Not every project is worth pursuing. The most successful contractors know that strategic bid/no-bid decisions are as important as winning the contracts they pursue. This guide provides a systematic framework for evaluating opportunities and focusing your resources on winnable projects.
Why Bid/No-Bid Decisions Matter
Every bid consumes valuable resources. Poor bid decisions waste estimating time, tie up bonding capacity, and dilute your competitive focus.
The Cost of Poor Bid Decisions
| Resource | Impact of Pursuing Wrong Opportunities | |----------|----------------------------------------| | Estimating time | Diverted from better opportunities | | Bonding capacity | Committed to unlikely wins | | Staff morale | Demoralized by constant losses | | Reputation | Seen as desperate bidder | | Profitability | Winning wrong jobs hurts margins |
Benefits of Disciplined Selection
- Higher win rates
- Better project fit
- Improved profitability
- Stronger client relationships
- More efficient resource use
The Bid/No-Bid Framework
A systematic approach ensures consistent, objective decisions.
Step 1: Initial Screening
Quickly filter out obvious non-fits before investing significant time.
Immediate Disqualifiers:
- Project type outside capabilities
- Location not serviceable
- Size exceeds bonding capacity
- Timeline conflicts with existing work
- Required certifications not held
- Mandatory requirements not met
Quick Assessment Questions:
- Can we legally bid this project?
- Do we have the basic capabilities?
- Is the timing feasible?
- Do we want this type of work?
Step 2: Detailed Evaluation
For projects passing initial screening, conduct thorough analysis.
Evaluation Categories:
- Strategic alignment
- Competitive position
- Resource requirements
- Risk factors
- Financial considerations
- Relationship factors
Step 3: Scoring and Decision
Use weighted scoring to reach objective decisions.
Evaluation Criteria Deep Dive
1. Strategic Alignment
Does this project fit your company's direction?
Questions to Consider:
- Does it build capabilities you want to develop?
- Does it enter markets you're targeting?
- Does it serve clients you want to grow with?
- Does it enhance your portfolio?
- Does it support long-term goals?
Scoring Factors:
| Factor | High Score | Low Score | |--------|------------|-----------| | Target market | Core market | Outside focus | | Client relationship | Strategic client | Unknown client | | Project type | Builds expertise | Outside expertise | | Geographic fit | Primary service area | Remote location |
2. Competitive Position
What are your chances of winning?
Questions to Consider:
- Do you have an incumbency advantage?
- Is the client relationship strong?
- Do you have relevant past performance?
- Is your technical approach superior?
- Can you be price competitive?
Competitive Indicators:
| Indicator | Advantage | Disadvantage | |-----------|-----------|--------------| | Prior work | Recent successful project | No history | | Relationships | Know decision makers | No contacts | | Experience | Multiple similar projects | First of type | | Competition | Few competitors | Many competitors |
3. Resource Requirements
Can you adequately resource this project?
Questions to Consider:
- Do you have estimating capacity to bid properly?
- Are key personnel available?
- Do you have required equipment?
- Is bonding capacity available?
- Can you fund the cash flow?
Resource Assessment:
| Resource | Available | Stretch | Not Available | |----------|-----------|---------|---------------| | Estimators | Adequate capacity | Overtime needed | Overloaded | | Project team | Personnel available | Will need to hire | Committed elsewhere | | Equipment | Owned or readily available | Must purchase/rent | Difficult to obtain | | Bonding | Well within limits | Near limits | Exceeds capacity |
4. Risk Factors
What risks does this project present?
Questions to Consider:
- Are contract terms acceptable?
- Is the schedule realistic?
- Are specifications clear?
- Are site conditions known?
- Is the client known for fair dealing?
Risk Categories:
| Risk Type | Low Risk | Medium Risk | High Risk | |-----------|----------|-------------|-----------| | Contract terms | Standard terms | Some onerous clauses | Unacceptable terms | | Schedule | Adequate duration | Tight but achievable | Unrealistic | | Scope clarity | Clear specifications | Some ambiguity | Major unknowns | | Site conditions | Well understood | Some unknowns | Significant risks | | Client reputation | Good history | Mixed | Known problems |
5. Financial Considerations
Is this project financially attractive?
Questions to Consider:
- What margin is achievable?
- Is the payment structure acceptable?
- Are there financing requirements?
- What's the cash flow impact?
- Are there hidden costs?
Financial Metrics:
| Metric | Target | Acceptable | Walk Away | |--------|--------|------------|-----------| | Gross margin | >15% | 10-15% | <8% | | Retainage | <5% | 5-10% | >10% | | Payment terms | Net 30 | Net 45 | Net 60+ | | Mobilization | Paid | Partially covered | Self-financed |
6. Relationship Factors
How does this project affect client relationships?
Questions to Consider:
- Is this a repeat client relationship?
- What's the potential for future work?
- Will success lead to references?
- Is the client collaborative?
- What's their reputation in the industry?
Relationship Value:
| Factor | High Value | Low Value | |--------|------------|-----------| | Repeat potential | Ongoing relationship | One-time project | | Reference value | Industry leader | Unknown entity | | Collaboration | Partnership approach | Adversarial | | Growth potential | Expanding program | Declining needs |
Scoring Template
Use a weighted scoring system for consistent evaluation.
Sample Scoring Matrix
| Criteria | Weight | Score (1-5) | Weighted | |----------|--------|-------------|----------| | Strategic alignment | 20% | 4 | 0.80 | | Competitive position | 25% | 3 | 0.75 | | Resource availability | 15% | 5 | 0.75 | | Risk level | 20% | 3 | 0.60 | | Financial attractiveness | 10% | 4 | 0.40 | | Relationship value | 10% | 4 | 0.40 | | Total | 100% | | 3.70 |
Decision Thresholds
| Score | Decision | Action | |-------|----------|--------| | 4.0+ | Strong Bid | Prioritize and pursue aggressively | | 3.5-3.9 | Bid | Pursue with normal effort | | 3.0-3.4 | Conditional | Address concerns before deciding | | 2.5-2.9 | Likely No-Bid | Only pursue if conditions improve | | <2.5 | No-Bid | Decline to bid |
Decision-Making Process
Who Should Decide?
Small Contractors:
- Owner/Principal makes final decision
- Input from estimating and operations
Mid-Size Contractors:
- Bid review committee
- Estimating manager, operations manager, principal
- Structured review meetings
Large Contractors:
- Formal go/no-go meetings
- Multi-disciplinary review
- Documented decisions
Decision Meeting Agenda
- Project overview (5 minutes)
- Scoring review (10 minutes)
- Key concerns discussion (10 minutes)
- Win strategy discussion (10 minutes)
- Decision and next steps (5 minutes)
Documentation
Record decisions for:
- Future reference
- Pattern analysis
- Process improvement
- Accountability
Common Decision Traps
Trap 1: Desperation Bidding
Problem: Bidding everything during slow periods.
Solution: Maintain discipline; bad projects worsen slow periods.
Trap 2: Relationship Pressure
Problem: Bidding to maintain relationships despite poor fit.
Solution: Honest communication with clients about fit issues.
Trap 3: Optimism Bias
Problem: Believing you'll win despite weak position.
Solution: Objective scoring; seek outside perspectives.
Trap 4: Sunk Cost Fallacy
Problem: Continuing pursuit because you've already invested time.
Solution: Evaluate current position regardless of past investment.
Trap 5: Competition Fixation
Problem: Bidding just because competitors are bidding.
Solution: Focus on your strategic fit, not competitor actions.
Win Rate Analysis
Track and analyze your bidding performance.
Key Metrics to Track
| Metric | Calculation | Target | |--------|-------------|--------| | Hit rate | Wins ÷ Total bids | 15-25% | | Qualified hit rate | Wins ÷ Targeted bids | 25-40% | | Bid efficiency | Win value ÷ Bid cost | >100:1 | | Score accuracy | Actual outcomes vs. predicted | Correlation |
Pattern Analysis
Review decisions to identify:
- Types of projects you win most often
- Clients where you have highest success
- Competitive situations that favor you
- Price levels that generate wins
- Red flags that predict losses
Implementing the Framework
Getting Started
- Define your criteria - Customize to your business
- Set weights - Reflect your priorities
- Create templates - Standardize evaluation
- Train team - Ensure consistent application
- Track results - Monitor and adjust
Continuous Improvement
After Each Bid:
- Review decision accuracy
- Document lessons learned
- Update scoring criteria
Quarterly Review:
- Analyze win/loss patterns
- Adjust weights and criteria
- Identify improvement opportunities
Special Situations
Must-Win Opportunities
Sometimes strategic importance overrides scoring:
- Key client relationships
- Market entry opportunities
- Competitive positioning
- Long-term contracts
Even then, understand risks and have a win strategy.
No-Bid With Relationship
When declining to bid for valued clients:
- Communicate early
- Explain reasons honestly
- Offer alternatives if possible
- Maintain the relationship
Conditional Decisions
Sometimes decisions depend on:
- Addendum clarifications
- Subcontractor coverage
- Bonding availability
- Personnel scheduling
Set deadlines for resolution and clear criteria for final decision.
Next Steps
Ready to improve your bid decisions?
- Assess current process - How do you decide now?
- Define criteria - What matters most to your company?
- Create templates - Standardize evaluation
- Implement reviews - Establish decision process
- Track results - Monitor and improve
Related Articles
- How to Write Winning Construction Bid Proposals
- Construction Estimating Software Comparison
- Pre-Qualification Requirements for Government Contracts
Frequently Asked Questions
What win rate should I target? Most successful contractors achieve 15-25% overall hit rates. For targeted, qualified pursuits, 25-40% is achievable.
Should I bid to stay visible? Occasionally bidding to maintain relationships or visibility is acceptable, but don't sacrifice resources better used on winnable projects.
How much time should bid decisions take? Initial screening should take 15-30 minutes. Detailed evaluation for serious opportunities might take 1-2 hours. Don't over-analyze.
What if my estimators disagree with no-bid decisions? Involve them in the decision process. Their input on constructibility and pricing is valuable. Explain strategic rationale when overriding.
How do I handle client pressure to bid? Be honest about fit concerns. Offer alternatives if possible. A respectful no-bid often strengthens relationships more than a half-hearted bid.
