We already covered the bidding process in a different lesson, but we felt it was necessary to dedicate an entire lesson to the differences between competitive and negotiated bidding—the two main types of construction bidding processes.

Each of these bidding processes has its own advantages and disadvantages and is used in different circumstances. If you’re bidding on construction projects, then it’s crucial you understand this information.

Competitive Bidding

As the most common type of construction bidding, competitive bidding starts with contractors submitting sealed bids in response to a request for approval—or “RFP”. The project owner will then evaluate the bids based on specified criteria—such as price, quality, and timelines—then awards the contract to the lowest bidder (usually) who meets the required standards.

Competitive bidding is commonly used on the following types of projects:

• Public construction projects: Many government agencies use competitive bidding to select a contractor for public construction projects—such as roadways, bridges, schools, and public buildings.
• Private construction projects: Competitive bidding is also used in private construction projects—such as commercial buildings, residential properties, and industrial facilities.
• Infrastructure projects: Large-scale infrastructure projects—such as water treatment plants, power plants, and airports—often utilize competitive bidding to select a contractor.
• Maintenance and repair projects: Competitive bidding is used for maintenance and repair projects—such as road repairs, building renovations, and equipment upgrades.

Advantages of competitive bidding include:

• Ensures the lowest possible price for the construction project
• Encourages competition among contractors—encouraging higher quality work
• Provides a transparent and fair process for awarding contracts

Disadvantages of competitive bidding include:

• May result in lower quality work—as contractors may cut corners to win the bid
• May not emphasize important factors enough—such as the contractor’s experience, qualifications, and references
• Can lead to disputes between the project owner and the contractor over the scope of work and timeline

Negotiated Bidding

Considered a less common type of construction bidding—negotiated bidding occurs when the project owner selects a contractor based on qualifications, experience, and references… and less on price. The project owner and contractor then negotiate the terms of the contract—including the price, timeline, and scope of work.

Negotiated bidding is typically used for more complex or specialized construction projects, where the project owner wants to ensure that the contractor has the necessary skills and experience to complete the work to their standards.

Negotiated bidding is commonly used on the following types of projects:

• Design-build projects: Negotiated bidding is commonly used in design-build projects, where the project owner contracts with a single entity to provide both design and construction services.
• Construction management projects: Negotiated bidding is also used in construction management projects, where the project owner contracts with a construction manager to oversee the construction process.
• Complex or unique projects: Negotiated bidding is often used for complex or unique projects—such as historical building restorations, museum installations, and high-end residential projects.
• Projects with specialized requirements: Negotiated bidding is sometimes used for projects that require specialized expertise or equipment—such as environmental remediation, hazardous waste removal, and infrastructure upgrades.

Advantages of negotiated bidding include:

• Takes into account the contractor’s qualifications, experience, and references
• Allows for a more tailored and specific contract between the project owner and contractor
• Encourages a more collaborative relationship between the project owner and contractor

Disadvantages of negotiated bidding include:

• Might result in a higher price for the construction project—as the contractor is not bidding against other contractors
• May not provide the same level of transparency and fairness as competitive bidding
• Can lead to disputes between the project owner and the contractor over the scope of work and timeline

View the complete article here.

What is competitive bidding in construction projects?

Competitive bidding involves contractors submitting sealed bids in response to a request for approval (RFP), with the project owner awarding the contract to the lowest bidder meeting specified criteria, commonly used in public and private construction projects.

When is negotiated bidding used in construction projects?

Negotiated bidding is employed for more complex or specialized projects, focusing on the contractor's qualifications, experience, and references, with the project owner and contractor negotiating contract terms, often used in design-build, construction management, and projects with specialized requirements.