The hiring of a construction contractor by a project owner is done through a procedure known as the bidding process, which takes place prior to the start of a construction project. As a contractor, you must be able to convince a potential client to choose you by presenting a proposal that accurately describes the range of work you intend to accomplish and conveys confidence in your company's capacity to do so.
Your construction company may exhibit effective leadership, have devoted, hard-working employees, or even fill a niche that few others do; however, if you cannot clearly communicate these qualities to a potential client in a written construction proposal, you may be losing many opportunities. To help you write a client-winning proposal, we will go over the necessary preparation and essential elements you must cover.
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When competing for contracts, a construction proposal, also known as a bid, is presented. It contains comprehensive project details, such as quotes from suppliers that provide an estimate of the cost of the construction project's raw materials. Additionally, it provides estimates from subcontractors for the work they will perform on the construction project. A good construction proposal can also serve as your company's portfolio, assurance, legally-binding agreement, as well as an effective marketing and sales tool.
It helps you prevent disputes later on in the construction process because it is far more detailed than a project bid, and it also gives you a chance to present your client with a workable alternative in case their expectations are not reasonable and manageable through the construction project. You may promote your business, talents, and reputation while demonstrating to potential clients how well you understand their construction project by simply writing a strong construction proposal.
But there are a few things you must take care of before you sit down to write your business proposal.
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Your construction proposal must be excellent if you want to impress your potential clients and get the green light for your project. And you can't write a convincing proposal without some preparation work. Here are some tips to help you get it right.
Any successful construction project must start with research. Don't start writing your proposal until you have done extensive research on every facet of what you'll be writing and delivering. This also entails becoming familiar with the bidding process, particularly if you're trying to land a government project as they are frequently subject to strict regulations.
Often, construction proposals fall short in accurately defining the goods or services they aim to provide. When this happens, your client will have a lot of inquiries to make in order to comprehend the scope of work, and will probably find your proposal difficult to understand, therefore might disregard it.
Depending on the state you will be working at, there might be mandatory requirements that your construction proposal must follow. These may outline the specific contact information you should include, the amount limit you are allowed to request as a deposit, a legal registration of all contractors and subcontractors participating in the project, as well as a dispute resolution clause.
When creating a construction bid proposal for a new prospective client, it is crucial to understand who they are and what they are all about. Arranging a meeting with your clients before drafting a proposal will allow you to learn more about their industry and how it relates to the work you are looking to acquire, as well as obtaining essential information about the project that may be vital to include in your proposal. You may also do this over the phone, or online via email, as long as you can gather all the relevant information. This will ultimately help you show that you have the necessary knowledge, competence, and capacity to do the job and meet their needs.
Now let's go over the information you must never miss when drafting your construction proposal.
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Your construction proposal serves to 'paint a picture' for your clients by describing what you are planning to accomplish in clear detail. It should include information about specific materials, a payment plan, and expenses. In addition to presenting you in a professional light, a polished proposal safeguards both you and your client from miscommunication and disagreement. When you write proposals, make sure you include the following essential elements.
The construction bid proposal is once again a safety net for you and your clients, outlining their responsibilities and liabilities, as well as any information or resources they must give. For it to be a legally binding construction contract, your proposal must list all the parties involved, your client's information, be worded accurately, without errors, and it needs to be signed by all parties.
Include the parties' full names, addresses, federal ID numbers (if applicable), contractor registration numbers, names of any sales people participating. You may also add your company logo or any other branding elements to give your proposal a more professional presentation.
You should focus your attention mostly on the ‘scope of work’ section, this is where you will spend most of your drafting time. You must be as specific as you can in this portion of the proposal because it is by far the most crucial. Here is where you list the steps involved, the materials used, the model and spec numbers, the colors, etc. You can't afford to be vague and general in your scope of work as you might end up doing work you didn't agree to or having to honor a warranty because the materials were not specified.
Describe the building work that will be done as part of the project, providing specifics on the activities, deliverables, and phases. Include any necessary tools, labor, and supplies as well. Even a construction plan is acceptable. Take note of the certifications needed for the job, as well as the details on an annual inspection, a bond, and insurance.
Finally, you can include a critical closing statement that clarifies the conditions for the type of construction contract. Discuss the materials, commodities, labor, and services explicitly stated in this section.
Your construction proposal should also include a very thorough cost estimate covering every last detail. It must include all direct expenses such as labor (including subcontractors), equipment, the quantity takeoff, which accounts for all the materials required to finish the build, as well as a sum for allowances (which we will cover below). You must also account for all of your indirect expenses, such as office rent and operating expenses. Your clients will want to know exactly what their money will be spent on, so don't leave anything out.
You could also include a "success criteria" section to discuss your project goals and how the costs previously discussed will help achieve these goals. This will help your clients understand the need for each expense and envision the finished project.
Establishing a payment plan is necessary to maintain a healthy cash flow as well as to prevent having to wait 30 days for a sizable payment upon project completion. Again, depending on your state laws you'll be allowed to ask for a certain percentage of the total project cost as a deposit, and then you'll have to estimate how much each stage will cost you so you can lay out a clear payment schedule.
Typically, you'll use the deposit to pay for all materials, dumpster rental fees, and labor for the work. Each following payment guarantees you'll have enough money on hand to cover the subcontractor or labor costs in full. For example, you might send construction invoices as you reach established milestones (completing rough plumbing, electrical installation, etc...), or specify a certain date when you expect to get payments.
You should also define any upfront payment that you might request in the case of special orders such as windows, doors, custom accessories, etc. A good strategy to make sure you always cover the material costs, labor and sub contractors, is to set the last payment to be just the amount of profit you expect from the project, so that in case of any dispute you're not left with any loss.
Your clients will often do some planning around renovations, arrange accommodations for pets or furnishings and even schedule trips to be away while work is being done, so it's important to the client (and mandatory by law) to provide a detailed project schedule. The description of the construction schedule will include the anticipated start date for the work as well as the anticipated completion date.
You should also include additional dates, such as approvals, easements, and permitting, as well as milestones like when one phase concludes and another begins. In order to further protect you and your clients, you should also include milestone completion dates and who is responsible for delays, depending on the reason for the delay. Include the day on which all the contractors received notification to proceed with the construction project.
In the context of construction, an allowance is a set sum of money typically set aside for tasks you'll need to subcontract. Although it is anticipated that these figures won't be exactly correct, they will offer your client a general notion of what to anticipate. These figures will later be "fine-tuned" by having the subcontractor evaluate the work plan on location, either before or after the contract is signed.
Your construction proposal would usually include allowance items in your proposal for work that is frequently subcontracted, such excavation, concrete, heating, plumbing, electrical, cabinets, appliances, flooring, and painting. This helps you create a comprehensive project budget proposal for your clients that includes all of the predicted subcontractor items.
This section is often overlooked, but it is a very important addition if you want to save a ton of time, money, and disputes. The agreed-upon project costs always exclude any potential expenses associated with dealing with unforeseen, incidental, or hidden costs (such as those related to unsafe wiring, illegal plumbing practices, mold, structural problems, inspector or engineer requirements added after my agreement, and any other unanticipated conditions discovered after the construction project starts).
Of course, there will be additional costs in these situations for testing, handling, cleanup, containment, disposal, or elimination of the unanticipated problem, so you must stipulate that your client consents to cover these charges.
You should think about identifying alternatives that could improve the project's value or, on the other hand, lower project costs through value-engineering in addition to explaining your scope to the customer. Generally speaking, it's advised to only give alternative costs when the project specifications are vague or you have the impression that the client is receptive to alternatives.
You could also include different pricing packages to show your client what you could do with different budgets and what you could do with cheaper or more expensive materials. Include as many alternatives as you find appropriate, but always be mindful that an excessive number of options might be confusing for your clients. Many construction companies do this to highlight the services offered and showcase the value that their initiative might bring to the project.
The warranty portion of a construction proposal is another safety measure. Here you specify what repairs you are responsible for making and under what circumstances, as well as what you are not responsible for, such as general wear and tear, misuse, or lack of proper maintenance by the owner. You can also include an 'Incidental and Consequential Damages' disclaimer.
Your construction proposals must include a strong final call-to-action that leaves your clients with a positive impression of your business. Make sure to clarify the procedures to follow if they wish to do business with you, and present yourself as someone who is professional but also a pleasure to work with.
This is your opportunity to let your personality shine through in your closing remarks, inviting your client to give you a call or accept your proposal online via email. Make it clear you are open to any concerns they may have and express how much you look forward to making their dream project come true.
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?