For the Tulsa commercial contractor, the first step in the bidding process or job procurement is obtaining the bidding documents. The American Institute of Constructors or AIC describes the bidding documents in this way:
In many cases, albeit not all, the first step in the procurement and bidding process is the prequalification of the bidder. Prequalifying contractors is a way of verifying that they have the experience and financial strength to complete the project successfully. A company’s financial statements, proof of insurance, bonding capacity, EMR, and litigation history are typically requested for the evaluation. Once a company has been prequalified it can be sent bid documents and continue the procurement and bidding process. Bid documents contain bidding instructions and information about a particular project. They generally consist of bidding information, technical specifications, and bid drawings. Often found in the initial sections of the project manual, bidding information includes the
The Tulsa commercial contractor must seek out the invitation to bid and instructions to bidders from the owner and/or architect, defined below by the AIC:
“…• Invitation to bid, also known as advertisement for bids, is the invitation to bidders to bid on a particular project. Invitations to bid provide general information about the project including, type, size, and location of the project; the bid date; anticipated start and completion dates; bond requirements; location and cost of bid documents; and any other general or legal requirements. On public projects, invitations to bid must be publicly advertised. They are often posted in public places and advertised in the newspaper, on the Internet, in trade journals or magazines, and at local builder exchange offices.
• Instructions to bidders, also known as information for bidders, are instructions to bidders, stating the bidding procedures for a particular project. They often include much of the same general information as the invitation to bid and provide detailed information about the bid due date, location to deliver the bid, type of bid opening (public or private), instructions for filling out the bid form, how and when contracts will be awarded or rejected, responsibilities of the bidders, and other important details regarding the bid…”
Once the Tulsa commercial contractor gets the project documents the must review the drawings or plans and the specifications to review the building process. If the Tulsa commercial contractor decides to the bid the project the must complete all the steps in the instructions for bidders and fill out the bid form. AIC’s description of the bid form is below:
“…Bid form, also known as a proposal form, is the document used by the bidders to submit their bids. They commonly include the contractor’s name, amount of the bid (both written and numerical), price breakdowns, list of alternates, acknowledgment of addenda, fees for extra work, unit prices, proposed time frame to complete the project, key subcontractors, disadvantaged business participation, and the signature of the bidder…”
Most large projects require bonds and insurance even just bidding the project. The owner and/or architect will want to protect themselves from harm so they will require bid surety in the form of a cashier’s check for a percentage of the bidder’s bid or bid bond. Once the project is awarded there will be a request for a performance bond as well. The deference between bonds and insurance and the types of bonds are describe by the AIC as follows:
“…Insurance and bonds are used to protect owners and/or contractors against risks. Insurance differs from bonds in who is responsible for payment in the case of a claim. With insurance policies, the insurance company is responsible for the cost of the claim. In a bond, the bonding company fulfills the contractor’s obligation for payment but holds the contractor responsible for payments made on the contractor’s behalf. Another important difference is who is being protected. With insurance, the party purchasing the policy is being protected, whereas, with a bond, the purchaser (contractor) is paying to protect another party (owner)…
…Bonds are used to protect the owner in cases where the contractor fails to perform in accordance with the contract. Bonds are three-party agreements between an obligee (owner), a principal (contractor), and the surety (bonding company). General contractors often require their subcontractors to obtain a bond as well. In the event that the principal is in default, the surety is responsible for upholding the principal’s obligations to the obligee. This could be to financially support the contractor through completion or to take over the project with another contractor…”
The Tulsa commercial contractor should know the deferent types of bonds, as described by the AIC:
“…• Bid bond is used to ensure that the principal will honor his or her bid and enter into a contract with the obligee for the bid amount after the bid opening. The bid bond usually covers the difference between the low bid and the second-lowest bid, typically up to 10% of the bid price.
• Performance bond is a guarantee ensuring the obligee that the principal will perform all work in accordance with the terms of the agreement.
• Payment bond, also known as labor and material bond, guarantees the obligee that the principal will pay his or her bills for labor and materials provided on the project…”
This are all ways to mitigate risk for the parties involved, and protect each party from behavior of other parties. The AIC lists an alternate to a payment bond below:
“…An alternative to bonding is subcontractor default insurance (SDI), commonly referred to by Zurich Insurance Group’s trade name Subguard. SDI is an insurance policy, purchased by prime contractors, to protect themselves from subcontractor default. Unlike with a bond, which is a three-party agreement, SDI is a two-party agreement between the prime contractor and the insurance company. Under the SDI policy, the subcontractors are required to be prequalified, effectively lowering the risk of default. In general, SDI is lower cost and more flexible, and claims are processed faster when compared to a surety bond. Advantages to bonds over SDI policies include more case law and legal precedent and no deductibles (often >$100,000 with SDI policies), and SDI may not cover third- or fourth-tier sub-subcontractors…”
These can help keep a project free from lawsuits and liens for the Tulsa commercial contractor and the owner and/or architect.