The opportunity for small business construction contractors has rapidly grown over the past two years and we will see continued growth over the next 30 years. It is projected that the City of Los Angeles alone, will see 10 billion dollars in construction activity over the next 10 years. That’s billion with a “b”, that’s enough for every small business in construction to be successful and stimulate the economy. But before you pursue these private or public contract opportunities, it’s important that you consider these 3 steps:
1) Can your firm perform the scope of work with quality? Be sure you or your team has the experience to perform ALL the scope required per the specifications and with quality. When pursuing a contracting opportunity it’s best to stick with a specific expertise, don’t do it for the money. Do it because you’re good at it. You can’t be good at everything. Choose those areas your firm will be recognized for.
2) Request a copy of the contract. Did you know you could request a copy of the contract prior to contract negotiation? You don’t have to wait until your firm is awarded the contract. If bidding to a general contractor as a subcontractor, request a copy of the contract. It’s important that you understand the terms of the contract. A few key things to look out for when reviewing the contract language: payment times and conditions, change order fees, bonding and insurance requirements and retention. But don’t be alarmed, some of these items can be negotiable. Never think a general contractor's contract is set in stone. However, there are some government and city contracts that can’t be changed so be aware of that.
3) Is this contract good for my business? Do you have the manpower and capital to meet the demands of the project? Although this may be a $500,000 contract opportunity, not all money is good money; will your contract generate a profit? Or are you breaking even and possibly losing money? Be sure to do your due diligence, for example a Rough Order of Magnitude (ROM) will help you quickly determine whether or not this project is worth dedicating your time and resources. Remember, submitting a bid takes time and money and as a small business, you want to be absolutely sure you are using your time wisely.
If you’ve done these 3 steps, and you’ve determined your firm can perform the work with quality, meet the contractual obligations and earn a profit, you’ve just put your firm in the best position to succeed in this industry. Good Luck!
The 3 Steps to Consider Before Bidding On A Construction Project As a Small Business