By JB Peters, Senior Director of Product Management, Infotech
Some of the most painful words a contractor can hear are: “Thank you for your bid, but you lost by 5%.” That figure is more than a rhetorical device. An FHWA-sponsored analysis of state DOT construction bids found that the median spread between the lowest and second-lowest bids ranged from 5.3% to 7.7% across the states studied. On a $2-million project, 5% is $100,000.
A narrow loss does not automatically mean the contractor’s underlying costs were too high. It may reflect a labor assumption that no longer matches field availability, an incomplete picture of regional competition or a price history that was accurate six months ago but less so today. In many close losses, the contractor didn’t lose because their costs were higher; they lost because they didn’t know what they didn’t know.
The risks mentioned above are converging. In the Associated General Contractors of America’s 2025 workforce survey, 45% of firms reported project delays caused by shortages among their own workers or their subcontractors’ workers. Among firms hiring estimating personnel, 77% said those positions were difficult to fill. Labor scarcity is affecting the capacity to perform work as well as the capacity to evaluate it before the bid.
Material cost volatility is adding more uncertainty. FHWA’s National Highway Construction Cost Index rose 6.5% in the third quarter of 2024, even as the producer price index for asphalt fell 6.4% and concrete products increased only 0.4%. The overall market was moving up, but individual inputs were moving in different directions, making it harder to estimate costs consistently over time.
Contractors still need strong takeoffs, production rates and cost controls. But those internal calculations must be tested against a market that changes by item, geography, season, labor availability and competitive field. This variability complicates the bid phase, where contractors need to not only assess costs, but also whether pricing fluctuation risks make an opportunity worth pursuing.
The Pricing Data Gap
The industry does not lack data. Contractors can access cost books, agency advertisements, plan-holder lists, bid tabs, internal job-cost histories, supplier quotes and estimating systems. In recent conversations with contractors across different sizes and regions, many mentioned using multiple bidding platforms because no single source provided everything they needed. They also expressed a distinct desire for better pricing insights from their current tools.
The problem, clearly, is converting all of those separate inputs into a current market view.
Historical prices are useful only when the comparison is relevant. FHWA’s cost-estimating guidance cautions that bid-based estimates depend on prices from similar work and similarly sized projects. Its broader guidance also calls for historical prices to be adjusted for location, project quantities, project size and general market conditions.
That context matters because a statewide average can conceal local competition. In our review of bid data across multiple states, we found cases where one district averaged eight bidders per letting while the neighboring district averaged four. The work and agency may be similar, but the competitive pressure can be meaningfully different. A price that reflects last year’s market may fail to account for a recent shift in material availability, labor capacity or the agency’s letting schedule.
The result is a gap between having data and having decision-ready intelligence. There is a significant difference between using data to confirm a pursuit decision that has already been made and using it to identify opportunities the contractor might not otherwise have considered. Many legacy workflows answer the question: “What happened before?” The more strategic questions are: “What is happening in this market now?” and “Where does our company have an advantage?”
Closing that gap requires discipline around five decision points:
1. What Should We Pursue?
The first decision, of course, is not how much to bid. It is whether to bid at all.
A useful go/no-go process should consider project fit, crew and equipment capacity, subcontractor availability, the likely competitive field and the firm’s history with similar work. It should also account for the opportunity cost of tying up estimators on a pursuit with a low probability of success.
When labor is scarce and input prices are unstable, volume can become a misleading objective. More bids create more activity, but not necessarily a healthier backlog. The target is work where the company has a defensible advantage and can execute without taking on unreasonable risk.
2. How Should We Price It?
An estimate establishes the contractor’s expected cost. A competitive bid turns that estimate into a market position.
Contractors should compare their assumptions with recent award prices, competitor behavior and item-level movement in the relevant region. They should know which portions of the estimate are stable enough to price tightly and which require additional protection.
Broad contingencies can create two opposite problems. Applying too much protection to a stable item makes the bid less competitive. Applying too little to a volatile item puts the margin at risk before the project begins.
Pricing data should not replace the estimator’s judgment. It should challenge and sharpen it.
3. Who Should We Partner With?
Subcontractor strategy is part of pricing strategy. The question for contractors is whether they have a subcontractor strategy or merely a subcontractor list.
A subcontractor that understands the prime contractor’s standards and field expectations can provide a quote with fewer unknowns. Greater confidence can support a more precise contingency. A last-minute quote from an unfamiliar partner often carries more uncertainty, and uncertainty usually enters the bid as additional cost. Labor shortages increase the importance of these relationships. The winning number has little value if the team cannot staff the work.
It may also be worth assessing the competitive landscape here. Which subcontractors are your competitors working with? Which items are they winning on?
4. How Will We Submit?
A competitive price cannot overcome a nonresponsive submission.
Forms, certifications, bonds, addenda and deadlines deserve the same procedural discipline as the estimate itself. Contractors should assign clear ownership for each requirement, use repeatable checklists and preserve time for a final review.
Digital bidding systems are extremely useful here in flagging common human errors and omissions, but technology does not eliminate accountability. Submission discipline protects the investment already made in estimating the project.
5. What Will We Learn?
The most valuable pricing database available to a contractor may begin with its own bid history.
Every result should answer more than “win” or “loss.” How far was the company from the low bid? Which major items drove the difference? Which competitors appeared? Was the firm consistently close in one district but far outside the range in another?
Post-bid analysis connects estimating assumptions to market outcomes. Project performance can then show whether the assumptions behind the winning price were correct. The goal is to create a continuous loop: estimating data feeds bid intelligence, bid outcomes improve estimating accuracy and project performance informs what the company should pursue next. The more consistently contractors close that loop, the more informed their entire operation becomes.
Where AI Fits
AI can help contractors process this information at a scale that manual review cannot match, but adoption remains early. A 2025 RICS survey of more than 2,200 construction professionals found that 45% reported no AI implementation and another 34% were still in pilot phases. Respondents also identified system integration and data quality as major barriers.
AI will not repair fragmented or poorly structured data by itself. Its near-term value is in focused applications: organizing historical results, identifying comparable projects, detecting unusual prices, summarizing competitor patterns and surfacing opportunities that match a contractor’s profile.
The estimator remains responsible for the decision, but AI can widen the field of view and reduce the time spent assembling information.
Start With the Last 10 Bids
A contractor does not need to begin with a major technology deployment. Start by pulling the company’s last 10 bids.
How many finished within 5% of the winner? How many were more than 15% away? Are the results concentrated around particular agencies, districts, work types or competitors?
If most bids were close, the company’s pricing may be sound and its greatest opportunity may be better project selection. If most were far away, the cost or market intelligence may have gaps. If the results are inconsistent, the company may need a more repeatable process for connecting estimates with current market conditions.
On a bid tab, 5% appears small. Across a year of pursuits, it can separate profitable growth from expensive activity. Contractors that close the gap will be the ones that treat estimating and bidding as a connected business system built on current information, selective pursuit and continuous evaluation.
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