Bid Template
A bid is a written offer to provide specified goods or services to a prospective client at a set price. Bids resemble estimates but, legally speaking, the two are different. Estimates are non-binding yet accurate, educated guesses as to the anticipated cost of providing goods or services. Bids on the other hand, are precise and, once accepted, legally binding. Bids and the bidding process are common in government procurement and are used as a means to promote transparency while increasing the quality of goods or services received. The bidding process is competitive by nature and provides the client with options when searching for a solution to a given need. Bids and bid requests can be used by any company or individual wishing to find a supplier, contractor, or other service provider to work with.
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How Does the Bidding Process Work?
In a nutshell, the bidding process begins when an agency, company, or individual solicits bids by issuing a request for proposal (RFP). The RFP will include all of the information needed for a “seller” to create a bid. Once the submission period has ended, the “buyer” will analyze the bids and select the one that most closely meets their needs. Lowest price is not always the sole deciding factor. Winning bids can be selected for a number of reasons including:
- Seller’s experience and qualifications
- Delivery guarantees
- Quality of service
A bid may be withdrawn by the seller at any time prior to its acceptance by the buyer.
Bid vs. Estimate
There is some confusion when it comes to the difference between a bid and an estimate. So much so that bids are sometimes mistakenly referred to as “bid estimates”. While bids and estimates do share common elements, they are not the same. Care should be exercised when writing an estimate so as not to inadvertently turn it into a bid. It is not enough to rely solely on the header. A document that says “estimate” at the top can actually be a bid, legally speaking, if it includes language specific to a bid. Bids will contain language that effectively satisfies or establishes the following:
- The bid is an offer to provide specified goods or services for a stated price
- Customer must accept the bid by a certain date
- The customer signature is an indication of acceptance
Estimates are meant to remain flexible, bids are not. Over the course of a job or project, previously unknown factors may present themselves that lead to increased costs. This is where the flexibility of an estimate is useful. In machinery repair, for example, it may be necessary to revise the scope of work as the project dictates. It is rarely possible to know exactly what repairs are required until a piece of machinery has been sufficiently disassembled. So, an estimate is initially offered. It is unlikely that a repair person could realistically offer a legally binding commitment (a bid) to repair a piece of machinery with unknown defects for a set price.
Information Typically Included in Both Bids and Estimates
Aside from the requisite general information that identifies parties to bids and estimates, here are some more areas where the two share a distinct resemblance:
Scope of Work
With a bid, the scope of work will be defined by the buyer in the RFP and will typically be fairly detailed in specification. It will be the seller’s responsibility to build the bid based on those details and specifications. Because a bid is a binding commitment, it is important that a seller be satisfied with the level of detail provided by a buyer. Beware any areas that remain vague. If at all possible, clarify when necessary. With an estimate, the scope of work may not necessarily include quite the same level of detail. Or, like in the case of machinery repair, the job may have unknown factors making the commitment to a fixed price unreasonable. An accurate and clear description of the work to be performed is extremely important, however, it is understood that an estimate is just that.
Other Information
Additional similarities might include:
- Guarantees and warrantees
- Timeline for completion
- Payment terms
- Specific exclusions
How to Use the Bid Template
To use the bid template, simply download and fill it out.