Below is a good article from techaeris.com on why companies require a bid process for projects. As you can see, there are a variety of protections in the bid process, including such things as a bid bond, pricing protection and contractual considerations.
Three reasons why industries require a bidding process for projects
One of the ways that owners save a great deal of money is by requiring companies to “bid” for their business. This ensures that the owner will get the best deal as well as the highest quality of work possible for the money. Not only does it save money, but it can also provide legal assurance that the project will be completed properly and in the time allotted in the agreement. This article will share several reasons as to why industries require a bidding process for projects.
- Best price.Many industries including the government, construction, and businesses all require a bidding process for projects. One of the main reasons that this is a required stipulation is that many bidders will apply for the same job which in turn gives the consumer the upper hand and likely a much better price. Many companies require at least three bids in order to move forward with a project. Typically the lowest bid will win but not always. Depending on the project, the budget, and the quality of work that is needed can all make a difference in who walks away with the opportunity to complete the project.
- Project protection.While getting the best price on a project is a top priority, it is also important that you hire someone who can complete the job on schedule and will also not cause additional expenditures along the way. It is important that you inspect all bids thoroughly and do your research to ensure that the company who will be performing the work is reliable and has reliable references to back up their work. If you are unsure of whether or not you are going to hire a company that can perform the work in the way in which it is agreed upon, you may want to consider purchasing a bid-bond. A bid bond can protect you from frivolous bidders who offer a low-ball price with no intention of following through to complete the project.
- Legally enforceable contract.A bidding process can provide security for both the general contractor and the company that is looking to hire out a project. Once the bidding process is complete and both parties have signed the contract, it is now legally enforceable and services must be rendered. If the services are not rendered, a refund or remittance of services must be distributed back to the company who did not receive all agreed upon services.
One of the ways that contractors lose out on potential business is because they do not read the proposal correctly and omit information that the company feels is of utmost importance. Attention to detail is important and can make or break one’s success. To help with the bidding process, many have begun to invest in software programs. Before submitting a bid, be sure to do an analysis of your company and determine if you have the staffing and monetary resources to complete the project. Once you have determined your ability to make good on the potential contract, you will then want to put together a bid that provides examples of work, budget and pricing information, as well as photos and any other information that will be helpful in the decision-making process.