Selecting and awarding subcontracts and supply

Once bidders are prequalified, the contractor invites prices, compares them on a like-for-like basis, confirms that the preferred bidder understands and has priced the whole scope, negotiates any remaining points, and awards. CON-300 covered how estimators level subcontractor quotes on bid day, when the contractor is building its own price for the owner. After award the situation is different: there is more time, the scope is fixed by the contract documents, and the contractor's own money is now at stake. This lesson covers the post-award selection process, from the invitation to bid to the award letter.

The invitation to bid

The invitation to bid (also called a request for quotation or bid package) tells prequalified firms exactly what to price and how. A clear package produces comparable bids; a vague one produces bids that cannot be compared and scopes that will be argued about later.

A bid form with a mandatory breakdown is one of the most useful tools. Asking every bidder for the same line items (for example, for windows: supply, installation, sealants, mock-up, shop drawings and engineering, and the price of each alternate) turns a single lump sum into something the contractor can compare and later use to value changes.

Managing the bid period

During the bid period, bidders ask questions and the contractor issues clarifications. Two rules keep the process fair and the bids comparable. First, answers that change or clarify scope go to every bidder in writing, as an addendum to the bid package, not to the one firm that asked. Second, the deadline is the deadline for everyone: a contractor that accepts one late bid, or lets one bidder revise after seeing others, invites complaints and, on public projects, possible challenges.

The bid period must be long enough for bidders to obtain their own supplier quotes. For complex packages such as mechanical, electrical or curtain wall, two to three weeks is common; for simple packages, one week may be enough. Shortening it to recover schedule (Lesson 2) is possible but usually reduces the number of bidders and the quality of their pricing.

Leveling the bids

Bids rarely arrive on the same basis. One bidder excludes hoisting, another includes it; one prices an alternate product, another qualifies its price as valid for 30 days. Leveling adjusts each bid to the same complete scope, usually by adding a plug value for anything a bidder excluded and deducting anything it added that is not required. CON-300 covers the method in detail; the post-award version is the same but with more time to confirm each adjustment with the bidders themselves.

# Adjusting the Larch Street windows and storefront bids (illustrative)
base = {"Glaze 1": 2_198_000, "Glaze 2": 2_265_000, "Glaze 3": 2_310_000}
# adjustments: positive = add for an exclusion, negative = deduct for added scope
adjust = {
    "Glaze 1": {"hoisting excluded": 38_000, "mock-up excluded": 22_000, "engineering stamp excluded": 15_000},
    "Glaze 2": {"sealant at cladding interface excluded": 26_000},
    "Glaze 3": {"upgraded glass not required": -18_000},
}
for b in base:
    total = base[b] + sum(adjust[b].values())
    print(f"{b}: base {base[b]:,}  adjustments {sum(adjust[b].values()):+,}  adjusted {total:,}")
adjusted = {b: base[b] + sum(adjust[b].values()) for b in base}
low = min(adjusted, key=adjusted.get)
print("Lowest bid after adjustment:", low, f"{adjusted[low]:,}")

Glaze 1: base 2,198,000  adjustments +75,000  adjusted 2,273,000
Glaze 2: base 2,265,000  adjustments +26,000  adjusted 2,291,000
Glaze 3: base 2,310,000  adjustments -18,000  adjusted 2,292,000
Lowest bid after adjustment: Glaze 1 2,273,000

After leveling, the apparent lead of Glaze 1 shrinks from $67,000 to $18,000 over Glaze 2, and the order could change again once the plugs are confirmed. A plug is the contractor's estimate of what an excluded item will cost; if Glaze 1 can include hoisting for less than $38,000, its leveled price falls. This is why the next step, the scope review, matters.

The scope review meeting

Before award, the project manager meets the preferred bidder (and often the second bidder) to walk through the scope line by line. The purpose is not to reopen the price but to make sure the bidder has priced exactly what the contract documents and the responsibility matrix require, understands the schedule and site conditions, and accepts the subcontract terms. Problems found here can be fixed by clarifying scope or adjusting the price before anyone is committed.

The outcome is written scope review minutes, signed by both parties and attached to the subcontract. They record each clarification and its effect on price, so that the subcontract scope matches what was actually agreed. Verbal assurances that are not written down tend to be forgotten by the time the work starts.

Negotiation without bid shopping

Contractors legitimately negotiate after bids close, but there is a line between negotiating and bid shopping. Discussing scope, alternates, schedule, payment terms or value engineering ideas with a bidder is fair. Telling a bidder what a competitor bid, or implying a lower price exists that does not, is not. A practical test: would you be comfortable if every bidder saw a transcript of the conversation?

In the US, many public owners require bidders to list major subcontractors in the prime bid, and state listing laws (for example, California's Subletting and Subcontracting Fair Practices Act) restrict substituting a listed subcontractor after award without the owner's consent and a statutory reason. Bid shopping a listed subcontractor's price is therefore both bad practice and, on such projects, potentially unlawful (CON-220).

Choosing: lowest compliant price or best value

Most contractors award subcontracts to the lowest compliant leveled bid among prequalified firms. Prequalification has already screened out firms the contractor would not hire, so the remaining firms are all acceptable, and price decides. For packages where non-price factors differ materially among acceptable firms (schedule capability, key staff, design input on a design-assist package), a best-value method weighs them explicitly.

# Best-value selection for a design-assist mechanical package on another project (scores out of 100)
bids = {"Mech 1": 5_812_000, "Mech 3": 5_905_000}
non_price = {"Mech 1": 72, "Mech 3": 86}   # team, schedule plan, design-assist approach
w_price, w_tech = 0.6, 0.4
low = min(bids.values())
for b in bids:
    price_score = 100 * low / bids[b]       # lowest price scores 100
    total = w_price * price_score + w_tech * non_price[b]
    print(f"{b}: price score {price_score:5.1f}  technical {non_price[b]}  total {total:5.1f}")

Mech 1: price score 100.0  technical 72  total  88.8
Mech 3: price score  98.4  technical 86  total  93.5

Consider a design-assist mechanical package on a different Halyard project, a clinic where the mechanical trade helps develop the design. With a 60 % weight on price, Mech 3's stronger technical score outweighs its 1.6 % higher price, and Halyard would award to Mech 3 and record why. On Larch Street, a conventional package fully designed by the engineer, Halyard awarded mechanical to the lowest compliant bidder, Mech 1, at $5,812,000. Best-value methods are useful but easy to misuse: the weights and scoring criteria must be set before bids are opened and applied consistently, or the method becomes a way to justify a decision already made.

Awarding: letters of intent and subcontracts

The award is complete only when the subcontract is signed. Schedules sometimes push contractors to let a trade start, order material or prepare shop drawings before the subcontract is finalized. The usual instrument is a letter of intent (LOI) authorizing limited work up to a stated dollar cap and time. LOIs are useful but risky: if the subcontract is never signed, the parties may find themselves bound by the LOI's few terms, or arguing about whether a contract exists at all.

When the award is made, the contractor should also notify unsuccessful bidders promptly and courteously. Many contractors share the rank or the range of bids without revealing competitors' prices; this helps bidders improve and keeps them willing to bid next time.