Winning a bid for a problem owner can be worse than losing. Difficult clients lead to payment issues, scope disputes, change order battles, and projects that consume resources while destroying margins. Smart contractors evaluate owners before deciding to bid.
Why Owner Evaluation Matters
The Hidden Cost of Bad Owners
Working for difficult owners affects:
- Cash flow: Slow payment, disputed invoices
- Profitability: Excessive documentation, meetings, rework
- Team morale: Frustrating interactions, unfair treatment
- Opportunity cost: Resources tied up on troubled projects
- Reputation risk: Claims, disputes, negative references
The Asymmetry Problem
In construction bidding:
- You invest significant effort to prepare a bid
- Owners evaluate you extensively
- But you often bid without evaluating them
- This creates an imbalanced relationship
Taking time to assess owners balances this equation.
Red Flags to Watch For
Financial Warning Signs
Payment History Issues
- Reputation for slow payment
- History of disputed invoices
- Cash flow problems
- Bankruptcy or financial distress
- Excessive retainage demands
Budget Concerns
- Unrealistic project budgets
- Unwillingness to share budget information
- History of scope cuts mid-project
- Multiple failed bid attempts on same project
Behavioral Red Flags
Communication Problems
- Unresponsive during bid phase
- Unclear or contradictory direction
- Unwillingness to answer questions
- Changing requirements without notice
Relationship Warning Signs
- High contractor turnover
- Multiple lawsuits or claims
- Adversarial reputation
- Unreasonable expectations
Process Red Flags
Bidding Process Issues
- Extremely low design fee (indicates problem drawings)
- Requests for free design services
- Unreasonable bid timelines
- Vague or incomplete bid documents
- Non-standard contract terms
Project Setup Concerns
- No pre-bid meeting offered
- Refusing site access
- Incomplete specifications
- Unclear decision-making authority
Research Methods
Public Records Research
For public owners, check:
Payment Records
- Prompt Payment Act compliance
- Reported payment delays
- Budget allocation history
Contract History
- Past project awards
- Change order frequency
- Dispute history
- Contractor complaints on file
Financial Position
- Bond ratings
- Audit reports
- Budget trends
- Revenue stability
Industry Intelligence
Tap your network:
Contractor References
- Other contractors' experiences
- Trade association feedback
- Industry gossip (with appropriate skepticism)
- Sub and supplier perspectives
Professional Networks
- Union hall intelligence
- Bonding company knowledge
- Plan room observations
- Industry association connections
Direct Observation
Evaluate through the bidding process:
- How are they conducting the procurement?
- Are they responsive to questions?
- How complete are the documents?
- What's the quality of the pre-bid meeting?
- How do they treat bidders?
Evaluating Different Owner Types
Government Agencies
Advantages
- Generally reliable payment (with bureaucratic delays)
- Defined processes
- Transparent requirements
- Legal protections
Concerns
- Change order approval difficulties
- Bureaucratic delays
- Political pressures
- Lowest price focus
Research Focus
- Agency reputation among contractors
- Historical change order percentages
- Payment processing timelines
- Inspector and PM quality
Private Developers
Advantages
- Faster decision-making
- Relationship potential
- Repeat work opportunities
- Flexibility in approach
Concerns
- Financial stability varies
- Fewer legal protections
- Payment depends on their financing
- May cut corners under pressure
Research Focus
- Financial backing
- Track record completing projects
- Relationships with lenders
- Past contractor experiences
Institutional Owners
Advantages
- Often professional procurement
- Stable organizations
- Long-term relationships possible
- Clear processes
Concerns
- May have bureaucratic tendencies
- Committee decision-making
- Risk aversion
- Budget pressures
Research Focus
- Organization's financial health
- Capital program track record
- Internal construction expertise
- Reputation among contractors
Owner's Representatives
When an owner uses a rep, evaluate both:
The Owner
- Why are they using a rep?
- What's their ultimate authority?
- Financial position
The Rep
- Industry reputation
- Past project performance
- Relationship with contractor community
- Decision-making authority
Building Your Intelligence System
Information Sources
Develop reliable sources:
| Source | Information Value | |--------|------------------| | Subcontractors | Payment history, project difficulty | | Suppliers | Credit standing, relationship quality | | Competing contractors | Bidding patterns, experiences | | Design professionals | Project setup quality, owner cooperation | | Surety/bonding agents | Financial concerns, claim history |
Tracking System
Maintain owner information:
- Database of past interactions
- Notes from debriefs and feedback
- Payment history tracking
- Relationship quality assessments
Pre-Bid Intelligence Gathering
For each opportunity:
- Check your internal records
- Query your network
- Research public information
- Observe bid process quality
- Make informed go/no-go decision
The Owner Evaluation Checklist
Before Pursuing
Answer these questions:
Financial Assessment
- [ ] Can they pay for this project?
- [ ] What's their payment reputation?
- [ ] Is financing secured?
- [ ] Any financial distress signs?
Relationship Assessment
- [ ] What's their contractor relationship history?
- [ ] How do they handle disputes?
- [ ] Are they litigious?
- [ ] Do contractors want to work for them?
Process Assessment
- [ ] Is the bidding process professional?
- [ ] Are documents complete and quality?
- [ ] Is the schedule realistic?
- [ ] Are contract terms reasonable?
Strategic Assessment
- [ ] Does this align with our strategy?
- [ ] Is there relationship-building potential?
- [ ] Will this lead to future opportunities?
- [ ] Is the risk/reward appropriate?
Contract Term Evaluation
Payment Terms
Evaluate carefully:
- Payment frequency: Monthly is standard; longer is a red flag
- Retainage percentage: Over 10% is excessive
- Retainage release: At substantial vs. final completion
- Pay-when-paid clauses: Understand your risk
Change Order Terms
Look for fair processes:
- Reasonable markup allowed
- Timely approval requirements
- Dispute resolution process
- Documentation requirements
Risk Allocation
Assess overall fairness:
- Liquidated damages amounts
- Insurance requirements
- Indemnification clauses
- Warranty obligations
- Termination provisions
Non-Standard Terms
Watch for concerning clauses:
- Unlimited liability
- Waiver of lien rights
- Unreasonable warranties
- Pay-if-paid provisions
- Excessive insurance requirements
When to Walk Away
Clear No-Go Situations
Don't bid when:
- History of non-payment
- Multiple contractor lawsuits
- Unreasonable contract terms they won't negotiate
- Incomplete documents with tight timeline
- Your research reveals consistent problems
Yellow Light Situations
Proceed carefully when:
- Mixed reputation (some good, some bad experiences)
- New owner with limited track record
- Good owner with troubled project
- Attractive project with concerning terms
Increase contingency, limit exposure, or negotiate terms.
Making the Decision
Balance opportunity against risk:
- High opportunity, low risk: Pursue enthusiastically
- High opportunity, high risk: Negotiate terms or add contingency
- Low opportunity, low risk: Standard pursuit
- Low opportunity, high risk: Walk away
Building Owner Relationships
Good Owners Deserve Investment
When you find good owners:
- Provide exceptional service
- Build personal relationships
- Communicate proactively
- Earn repeat opportunities
Reputation as a Filter
Your reputation attracts certain owners:
- Quality-focused contractors attract quality-focused owners
- Price-only contractors attract price-only owners
- Relationship builders attract relationship seekers
Build the reputation that attracts the owners you want.
Conclusion
Not every bid opportunity is worth pursuing, and not every win is a good win. The most successful contractors are selective about who they work for, using careful evaluation to avoid problem owners while building relationships with good ones.
Develop your intelligence network, create systems to track owner information, and apply rigorous evaluation before committing estimating resources to any opportunity.
The best project is one with a fair owner, realistic budget, quality documents, and reasonable contract terms. Learn to recognize these opportunities - and learn to walk away from the ones that will only bring problems.
ConstructionBids.ai provides information on project owners and agencies, helping you identify opportunities with owners who match your criteria for successful projects.
