Winning Design-Bid-Build Projects
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What if commercial solar contractors could consult a catalogue of PV projects that have already been sold, funded and designed, for which qualified customers are actively soliciting bid proposals? Sounds pretty good, right? I am here to tell you that such a resource exists, and to help you access and win these projects.
In the US, the commercial construction industry, including the vast majority of public works projects, traditionally relies on a design-bid-build (D-B-B) model of soliciting bid proposals. In contrast, the solar construction industry is more likely to use a design-build process. Many solar contractors I have spoken with are reluctant to bid on D-B-B projects. Some are unfamiliar with the bidding process or feel that it takes too much time; others would rather originate their own projects and avoid a competitive bidding environment.
They are missing out on an opportunity to land profitable projects. My experience suggests that relatively few contractors respond when solar projects go out to bid via a D-B-B process, and that even fewer contractors submit a bid. My hope is that demystifying this process will encourage commercial solar contractors to view D-B-B projects as another customer acquisition route, one that they are currently underutilizing. Adding these opportunities to your new-project funnel not only diversifies your project and revenue streams, but also reduces your company’s reliance on lead sellers and direct sales tools.
Understanding the Process
In a design-build project, the customer contracts with a company that takes on both the design and the construction of the PV system. This company could be a general contractor, an EPC firm, or an architecture or engineering firm that then subcontracts out the construction. The key point is that the customer contracts one company that is responsible for both the project design and the construction.
By contrast, in a design-bid-build project the customer contracts with a design professional, usually an architect or engineering firm, to produce a detailed design. Once the design is complete, the customer then puts it out to bid and selects a contractor to build the system to the design specifications. The key point is that the customer contracts the design firm and the contractor separately.
Request for proposal. At the core of the D-B-B bidding process is a document called a request for proposal (RFP) or an invitation to bid. The RFP includes the project design documentation and other essential information such as bid dates, general information for bidders, conditions for the bid, scope of work, contract terms, insurance requirements and bid submission forms. When responding to an RFP, it is very important to read the bid documents carefully.
Failure to follow the bid preparation instructions precisely—for example, by overlooking a submission deadline or a required piece of documentation—is an easily avoided way to get eliminated from consideration. The goal of the RFP process is to make it easier for the customer to compare proposals. By defining the project design and bid submission terms in advance, the customer is able to make an apples-to-apples comparison when evaluating bids. This is in contrast to the apples-to-oranges comparison that customers must make when evaluating design-build proposals, where different contractors are invariably proposing different technical solutions.
Finding solicitations. Before you can submit a proposal, you have to find the project solicitation. While it is not particularly difficult to locate projects to bid, the process can be time-consuming. Governmental agencies and local municipalities generally post RFP solicitations to their publicly accessible websites. Some of these websites allow you to sign up to receive email alerts whenever new RFPs are posted.
The challenge for specialty contractors is that these public entities tend to post all their bid solicitations in one place, meaning you might have to search through RFPs related to landscaping, water systems and roof replacement to find a PV project solicitation. A typical medium-sized city could have 10 pages of RFPs, and searching through these solicitations might uncover one solar RFP or none at all. If you multiply this example across various public-sector entities and websites, you can see how tracking RFPs quickly requires a significant investment of time.
Another option for finding solicitations is to pay for a service that tracks and aggregates RFPs and sends you daily email alerts. Companies such as BidSync (bidsync.com) and Onvia (onvia.com) offer these services and allow you to customize your search criteria to specific geographic areas and types of projects. These options are a worthwhile investment if your service area is large enough to generate many RFPs and you intend to respond to a majority of solicitations.
Responding to an RFP
Though the structure of individual RFPs varies somewhat, bid solicitations tend to adhere to accepted industry standards. Responding to an RFP generally follows a predictable five-step process.
Step 1: Review the documentation. The first step in the process is to review the RFP and the design documents. In most cases, the RFP itself is part of the contract, which means that the winning bidder will be held to all of its conditions and terms. Review the design documents carefully, as this is the design you will have to build unless the RFP allows for changes. The level of depth can vary from basic permit documents to highly detailed construction plans with complete equipment specifications. The less detailed the design, the more leeway the bidder has in determining installation specifics. Responding to very detailed designs with equipment specifications can take additional time, as you need to identify equipment that meets all the requirements.
Step 2: Gather questions. While reviewing the RFP and design documents, make a list of any questions that come up, whether specific to the solicitation or regarding the project in general. The RFP will have instructions for how to submit these questions and will call out the last date for submitting them. The solicitor will subsequently send out an addendum to all bidders describing and answering each of the submitted questions. Note that the RFP may allow multiple rounds of question submittals, provided that bidders deliver questions for each round prior to the relevant cutoff date; if so, the first round is generally due before the prebid conference.
Step 3: Attend prebid conference and site walk-down. The prebid conference provides contractors with an opportunity to walk the project site, take photos, meet the customer’s representative and the design team, get further answers to previously submitted questions and ask new questions. While attendance is usually optional, I would treat the prebid conference and site walk-down as a requirement, simply because the contract typically holds the bidder responsible for knowing the site conditions. The prebid conference also gives you a chance to evaluate your competition and see who else is a serious bidder.
Step 4: Evaluate the need for substitutions. The prebid conference helps you obtain enough information to determine whether the project needs substitutions. This is one area where the bidder can have some input into the design. For instance, you may want to use a different module. The RFP should provide a method for submitting this request, typically with supporting information and a rationale for making the substitution. The solicitor will review each substitution request and send all bidders information regarding approved substitutions.
Step 5: Estimate project costs. The end goal of the RFP response process is to determine a competitive lump-sum bid price. While some solar contractors may be unfamiliar with pricing a project based on someone else’s design, this is a key skill worth attaining. To win a bid solicitation, you need to be able to estimate project costs based on a review of the design documents. An essential step in this process is to complete a takeoff, a count of the material the project requires. By reviewing the RFP documentation, you can determine quantities for PV modules, inverters, combiners, conductors, conduit, mounting hardware and so forth. In addition to determining in-house labor costs and overhead, you may need to solicit bids from subcontractors. Once you have estimated your material and labor costs, you can apply the desired markup or margin. Your goal is to arrive at a price that is lower than competing bids while allowing your company to complete the scope of work profitably. (For more information, see “The Science and Art of Estimating,” SolarPro, June/July 2014.)
Completing the Bid Forms
Completing bid forms correctly is a time-consuming task that may daunt first-time bidders. The process is much more involved and requires much more information than putting together a private sector design-build project proposal. However, once you have a couple of responses under your belt, you will find that the process becomes easier and more efficient. For a modest investment in time and resources, your company can access the meaningful business development opportunities that D-B-B projects represent.
Throughout the process of completing the bid forms, keep these three priorities in mind. First, you must write a proposal that meets all of the RFP requirements. Second, you want to avoid doing anything that will trigger a rejection due to noncompliance. Third, you want to emphasize any unique qualities of your company that give it a competitive advantage over other bidders.
Many RFP requirements are familiar to solar contractors. For example, you need to show proof of insurance, carry a construction bond, show relevant experience, provide a list of qualifications and so forth. When listing experience and qualifications, the goal is to show that the bidder has completed similar projects in the last 3 to 5 years. Do not assume that the client will automatically disqualify your company if it does not have experience with projects that are exactly the same as the one under bid. With a competitive bid and good references, a less experienced bidder can win the contract.
Other RFP requirements are unique to public works projects. For example, you may need to document your commitment to fair employment practices, comply with prevailing wage requirements or certify that you do not have any conflicts of interest. You may also need to identify subcontractors or major equipment vendors. In some cases, your company may need to meet specific registration requirements to submit a bid. In California, for example, contractors must register with the Department of Industrial Relations to be eligible to bid on a public works project.
Another option is to outsource bid preparation, if you plan to bid regularly on public works projects with a high enough value to justify the expense of outsourcing. Several companies provide this service to contractors. The bidder still needs to prepare the cost estimate, but the service provider prepares the other tedious parts of the bid package. I recommend that you start by doing the bids yourself to build an understanding of how they are put together. Then you can determine whether you want to make an effort to win more of these projects.
Solicitors evaluate bids for public works projects according to well-defined rules that are intended to level the playing field for bidders. While the lowest price wins the day, agencies may favor or even set aside contracts for certain official business categories. They will also screen out any bids that do not satisfy the RFP requirements and, in many cases, any bidders who do not meet minimum requirements for experience or qualifications.
Diverse or small business certification. Many government entities have established goals for business diversity that seek to improve inclusion in public spending by offering more economic opportunities for local businesses, small businesses in general or those owned specifically by disadvantaged groups. For example, an agency might have a scoring system in place that accounts for women-, minority- or disabled veteran–owned business certification. Other entities may have set-asides available exclusively for diverse or small businesses. To qualify for most of these business categories, you must meet specific requirements and complete a certification process. While this process requires a major investment of time that you must finish prior to bidding on projects, such certifications often improve bid competitiveness. It is possible to qualify for more than one certification.
Responsive bids and responsible bidders. While these concepts sound similar, they describe different qualification criteria. A responsive bid is one that meets all of the requirements outlined in the bid documents, which means that the bidder must deliver it on time to the correct location, and it must include all of the required forms, certifications and requested information. Failure to meet these minimum requirements results in a nonresponsive bid, which is generally grounds for disqualification.
The process of determining whether a bidder is responsible is more subjective. A responsible bidder has the capabilities and qualifications required to complete the scope of work. To make a judgment about bidder responsibility, agencies evaluate prior experience, references, financial qualifications and trustworthiness. If a purchaser finds a bidder lacking in any of these areas, the agency may decide that the contractor is not a responsible bidder and eliminate it from consideration.
Ranking bids. At the end of this process, the bid solicitor ranks all the responsive bids, from the lowest cost to the highest, and contracts the qualified bidder with the lowest bid price to execute the project. Depending on the project scale, the evaluation process can take hours, days or even months. If a losing bidder feels the solicitor did not fairly evaluate its bid, that bidder can appeal the decision. In some cases, the issuing agency determines that none of the bids are acceptable and rejects them all. This often results in a project redesign with the goal of reducing costs; once the new design is complete, the bidding process starts over.
Private Sector Projects
In today’s market, public sector entities are most likely to use the D-B-B process to select solar contractors. However, the commercial construction industry has long relied on this process in private sector settings. Therefore, it is entirely possible that you will see more private sector requests for D-B-B solar projects in the future.
It is generally more difficult to find opportunities to bid private sector projects. Rather than advertise bid opportunities to the general public, private sector entities tend to reach out directly to a short list of preferred providers. These are often contractors that they have worked with in the past or that their architecture or engineering firm has recommended. The process of evaluating proposals in the private sector is also less formal and transparent. In this scenario, customers are free to accept whichever proposal they prefer based on their own judgment.
—Marvin Hamon / Hamon Engineering / Alameda, CA / hamonengineering.com