Survey reveals true cost of bidding for construction work

In 2014, as the industry began to emerge from recession, MarketingWorks, in association with Professor Will Hughes of the University of Reading, updated their 2003 research to assess bid cost investment in the construction industry. 

The data was collected by reference to actual projects and was analysed to discover what can be learnt, not only in the cost of bidding for work, but also how differing behaviours and approaches have influenced whether a company wins or loses the bid.

In addition to providing some interesting indications on how and why a bid is successful, the survey also highlights that bidding for work is a complex situation with many variables, often particular to individual companies, and many companies fail to capture bid cost information and to fully evaluate their own specific market and processes. This has a real and clear impact on the profitability of the company, and is an issue that the industry needs to address.

Overall this survey suggests that when consultants and contractors invest more in the work-winning processes, they are more likely to win. However, it is not only the gross amount of time spent that results in winning bids, but the specific activities where the time is then invested. These, in most cases, are activities focused on the specific client, i.e. client-centric, aligned activities.

Key findings include:

• The survey was completed by 179 respondents; 118 with cost data. 61 provided bid information but without costs.
• The total project value of the bids submitted with data is £11.3 billion of which £8 billion has full cost data. Significantly this includes £4.3 billion of winning bids.
• The sample represents a large proportion of the construction work carried out last year in the UK and is a good representation in the key areas of measurement. 
• The cost of a contractor’s average winning bid is £60k in 2014 and consultants average £24k.
• In 11% of bids won and 15% of bids lost, the reasons for winning or losing are apparently unknown.
• Price was given as the single reason on 50% of losing bids but only 30% of winning ones.
• Almost 40% of winning bids identified a combination of factors as the reason for the win, compared with 21% of losing responses citing a combination of factors for the loss.
• Winning bidders invest more in their bids.
• The investment of time or money needs to be focused on the activities identified as creating a winning bid. 
• The activities identified as helping create a winning bid are importantly those that are client-focused.
• The bid cost worked out, across winning and losing bids, to be 0.57% of the total project value. 
• The bid cost percentage has significant impact on a contractor’s retained operating turnover.

For further information about the research, visit the MarketingWorks website.