When Disaster Strikes: Bids Exceed Budget or Available Funds

Opening bids may be one of the most nerve-wracking tasks in the project life cycle. A bid that is significantly lower than anticipated may raise concerns of poor workmanship, contractor experience, and solvency. A bid that is significantly higher than anticipated, on the other hand, leaves Owners questioning how they will complete the project without significant impacts to scope.

If a bid exceeds the budget or available funds, the Bell team immediately begins discussions with the Owner and contractors to identify why bids are higher than anticipated. There are many factors that can cause bids to be high beginning with the bidding environment. Is there an economic situation affecting the market? Since the onset of the COVID pandemic, we have seen an increase in bids due to both contractor and supply chain uncertainty. Materials are in high demand and production disruptions have led to higher prices and longer lead times. Another consideration is the length of time from project development to when it was actually bid. If a project was shelved, there will likely be increases in material and equipment prices from when the initial estimate was put together. Finally, did contractors have concerns about the bid package? Were there items that were unclear to them or is the performance period too short for their workload? These circumstances can lead to higher than necessary pricing as contractors account for uncertainties.

Once you have determined why the bid was high, it is time to evaluate options and engage your team members. It may be possible to provide clarification and negotiate with the low bidder and/or all bidders. Our engineers work with our clients to evaluate if a reduction in price can be achieved through value engineering to address increased equipment or material costs. These options are conditional upon funding source and legal counsel verification that all procurement requirements can still be met. If successful, they may be able to prevent a reduction of scope or the need to rebid a project. Our team also works with the existing funding partners and administrator to determine if they may be able to increase their participation in the project. We do this while evaluating other state and federal programs to identify any available sources of additional funds. Changes in funding may lead to rate impacts that must be considered.

As a last resort, it may be necessary to rebid or redesign and rebid the project. While this is not the most desirable solution, sometimes it is the only way to ensure that a project doesn’t die or move forward with significant scope or rate impacts. The bidding process can be a challenging time, but with the right team members, difficult situations can be resolved and a successful project can be achieved serving your community for years to come.