Commercial work is usually won by bid against a written specification, on the customer's terms.
The vocabulary
Tender — the formal invitation to bid, with a specification, a deadline and stated conditions.
Provisional sum — an allowance in the bid for work that cannot yet be priced, adjusted when the actual cost is known. It is not a fixed price and should never be presented as one.
Value engineering — reworking the specification to lower cost. It is a legitimate exercise and it is also the point at which quality is quietly reduced; whichever is happening should be stated.
Best and final offer — a request for a revised bid after the first round. Worth recognising for what it usually is: a request for a discount without a change in scope.
Scope gaps
The work that falls between the packages awarded to different trades, and which nobody has priced.
They are found during construction rather than at bid, and they are the most common source of dispute. The protection is a bid that states clearly what is excluded as well as included — see scope of work.
Marking up subcontracted work
Subcontracted work carries a markup for the management, the coordination and the risk of it — which is real work and is frequently forgotten in the bid.
Some contracts cap the percentage that may be applied. Where they do, that cap belongs in the pricing decision before the bid rather than as a surprise afterwards.
Bidding low to get in
Rarely recovers. The relationship built on a thin price is renewed at that price, and the work is judged against a margin that was never there — see pricing strategy.
The exception is a deliberate, priced decision with a stated plan, which is different from bidding low because the work was wanted.
What to read before bidding
Payment terms and any pay-if-paid clause, retainage, liquidated damages, insurance and bonding requirements, and who bears the risk of delay.
Any of these can make an otherwise profitable job a loss, and all of them are settled before the bid rather than after the award.