The construction bidding process explained

By

Alex Benarroche

, Daniel Gray

, and Kristen Frisa

Last Updated Apr 14, 2026

By

Alex Benarroche

, Daniel Gray

, and Kristen Frisa

Mastering the bidding process is essential for general contractors and subcontractors alike. Across the industry, a hit ratio of around 5:1 is considered successful—meaning that for every five jobs you bid, you are awarded the contract for one of them. 

Being successful with bidding requires a deep understanding of the process and the strategy that you should take as a contractor. Read on for detailed information about each step of the construction bidding process. 

What is construction bidding?

Construction bidding is the process of contractors submitting a proposal to do construction work on a project. The bid itself includes all the parameters under which the work will happen, including exactly what the work entails, how long it’s expected to take and the costs involved.

In order to prepare a construction bid, contractors first complete a cost estimate by gathering information about the project to determine what the work will entail.

Owners and general contractors use bids to compare contractors and ultimately decide who to hire.

Contractor essentials for construction bidding

Contractors bring a lot of strategy to their construction bids, carefully treading the balance between competitiveness and profitability. It takes careful analysis, experience and industry knowledge and a strong understanding of financials to complete a successful bid. Here are some of the key elements contractors can use to get there.

Accurate estimating

A strong construction bid reflects the true cost of the project while allowing for a reasonable profit margin. Getting there requires a meticulous assessment of material costs, labor and equipment requirements, and overhead expenses. A well-prepared estimate reduces the risk of financial shortfalls while building bid credibility.

Market knowledge

Nailing a bid means more than just adding up expenses. Contractors need to understand market dynamics and the competitive landscape in the project locale, and possess an awareness of trends, competitor pricing strategies and demand for the specific type of project.

Market knowledge allows contractors to position their bids strategically and align them with client expectations.

Risk assessment

Every project carries a certain amount of risk. Risk management involves figuring out the most likely and most impactful risks for a specific project and creating contingencies to use if they occur.

Risk management also requires that contractors set reasonable timelines and budgets for project completion. Contractors should consider factors such as project complexity, site conditions and regulatory requirements in their risk assessments.

Perceived value

Beyond cost, clients often look for value-added services and innovative solutions. Contractors should emphasize unique strengths, like sustainability practices advanced technology. Demonstrating perceived value can differentiate a bid and convince clients of the contractor's capability to deliver exceptional results.

Bid bonds

Bid bonds provide assurance to clients that the contractor is financially stable and committed to undertaking the project. They act as a safeguard to ensure the contractor will execute the work if awarded the contract. Having a bid bond in place boosts trust in the bidder and reduces the client's financial risk.

7 steps in construction bidding

The construction bidding process is broken down into five key steps: bid solicitation, bid submission, bid selection, contract formation, and project delivery. 

1. Bid solicitation

During the bid solicitation phase, the property owner or their representative will typically issue an Invitation for Bid (IFB), a Request for Quote (RFQ), or a Request for Proposal (RFP).

Regardless of the project type, the bid package contains project details to enable contractors to produce an accurate bid, including:

• Construction specifications
• Project requirements
• Contract type
• Project delivery method
• Bonding & insurance requirements

The solicitation will typically also ask for additional information about the contractors who apply, including professional qualifications and examples of similar past projects. Project owners use this information to prequalify the contractors, ensuring that they will be able to complete the job as promised.

Contractors who meet the requirements and are interested in the job will be able to submit a bid. 

2. Prequalification

Contractor prequalification involves a thorough evaluation process to ensure that contractors meet the necessary requirements and standards for a project.

During this time, the owner or general contractor will evaluating subcontractors, establish prequalification requirements and align bid expectations before bids are submitted. This helps ease the process and improves bid quality. This process typically includes:

• Financial stability

  Contractors must demonstrate their financial health through balance sheets, income statements and credit ratings to prove they have the resources to complete the project.

• Experience and expertise

  Evidence of past projects of similar scope, size and complexity help show the contractor has relevant experience. References and project portfolios are often reviewed.

• Licenses and certifications

  The client will verify necessary licenses, certifications, and registrations specific to the construction industry and relevant to the project location.

• Safety record

  Proven safety performance, indicated through OSHA logs, safety policies and training programs, indicates that a contractor prioritizes a safe working environment. Contractor safety performance impacts the owner's level of risk on a project.

• Insurance coverage

  The contractor requires adequate insurance, including liability insurance and workers' compensation.

• Technical capabilities

  The contractor should have the technical skills, equipment, technology and workforce resources to complete the work.

• Quality control

  Review of the contractor's quality assurance processes to ensure adherence to industry standards and project specifications.

Prequalification helps clients select competent contractors, reducing the risk of project delays, cost overruns, and quality issues.

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3. Bid submission

In the bid submission phase, interested contractors submit documentation about the project timeline and costs, as well as information about their business. During this phase, general contractors will often solicit their own bids, proposals, or RFIs from subcontractors they need to hire to complete specialized aspects of the job. The GC will combine the subcontractor proposals to prepare the bid they submit to the property owner. 

In order to create an accurate bid, contractors must create an accurate estimate of project costs, including:

• Labor
• Materials
• Equipment
• Overhead
• Profit margin

If required, the contractor will need to submit a bid bond along with the bid in order to be considered for the project. The bid bond serves as a guarantee to the owner that the contractor will be able to complete the project according to their bid.

4. Bid selection

When it comes to bid selection, property owners will often pick the bid with the lowest or most competitive price. On public projects, government rules often require that the lowest bid wins.

Because contractors submit bids in a variety of different formats and with a wide range of prices, the bid solicitor will typically go through a process called bid leveling.

During bid leveling, the owner will attempt to standardize the bid formats as much as possible, enabling them to compare the similarities and differences between them. This process enables the owner to compare "apples to apples" to make a more informed decision about the right contractor for the job.

5. Contract formation

After the owner selects a bid, they work together with the contractor to form a construction contract that both parties will eventually sign. While the type of contract (e.g. fixed-price, time and materials, etc.) is generally predetermined by the owner, contractors still have leeway at this point to negotiate the terms of the contract, as well as the final pricing structure. 

Even if the project owner is using a standard contract form, like AIA or ConsensusDocs contract documents, the contractor always has an opportunity to negotiate the provisions.

6. Notice to proceed

After all contracts are signed, the contractor will receive a notice to proceed (NTP), which is a formal document that gives the contractor the go-ahead to begin working on a project. It includes information like project start date, a full project scope, expected date of completion and contract details.

The NTP is usually delivered via certified mail, email, or through a project management portal. It is often accompanied by a formal meeting or communication to discuss any initial details or questions.

7. Project delivery

Even though it's not technically part of the bid process, project delivery plays a very important role in bidding. 

Before bidding starts, the property owner will determine the project delivery method. Common delivery methods in construction include:

• Design-Bid-Build
• Design-Build
• Construction Manager at Risk (CMAR)
• Integrated Project Delivery (IPD)

During bidding, the project delivery method determines how bids are solicited and submitted. For example, Design-Bid-Build solicits bids from general contractors based on designs from a separate firm, whereas Design-Build employs a single firm for design and construction, so bids are only received from subcontractors supporting that firm's work.

After bidding, the project delivery method often influences contract negotiations. For example, with the construction-manager-at-risk (CMAR) method, there is likely a guaranteed maximum price in the contract, which the construction manager will want to carefully negotiate to ensure project profitability.

Types of construction bids

When a property owner is ready to receive bids on a project, they will choose a tendering method. The three most common types of tendering are open tendering, negotiated tendering, and selective tendering.

Open tendering

With open tendering, anyone is allowed to submit a bid on the project. This is the method most commonly used on government projects, and it is generally considered to create the most competition for a job, driving prices down. In fact, many public projects are required to solicit contractors through an open tender.

Negotiated tendering

With negotiated tendering, the property owner identifies a single contractor to perform the work and negotiates a contract with them. This method of tendering is generally reserved for highly specialized projects, and it may be considered anti-competitive in certain cases.

Selective tendering

Selective tendering is the middle ground between open and negotiated tendering: A small set of predetermined contractors is invited to submit bids on a project. Typically, this method of tendering offers a balance between competition and simplicity in the bid selection process.

Serial tendering

Serial tendering is used for situations where a property owner is soliciting bids for a series of similar projects over a period of time. For instance, a housing developer may be building hundreds of residential homes over a three-year period. Serial tendering can reduce the burden of repeatedly soliciting bids for similar projects, though it does potentially reduce competition.

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Mastering the bidding process takes time.

Because contractor cash flow is heavily dependent on skillful bidding, businesses that bid well tend to outlast their competition. Learning to find the correct bids, prepare proper estimates, and submit professional bids takes time, but it's worth the effort.

Mastering the bidding process is essential for contractors who want to grow in the commercial or government construction sectors.

Written by

Alex Benarroche

Associate Counsel | Procore

26 articles

Alex Benarroche serves as Associate Counsel for Procore. His legal expertise includes construction, contracts, business, and intellectual property. Alex is bilingual in English and Spanish. He earned a J.D. from Loyola University College of Law and an M.S. in Intellectual Property and Internet Law from the University of Alicante in Spain. Originally from South Florida, Alex has called New Orleans home since 2003.

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Daniel Gray

Contributing Writer

33 articles

Daniel is an educator and writer with a speciality in construction. He has been writing construction content for Procore since 2022, and previously served as a Procore Content Manager before continuing to pursue an education career as an Assistant Headmaster for Valor Education in Austin. Daniel's experience writing for construction — as well as several clients under an agency — has broadened his knowledge and expertise across multiple subjects.

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Kristen Frisa

Contributing Writer | Procore

121 articles

Kristen Frisa is a contributing writer for Procore. She also contributes to a variety of industry publications as a freelance writer focused on finance and construction technology. Kristen holds a Bachelor of Arts in Philosophy and History from Western University, with a post-graduate certificate in journalism from Sheridan College. She lives in Ontario, Canada.

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