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What is a Bid Contract?

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  • Written By: Summer Banks
  • Edited By: Michelle Arevalo
  • Last Modified Date: 16 September 2016
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A bid contract is an estimate of the total cost to complete a specific job. Used in various forms of business, such a contract is delivered to the person or business requesting completion of the work. In some cases, cost proposals will be collected from various bidders, with one or more of them being chosen to complete the job.

Such a contract may begin with what is called the request for proposal (RFP). This is an invitation to bid on a specific job. The RFP will often clarify details of the work to be completed. These specifics could include work timelines or deadlines, location of the job, and any other details that could affect the supplier's bid. If the RFP does not clearly indicate some of the specifics needed for a proper bid contract, the potential supplier will need to contact the requestor for more information.

When writing the bid contract, the supplier may need to consider such things as the materials needed for job completion, time to be spent on the job, and labor costs. These will often vary based on the work to be completed and the level of training needed for the job. For instance, the more technical a job, the more both materials and labor may cost to complete it. A bid template can be used to ensure all costs are covered when writing the bid.

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The bid contract should also take into consideration the profit the supplier wants to make from the job. In most cases, these proposals are a way for the business requesting bids to compare multiple offers for the job. The more suppliers competing for the job, the greater the chance that some of them will accept below average profit margins. The lower the required profit margin, the lower the overall bid may be.

An important aspect of the bid contract can be the change clause. A change clause can allow the supplier to request a change to the bid, if more money or time is needed to complete the work. This can be crucial if the job requires building, renovating, or construction of any kind. If a contractor does not write a clause of this kind into the bid, any extra costs needed to finish a job with unexpected extenuating circumstances could fall on the supplier.

After the bid contract is accepted, the contractor will often have to sign the final copy in person. At this time, a representative from the business hiring the supplier should also sign the contract. Multiple original copies should be signed at one time and kept on file by both parties.

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