How to level construction bids before you compare them

Bid levelling is the adjustment of every bid for a package to the same scope and the same basis, so that the totals you compare price the same work. The lowest submitted bid is often not the lowest, because it is usually the one that left the most items unpriced, excluded the most work in its cover letter, or asked for the most expensive terms.

This is the method a commercial team uses to level the bids for a package before anyone recommends an award. It works for a main contractor buying a subcontract, a subcontractor buying supply, and a developer comparing main contractors. The glossary has the short definition.

Why submitted totals mislead

A bid total is the sum of what the bidder chose to price. Six things make that sum differ from what the package will cost you.

• Unpriced items. A blank, a dash or a zero in the BoQ. The preambles may deem an unpriced item included in other rates. A subcontractor who never allowed for the work will still dispute it on site.
• Lump sums. A section priced as one figure with no rates behind it. You cannot see what it covers, and you cannot value variations against it.
• Qualifications and exclusions. The cover letter says "scaffolding by main contractor", "testing and commissioning excluded" or "prices exclusive of VAT". None of these appear in the priced BoQ. All of them cost you money.
• Provisional sums and PC sums. Every bidder should carry the same figures. A bidder who reduced or omitted one lowers its total without competing on anything.
• Rates far from the others. A rate at a third of the other bids is an error, a misread specification or a deliberate choice. Each of those costs you later.
• Terms that cost money. A 20% advance payment, 30-day payment where your client pays you at 60 days, or a refusal of retention. Two bids with the same total and different terms have different costs.

How to level construction bids, step by step

1. Fix the baseline: the BoQ as issued

Every bid must price the BoQ you issued, in its structure: the same item references, descriptions, units and quantities. Check that each bidder acknowledged every addendum issued during the tender. If a bidder priced an earlier revision, put its rates onto the current one or ask it to resubmit.

Some bidders retype the BoQ, change quantities or price their own take-off. Put their rates onto your quantities before you compare anything. Watch for wording such as "quantities as per our take-off" and "subject to remeasurement".

If the bids keep coming back in different shapes, the BoQ is usually the cause. Our BoQ template shows a structure bidders can price without interpreting it.

2. Count what each bid left unpriced

Go through each bid and list every item with no rate. Treat "included" separately from a blank. "Included" is a claim that the cost sits in another rate, so ask where. A blank is an item the bidder did not price.

Record the count for each bidder. A bid that left 38 of 186 items unpriced covers a different package from the one you issued.

3. Price the gaps back in, and keep both totals

Price each unpriced item at your own estimate rate for it. Where you have no estimate, use the median of the rates the other bidders put on that item. The median is safer than the average, because a single extreme rate hardly moves it. If you want to be cautious on a package with a history of claims, use the highest of the other bids' rates instead. Whichever rule you choose, apply it to every bidder and write it down.

Keep the as-bid total on the sheet and add the levelled total beside it. Never replace the bidder's figure with yours. The as-bid total is what the bidder offered and what it will sign. The levelled total is your estimate of what the package costs with that bidder. The difference is what you must either get priced in a clarification or carry as risk.

4. Treat lump sums and declined sections differently

A bidder may price a whole section as one figure and state that it covers the section. Treat that section as priced, and compare its sum with the same section in the other bids. Ask for a breakdown before award, so you have rates for valuing variations.

A bidder may also decline a section outright, for example a plumbing subcontractor declining the external drainage. That bid is a partial-scope bid. Show it as partial scope on the comparison sheet, so nobody reads its total as a price for the full package. If awarding to it means buying the declined section elsewhere, add that cost when you compare.

5. Read the qualifications and price every exclusion back in

The priced BoQ is half the bid. The other half is the cover letter, the list of clarifications and the assumptions. Read every one, and price each exclusion back in at your estimate or at the other bids' rates.

The common ones on Middle East packages include:

• Access and scaffolding: "scaffolding by main contractor". Price the scaffold for this trade's duration.
• Testing and commissioning: "T&C excluded" or "witness only". Price it at the highest rate among the bidders who included it.
• Builder's work in connection: "BWIC by others". Price it from the other bids' rates or your estimate.
• Civil defence approvals: "submissions and inspections by others". Add the effort, or make the approval a condition of award.
• VAT: "prices exclusive of VAT", or nothing said. Put every bid on the same basis: 5% in the UAE, 15% in Saudi Arabia.
• Escalation: "subject to steel price at order". Add an allowance on the exposed materials up to the expected order date.

Our Bid Levelling Checklist lists 25 exclusions and qualifications that move a package price, with how to level each one. A few cannot be priced, such as a missing in-country value certificate where your client requires one. Settle those before you compare prices.

Any qualification still standing at award becomes part of the subcontract. Get each one withdrawn in writing or priced.

6. Leave provisional sums and PC sums out of the competitive comparison

A provisional sum is carried by every bidder at the figure you gave, and it is adjusted to actual cost when the work is instructed. A PC sum works the same way for the goods or work of a named supplier or subcontractor. Neither tells you who is cheaper.

Check that each bid carried every provisional sum and PC sum exactly as issued, and restore any that were changed. Then compare the bids on the total without them. For PC sums, compare the profit and attendance each bidder priced against them.

7. Flag rates far from the other bids

For each item, compare every bidder's rate with the median of the other bids. Set a band before you look, for example 0.4 to 2.5 times the median, and question every rate outside it. A rate outside the band is usually an arithmetic error, a misread unit or specification, or a deliberate pricing choice.

The deliberate choice to watch for is front-loading. The bidder prices early work high, such as mobilisation, preliminaries, excavation and first-fix. It prices late work low, such as testing, finishes and handover. The total stays competitive, and the bidder is paid more in the first months. If it fails halfway, you have overpaid for the work done, and the remaining work is underpriced for whoever replaces it.

Rates also set the price of variations and remeasured quantities. A high rate on an item likely to grow costs you on every extra unit. Where a pattern looks like front-loading, ask for a rate breakdown into labour, materials, plant and overheads before award.

8. Cost the terms at your cost of money

Terms move cash, and cash has a cost. Use your own cost of money, the rate at which your business funds its working capital, and cost each term as an estimate.

• Advance payment. A 20% advance on a AED 3.0m package, recovered evenly over a 12-month programme, has you funding an average of about AED 300,000 for a year. At an 8% cost of money, that is about AED 24,000, before the cost of the advance payment guarantee.
• Payment days. A bidder that wants payment in 30 days, when your client pays you in 60, has you funding about one month's valuation for the length of the job.
• Retention. A bidder that refuses retention, asks for 5% where you hold 10%, or asks for release at completion instead of after the defects period, leaves you holding less of its money for less time. Cost the difference in cash, and treat the lost security as a separate risk.

Put the result beside the levelled total as an estimate. Keep it separate, so everyone can see which part of the difference comes from scope and which part comes from terms.

9. Check the arithmetic

Extend every rate by its quantity. Add up each section, and check that the collection pages and the summary carry the right figures forward. Your instructions to tenderers should say which governs when a rate and its extension disagree, and commonly the rate governs. Apply that rule and record every correction. Check the currency and the VAT basis on the summary page as well.

10. Compare the levelled totals

Only now rank the bids, on the levelled total, with the as-bid total and the cost of terms beside it. A bid that moves several places between the two columns needs a sentence of explanation on the sheet. Our free bid comparison sheet does this in Excel: it counts the gaps, prices them back in, flags rates outside 0.4x to 2.5x of the median and ranks both totals.

11. Evaluate technically and commercially, with weights set before bids arrive

Price is one part of the award. The technical evaluation asks whether the bidder can do the work: method statement, programme, resources, key staff, comparable projects and compliance with the specification. The commercial evaluation covers the levelled total, the terms and any qualifications still open.

Set the weights before the bids arrive, for example 60 commercial and 40 technical. Weights chosen after the bids are opened tend to follow the preferred bidder. Score each bid against the weights and record a reason for each score.

12. Record why the winner won

Keep the comparison sheet with both totals, the rule you used to price the gaps, every clarification and answer, the weights and scores, and a short statement of why the winner won. Put the agreed scope and the withdrawn qualifications into the letter of award. The record answers the client, the auditor and the bidders who lost. It also tells the site team what was bought.

A worked example: one package, five bids

The figures below are illustrative. A main contractor tenders a plumbing and drainage package of 186 items. Its estimate is AED 3.40m. Five subcontractors bid, and the unpriced items are priced back in at the estimate rates.

Bidder E submitted the lowest bid, 41% under the estimate. It left 38 of the 186 items unpriced, about one in five. Levelled, it comes to AED 3.63m, above the estimate, and it ends last. Bidder A was fourth on paper. It left two items unpriced and comes out first at AED 3.16m. Bidder D priced everything and moves from last to third.

The example covers unpriced items only. Exclusions in the cover letters and the cost of the terms would move these totals further. A and B are AED 0.10m apart, so the qualifications, the terms and the technical evaluation can still decide between them.

Common mistakes

• Ranking bids on the submitted totals and levelling only the winner.
• Overwriting the bidder's price with the levelled figure, so nobody can see what was offered.
• Pricing gaps at the average of the other bids, which one extreme rate distorts.
• Reading the priced BoQ and skipping the cover letter.
• Leaving provisional sums inside the competitive comparison, or accepting a bid that changed them.
• Accepting a very low rate without asking why.
• Setting the evaluation weights after the bids are opened.
• Issuing the letter of award with qualifications still standing.

Doing it on VEXORS

On VEXORS, every bid prices the same BoQ in the same structure. Items a bidder left unpriced are priced back in at your estimate or at the other bids' median, and the levelled total sits beside the as-bid total. Rates outside 0.4 to 2.5 times the other bids' median are flagged, with the advice to ask for a rate breakdown where the pattern looks like front-loading. Advance payment, payment days and retention are costed at your cost of money, as an estimate beside the total. Answers, pricing and terms are cross-checked for contradictions.

AI then scores each bid on your commercial criteria and your technical questionnaire, with the weights you set, and writes out its recommendation with the reasons. The award stays with you and your approvers. The comparison exports to Excel.

Read how bid evaluation on VEXORS works, or how VEXORS runs construction tenders.