as your scoring tool. The scoring process can be basic or weighted, depending on the project’s requirements. 

  • In basic scoring, each of the criteria offers a score, usually 1 to 5 or 1 to 10. The drawback of this scoring matrix is that each criterion has the same weight. When evaluating proposals, this is never the case, so basic scoring is not always the best.
  • With weighted scoring, the process pays more attention to the priorities and key requirements of the project. It assigns a point value to each question and weight to each RFP section. This offers a clearer and more detailed view of the contractor’s capabilities and long-term value, making it a preferred approach for project managers.

When setting up your scoring matrix, take into account your evaluation criteria and the scoring scale. This will help to determine the assigned weight, the score of each proposal, and the rationale for the score, simplifying the comparison process and decision-making.

Of course, you can create your own scoring matrix, giving weight to your priorities and key considerations. For example, when looking for the best value, you can give weight to cost and technical criteria, on a ratio of 20:80 respectively.

Review the proposals in detail

When reviewing individual proposals, you need to pay attention to each element and section of the proposal. All proposals should cover key sections like insurance, cost, timelines, scope of work, risk management, and policy on change orders.

The proposal should show that the contractor understands the scope of work, which must cover the specifications, schedules, designs, materials, and objectives. You must verify that the schedules cover all the essential tasks, quantities, resources, and activities.

While not the ultimate factor, the cost and rates are important considerations, too. Review the unit rates and prices of labour, materials, and equipment in each proposal to ensure they are fair, realistic, and competitive. Don’t focus on how low or high the prices are; instead, understand the reasons behind them.

Ensure each proposal highlights the contractor’s credentials, references, and certifications, such as BBB rating, EMR rate, trade memberships, etc. This is important if the project has unique demands, and you’re looking to build long-term relationships with reliable contractors.

You should also ensure the proposal is error-free. A proposal needs to give you a clear grasp of the project details, contractor’s capabilities, prices, materials, and costs. The availability of errors in the proposal reflects the contractor’s professionalism and impacts your decisions.

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Conduct a reference check

Reference checks are an integral part of the proposal review process. Simply reviewing the contractor’s capacity, track record, and experience is not enough to gauge their ability to deliver quality results within defined timelines and budgets.

You need to contact the references included in the proposal to understand how their past clients feel about their technical capabilities, performance, quality, and results. If possible, write down all the key questions you need to ask the references. Examples include:

  • Did you experience any delays with the contractor? If so, why?
  • Did the project cost exceed the initial budget? If so, why?
  • Did you have any disputes or claims with the contractor? How did they handle them?
  • How did they communicate with you? Are they responsive?

During a reference check, don’t be afraid to be inquisitive, but be respectful of their clients’ privacy and confidentiality. This step is essential in feeling confident about your proposal review and verifying the qualifications and claims of the bidders.

You also need to find out if the contractor has a trained team, subcontracts work, manages risks well, and answers all key questions. Take notes and recordings or you can create online surveys for the references to complete.

Be sure to summarise the key points and findings for each contractor, evaluate the results, and assign scores. For the best results, it’s advisable to ask for at least ten references from each potential contractor, including references from their suppliers, banks, vendors, etc.

Discuss terms

Once you have identified the winning proposal, it’s essential to meet the contractor in person to discuss the terms of the project. This level of interaction makes a difference and allows you to get a better feel of the contractor, their team, performance, professionalism, and capabilities.

At this stage, you can create your joint goals and objectives and identify the key players on both sides to ensure a smooth working relationship. You want to delve deep into the project details, including schedule, budget, deliverables, scope, quality standards, payment terms, etc. The typical sections can include:

  • Scope of work: Clarify the kind and amount of work you want the contractor to complete. Discuss labour, materials, equipment, and services that the contractor will provide.
  • Contract period: You need to agree on the possible completion date of the project. You should also cover the timelines for different phases of the project.
  • Payment: You need to cover the payment terms of the project, including the contract sum. If possible, the contractor should provide a breakdown of the potential project cost.
  • Change orders: Projects, regardless of their size or type, always need modifications at some point. Remember to discuss the steps you’ll both take to manage modifications and their impacts on the costs and schedules of the project.
  • Claims & disputes: You should agree on the process of submitting and documenting claims, as well as the process of dispute resolution.

During the discussions, communication is vital – relay your expectations and position clearly and listen to their concerns, ideas, and perspectives. This is also a great time to review the contract to ensure every detail is covered.

Also, identify the risks that may affect the project and find out how the contractor will manage them. The goal is to have a mutually beneficial agreement that takes into account the values of both parties. If needed, you can consult a lawyer or an expert to clarify the terms.

Compare contractor proposals using LetsBuild

In the construction industry, the proposal is “the big bang” of the project. This crucial element determines the contractors you’ll work with and has a direct impact on the cost, timelines, and performance of the contractor.

In essence, the proposal combines bids, quotes, and estimates into a comprehensive package. It can also include images of past projects and references that a contractor submits to back up their proposal.

As such, it’s vital to review each proposal carefully when searching for the right contractor for your project or phase. At LetsBuild, we make this easy — you don’t need to review proposals manually or complete everything via email, which is prone to confusion and delays.

Our software streamlines communications with contractors and reduces paperwork, providing a centralised platform for accessing, managing, reviewing, and archiving proposals. This improves efficiency and results in up to a 25% decrease in project downtimes.
Book a demo to learn how our construction management software can streamline your contractors’ proposal process.