Managing bid costs

With over 35 years’ experience working with architects and engineers, I’ve had the opportunity to engage with numerous clients while at CMap and as a consultant to many firms. 

Throughout this extensive experience, I have consistently been surprised by the manner in which architectural firms approach the management of the bid process. Their primary area of contention is the allocation and management of bid costs.

The two predominant approaches to bid management are the “large bucket” method and the “project-specific” approach.

While a general bid bucket is necessary - particularly during the very early stages of a project, when meetings and calls are the primary expenditure of time - the “large bucket” approach lacks control and provides no valuable information. You are not able to understand:

• The cost of bidding for different sectors
• If particular clients always provide enquiries but little fee paying work
• The potential cost of winning work and whether bidding is worthwhile considering the fee offered
• How much you need to spend on a bid based on projects you have won

In my opinion, the most effective approach is to include bid costs in the project itself as a separate work stage such as “bid” or “enquiry”. You should, however, be able to clearly  distinguish the cost of winning the project from the cost of delivering the project. 

Treating bid costs as an additional stage also enables the establishment of a budget that can be effectively monitored. Regrettably, I have observed numerous firms accepting low fees offered by clients solely because they have invested too much time and cost in pursuing the project.

Furthermore, managing bid costs within the project allows for the identification of potential risk points. For instance, what would happen if the project fails to secure planning or funding for the developed design? Spending $50,000 to secure a $1 million fee may be acceptable, but what would occur if the planning fee is only $150,000 and the planning process itself consumes that amount?

While there are no simple financial formulas or accounting magic for managing bid work, establishing budgets provides a clear understanding of the consequences of decisions made.