Every year, Software Advice speaks to hundreds of small businesses that are searching for the best bid management software to fit their needs. These interactions give us tremendous insight into the needs of software buyers across a wide assortment of sectors in the construction industry.
We recently analyzed a random selection of 358 interactions with small-business buyers (those from companies with $100 million or less in annual revenue) to examine the main reasons they are seeking new bid management software.
- More than half (57 percent) of prospective buyers currently rely on manual methods (e.g., spreadsheets, pen and paper) to manage and track construction bids.
- The overwhelming majority (82 percent) of prospective buyers from small businesses want to implement a new bid management system within three months.
- Thirty-six percent of prospective buyers from small businesses want a bid management system that features an extensive subcontractor database.
More Than Half of Buyers Rely on Manual Methods
Over half of prospective buyers (58 percent) were relying on manual methods, such as Excel spreadsheets and pen and paper, to keep track of incoming and outgoing bids—often in combination with other light office productivity software, such as Microsoft Outlook or Word. For small businesses, these methods might work as a temporary solution, but as businesses grow (and they solicit and send out more bids), they can quickly get bogged down.
Twenty-six percent of prospective buyers were using commercial bid management software; many of them were unsatisfied with their current programs and were seeking greater functionality.
Eleven percent of prospective buyers were using non-bid management software, which refers to more specialized project or construction management software that lacks bid management capabilities, such as Microsoft Project.
Prospective Buyers’ Current Methods
Very small percentages of buyers were either using nothing at all (3 percent) or an in-house, proprietary software (2 percent) to manage their bids.
Most Buyers Want to Implement Within Three Months
A combined total of 82 percent of prospective buyers wanted to implement their new bid management system in three months or less: 39 percent wanted to deploy within one month of speaking to us, and 43 percent within three months.
Given how time-sensitive construction bids are, it’s unsurprising that so many buyers wanted to deploy a new system in a relatively short time frame; every day that goes by without a proper bid management system in place means lost opportunities and less revenue.
Prospective Buyers’ Time Frames for Implementation
Subcontractor Database Is Most Requested Feature
Beyond basic bid management functions such as tracking and managing bids and requests for information (RFIs), a sizable portion (36 percent) of our sample wanted access to a subcontractor database through their bid management system.
Traditionally, the process of bidding out projects was conducted through close-knit, smaller networks of contractors and subcontractors. In the age of the Internet, however, it’s a buyer’s market—contractors want to be able to compare bids from as many qualified subcontractors as possible.
Top-Requested Bid Management Features
With many bid management systems, users have access to a searchable and filterable database of regional or national subcontractors whom they can blast bid invitations to. Not only does that save time (and money), increased competition can lead to cheaper project costs. Thus, it’s no surprise that 33 percent of buyers were seeking software with bid solicitation features.
Streamlining Bid Management a Key Priority
One major hangup many of our prospective buyers spoke of—oftentimes, the main reason they wanted a formal bid management system—was that they were spending too much time finding and contacting individual subcontractors to solicit bids to.
Indeed, typical among buyers relying on manual methods for bid management were complaints that their current methods were inefficient and unorganized, particularly when it came to individually emailing each subcontractor.
Several buyers also mentioned being concerned that many of their manual email invitations were ending up in subcontractors’ spam folders; with a formal bid management system in place, this problem becomes far less of an issue.
As such, it is unsurprising that 86 percent of prospective buyers wanted to increase their efficiency and streamline their processes, particularly with regards to communication with subcontractors, using bid management software.
Many buyers also expressed frustration over their current bid management system—be it formal or ad-hoc—with 46 percent calling it “inadequate.”
Top Reasons For Software Purchases
Most Prospective Buyers Are General Contractors
Unsurprisingly, nearly three-fourths of the prospective buyers we spoke with were general contractors (73 percent). The remainder was comprised of home builders, renovators and specialty contractors, among others.
Demographics: Prospective Buyers by Industry Segment
And these buyers represent the even smaller side of small businesses: 67 percent of prospective buyers were generating less than $25 million a year in revenue.
Demographics: Prospective Buyer Size By Annual Revenue
The concept of bidding out construction work to the most qualified—and cheapest—subcontractors is almost as old as the industry itself. With so many moving parts on any given construction project, it is imperative for contractors and construction managers to be able to remain organized and efficient, all while ensuring that the best people are working on the project at the best price.
In a February 2014 article for Engineering News-Record, editor Bruce Buckley writes that “while some contractors have seen a healthy uptick in activity in recent years, margins have not kept pace,” noting that thin margins are driving contractors and construction managers to closely examine where they can make their processes more efficient.
On top of thinner profit margins, the realm of bid management is shifting due to different construction project delivery models becoming more popular. Design-bid-build (DBB)—in which one firm handles the design and the owners bid out the construction to a separate contractor—has long been the most popular delivery model.
However, design-build (DB)—in which the design firm also oversees construction—has been gaining in popularity in recent years, due to the perceived benefits of having a single firm handle both the design and implementation of a project.
According to a 2014 report by the Design-Build Institute of America, DB projects accounted for 39 percent of all non-residential construction projects that same year—up from 30 percent in 2005.
Meanwhile, DBB projects accounted for 52 percent of all non-residential construction projects in 2013, down from 67 percent in 2005. W
hat does this mean? Specialized DB firms are growing in popularity, squeezing out traditional design firms and general contracting firms.
For general contracting firms that do not handle the design aspect of construction, that could mean that open bids for bigger projects could become fewer and farther in between in the years ahead.
Thus, it is more important than ever to have streamlined, efficient processes for bidding on projects and soliciting bids from subcontractors—as the preferences of the buyers in this sample reflect.