Types of Construction Bidding

In construction, the bidding process is one of the most critical phases of any project. After all, it’s during this time that contracts are settled, pricing is determined, and expectations are set. Construction bidding is essential to virtually every stakeholder involved in the construction process. This includes contractors, owners, subcontractors, and all other teams involved in the project throughout its completion, such as designers, project managers, and maintenance providers.

In this blog, we’ll focus on the eight most popular types of construction bidding. We’ll also touch on how these types of construction bidding work and when and why to use a specific type. Finally, we’ll discuss a few pros and cons of each type of construction bidding, so you can make an even better decision about what’s best for your business.

What is construction bidding?

Construction bidding refers to the process by which contractors propose how they'll complete a project. These proposals are typically very detailed “bids”, and include information on schedule, labor, materials required, and—of course—estimated project costs.

The purpose of the bidding process is to enable owners to select a bid from a contractor that is best suited for the job. Of course, what’s considered “best” depends entirely on what the owner is looking for. That could be value, experience, some combination of the two, or another factor entirely.

Here are the eight types of bidding covered in this article:

1. Open Bidding 
2. Selective Bidding
3. Negotiated Bidding
4. Two-Stage Bidding
5. Design-Bid-Build (DBB)
6. Design-Build (DB)
7. Construction Management at Risk (CMAR)
8. Job Order Contracting (JOC)

1. Open bidding

Also known as competitive bidding, open bidding is typically associated with public sector projects. This is primarily because public sector projects are often, by law, required to post an open invitation for all qualified contractors to bid. You’ll usually see such open bidding announcements in local newspapers or on government websites.

The benefits of open bidding include a more transparent bidding process and pricing that tends to be more competitive due to the open nature of the contest. The downsides to open bidding are that it takes a considerable amount of time to review bids, and the quality and experience of bidding contractors may be lower. As a result, there is always a risk that contractors who aren’t qualified or experienced enough will come in with low-cost offers that seem attractive but are too good to be true.

Related: What is a Cost-Plus Contract in Construction?

2. Selective bidding

Unlike closed bidding, selective bidding for a construction project is by invitation only. More specifically, during selective bidding or closed bidding, the project owner contacts a select group of contractors and requests that they submit bids for the project. How this shortlist is curated depends entirely on the owner, but it is often based on prior relationships, experience, reputation, and even public financial health records.

The benefits of selective bidding often include a higher quality of work due to the curated list of contractors invited to bid, a shorter and more streamlined bid selection process, and ideally, the elimination of non-qualified contractors from the outset.

That said, selective bidding may result in higher costs due to less competition.

Generally, selective bidding is considered the most effective approach for private projects, whether commercial or residential. Closed bidding is also ideal for projects that are considered very complicated or high-risk, as all vendors selected to bid can be pre-screened to meet specific criteria.

3. Negotiated bidding

Negotiated bidding occurs when a project owner does not solicit multiple bids but instead decides to negotiate with a single contractor. This often happens in well-established relationships where the owner is already certain about whom they wish to work with, but all the details for the next project still need to be finalized.

Benefits of negotiated bidding include unmatched control over the bidding process, expedited project start times, and the fostering of meaningful and collaborative long-term relationships between owners and contractors.

As always, there are downsides to negotiated bidding. There is virtually no price competition, as owners won’t entertain any other bids. It also requires a great deal of trust from both parties, so negotiated bidding between contractors and owners with no prior working relationship can carry inherent risk.

Negotiated bidding is best suited for fast-tracked construction projects involving owners and contractors with a prior working relationship.

4. Two-stage bidding

Sometimes, bidding is conducted in multiple stages. The purpose of two-stage bidding is to narrow down a lengthy list of potential contractors to a shortlist of finalists.

In general, two-stage bidding begins with contractors submitting a simpler bid that articulates their qualifications and outlines their typical pricing approach for projects. From there, after the owner reviews these stage-one bids, more information may be requested. At that point, shortlisted contractors will come back to the owner with more detailed proposals.

Benefits of two-stage bidding include a more thorough evaluation of top candidates for a job, as well as the ability to focus on both cost and experience separately. Drawbacks include a longer timeline due to the complexities of the process.

5. Design-Bid-Build (DBB)

In the design-bid-build process, the owner hires an architect (or engineer) to design the project. Once that’s done, the owner asks for bids from contractors. Typically, the lowest bid wins. This is a traditional bidding strategy very often used for public sector projects.

Benefits include transparent scoping and conceptual pricing; however, the selection process can be lengthy, and coordination issues may arise between design and contracting.

6. Design-build bidding (DB)

In this next type of bidding, referred to as design-build bidding or DB, the designer and the builder are the same party. In other words, one company handles both the design and construction of a project. When they bid for the job, buyers pick the company that offers the best overall package, considering things like their experience, cost, and how good the final design looks.

While design-build bids tend to lead to improved communication and accountability, as well as fewer change orders and disputes, they also result in less control over aspects such as design. That said, these projects move quickly and are ideal for owners who need a turnkey solution to address their current needs right away.

7. Construction management at risk (CMAR)

In construction management at risk (CMAR), the construction manager provides consulting services during the design phase and then serves as the contractor once construction begins. That contractor is “at risk” because they have committed to a guaranteed maximum price contract (GMP), which means they are responsible for controlling costs.

CMAR is ideal for collaboration and integration between the design and construction phases, resulting in more transparent budgeting and better control over both costs and timelines. That said, to make construction management at risk work, you’ll need to involve the contractor very early.

These projects are best suited for owners who truly require professional guidance from the contractor at every step, even design. That’s why you often see it used for complex builds that require extensive experience and knowledge, such as hospitals or university campuses.

8. Job order contracting (JOC)

With job order contracting, also known as JOC, contractors bid on repair, renovation, and other repetitive projects. They’ll bid with what’s effectively a “catalog” of preset prices for various tasks.

One of the benefits of job order contracting is that it results in speedy project delivery for the owner. The owner simply orders what they need from that “catalog” to keep maintenance going. You’ll see job order contracting utilized for buildings that require ongoing maintenance, such as at schools.

About Sortly

Sortly is an inventory management solution that helps you track, manage, and organize your inventory from any device, in any location. We’re an easy-to-use inventory software that’s perfect for construction businesses of all sizes. Sortly builds inventory tracking seamlessly into your workday so you can save time and money, satisfy your customers, and help your business succeed.

With Sortly, you can track construction inventory like supplies, parts, tools, equipment, and anything else that matters to your construction business. It comes equipped with smart features like barcoding & QR coding, low stock alerts, customizable folders, data-rich reporting, and much more. Best of all, you can update inventory right from your smartphone, whether you’re  on the job, in the warehouse, or on the go.

Whether you’re just getting started with inventory management or you’re an expert looking for a more efficient solution, we can transform how your company manages inventory—so you can focus on building your business. That’s why over 15,000 businesses globally trust us as their inventory management solution.