I recently gained a new level of respect for the construction industry – particularly with regard to the construction proposal process. You see, my father-in-law is a successful residential contractor in the Georgia/Florida area and the other day he told me a few things about the process of bidding on new constructions.
Thanks to his insights on the initial request for proposal (RFP) to the arduous spec’ing, pricing, and negotiating process, I can now say to all you construction industry folks out there that I understand the challenges you face on a daily basis.
With media reporting that the housing industry is showing marked improvement, now is a great time for those of you working in the construction industry to start thinking about the coming influx of new business heading your way.
“4 out of 5 key housing indicators have shown improvement in the past year: prices, delinquency/foreclosure rate, non-distressed home sales, and young adult employment.”As The Huffington Post’s chief economist, Jed Kolko, points out in his more recent “Housing Barometer” post
That leaves just one indicator still to be seen: new construction starts.
And that’s where you come in. And there’s plenty of room to grow here, as Kolko’s article points out, new builds are only at 44% of pre-crisis levels. But, as you know, from the bottom, you can only go up. If you have worked in the construction industry for several years (remember how much it hurt in 2009? Ouch!), and you are still in business, you have weathered a storm.
Your business literally hinges on your ability to outmaneuver competing bids. This ebb and flow of RFPs and proposals tendered can make or break your construction industry business.
Based on what my father in law shared with me, I’ve put together this list of the top 5 documents you need to know and love in the construction industry. In an effort to make your busy life a little easier, we will look at documents that will help you out in various aspects of the construction industry.
A clever takeaway tip and an easy-to-swipe, free template accompany each entry on this list. Let’s get started with doc number one!
Construction Industry Document #1: The construction proposal template
Obviously, the construction proposal itself is the most important document for the construction industry. As my father in law pointed out to me, a minimum of 40 hours is invested in each construction proposal, often requiring more time.
The work of estimating and aligning all aspects of costs and materials is the time consuming part of the construction proposal process. This requires you to return to the proposal time and again to make adjustments as new pricing and new labor costs are factored in to the overall price of the job.
This process, as you know, doesn’t get a whole lot easier no matter what you do. It’s always going to be a process of interacting with prospective clients, suppliers, sub-contractors, and other entities to refine the construction proposal into a winning bid.
The actual sections of a construction proposal template are much like the parts of other types of proposals.
The table of contents generally follows this type of pattern:
A cover letter is an important part of any business proposal. The construction proposal cover letter should address your recipient (by name), introduce you and your company, and explain why you are submitting the proposal briefly, as well as summarize why your company is the right one for the project.
The next section of a construction proposal should highlight your past work and illustrate for the recipient that you are capable of completing the work required. Consider including information about how long you have been in business, what professional certifications you and your team have, and what local, regional, or national accolades you have received.
Very simply, you want to make sure the recipient knows how to get in contact with you, should they have any questions about the proposal – or want to accept it immediately (as would be ideal!). Make sure you give your recipient plenty of options for getting in contact with you.
Making it clear that you are providing an estimate, you want to list all costs related to direct labor, materials, subcontractors, and equipment fees and other costs. You will eventually replace these costs with detailed estimates a little later in the project (see Document #2).
Note that although the last page of a construction proposal is usually an agreement, this agreement is not the construction agreement, which is a separate document (see Doc #2 in this article). The agreement here is an agreement to be signed between both parties, agreeing to the terms laid out in the proposal, as well as the proposed cost estimate.
We’ve covered in several aspects of writing winning business proposals around our blog.
Using an online document management platform to scan, send, track, measure, and (above all) keep up with the various forms that get thrown around during the process will make managing all the documents that inform your construction proposal much easier.
Construction Industry Document #2: Service Contract
The service contract is our next essential document for the construction industry. After the construction proposal has been accepted, the negotiation is far from over. Your project may encounter cost overruns, unforeseen delays, or other things that call for adjustments to be made.
The construction service contract becomes the governing document of the project once the bid has been accepted. To help you avoid any unfortunate misunderstandings, it is important to put in place a construction contract that clearly outlines your (and your customer’s) responsibilities.
With this type of document, you basically hope for the best and plan for the worst. Construction projects can go horribly wrong and end up in litigation if this document is botched. All of the terms agreed to in the proposal are reflected in this document; its purpose is simply to expand upon and clarify the parties’ respective obligations, liabilities, and options.
The basic parts of a construction service contract are:
- Names of parties
- Definitions (services/deliverables/project)
- Statement of work to be performed
- Term (duration of the project)
- Detailed costs
- Payment terms
- Details of deliverables
- Acceptance terms
- Warranties and remedies
- Limitations of liabilities
- Delay or suspension terms
- General terms
Pay careful attention to the template below. As several sections are incredibly detail-oriented. This is one document in which you want to cover all your bases. This document is where the detailed costs and hard deadlines are established. The more detail you impart in writing this document, the easier it will be to manage and complete the project.
Construction Industry Document #3: Subcontractor Agreement
Subcontracting is another highly important (and common) element in the construction industry. If you are the primary contractor, you will need the subcontractor agreement to serve as the governing document when dealing with subcontractors, making certain that the cost, timing, and work to be performed by the subcontractor are all clearly laid out in the agreement.
If you are a subcontractor, you will want to know exactly what is expected of you and how you will be compensated. Often, the primary contractor will be working against his or her own set of deadlines, expectations, and budgetary concerns. This can place tremendous pressure on you to get the job done on time and in budget. You undoubtedly want to meet those expectations, but the only way you can know how efficiently you are completing the project is to have the subcontractor agreement in hand.
A carefully thought out subcontractor agreement is the best way to make sure that both parties know what to expect throughout the project.
Construction Industry Document #4: Flooring installation/repair proposal
Although you may be subcontracting work throughout the build, and the subcontractor agreement mentioned above will work for various purposes, flooring is a highly skilled trade and it may require you to enter into a specialized agreement.
Often, if the eventual owner of the new construction has a special request or need when it comes to flooring, you’ll turn to a dedicated flooring installation company to complete the work.
Construction Industry Doc #5: Architectural proposal
The only way to build is to follow the blueprint.
If you are a contractor, you will likely work with an architect at some point. Often they will prepare architectural proposals to submit to you. If, on the other hand, you are an architect, you may find yourself bidding in competition against other architects for special builds.
In that scenario, you will need submit a proposal that conveys that your design is sound, can be built within budget, and meets with local building codes – not to mention that it will appeal to the customer’s aesthetic expectations. What’s more, you’ll be doing this without the final blueprint. This means you’ll want to spend adequate time writing out clear and concise descriptions of the design.
Like the subcontractor, the architect is in the tough position of needing to fit his or her work within the context of the overall project. This places pressure on the architect to get things right on paper that will work exactly as planned in the real world. The architectural proposal must convince the primary contractor that the plan can come to life – in budget.
Wait! We’ve got bonus document templates for you…
Here are a few closely related templates that you should know about. Although these are not necessarily always a part of every construction project, they may come in handy from time to time.
- Construction Equipment Lease Proposal Template
- Independent Contractor Agreement
- Project Proposal Template
- Interior Design Proposal Template
- Solar Panel Installation Proposal Template
We hope these 5 documents come in handy during your next winning bid. What other documents or tips are important to the construction industry in your opinion? We’d love to hear from you in the comment space below.