Lesson 5 12 min

Contract and Bid Management: Read Faster, Bid Smarter

Use AI to analyze construction contracts, identify risk clauses, manage bid invitations, and coordinate subcontractor proposals.

Contracts and bids are where construction money is won or lost. A missed clause in a contract can cost you $50,000. A poorly evaluated bid can blow your budget. AI reads faster than you do — let it find the problems before you sign.

🔄 Quick Recall: In the previous lesson, you used AI for safety compliance — OSHA checklists, toolbox talks, and incident documentation. Contract management uses AI for a different kind of risk: financial and legal.

Contract Analysis with AI

Quick Contract Review

Review this construction contract and provide:

1. KEY TERMS SUMMARY:
   - Contract value and payment terms
   - Timeline and milestones
   - Warranty and defect liability period
   - Insurance requirements
   - Retainage percentage and release conditions

2. RISK FLAGS (highlight these):
   - Liquidated damages clause (amount per day?)
   - Indemnification scope (broad or mutual?)
   - Pay-if-paid vs. pay-when-paid language
   - Termination for convenience provisions
   - Change order procedures and pricing limits
   - Dispute resolution method (arbitration vs. litigation)

3. NON-STANDARD CLAUSES:
   - Anything unusual compared to AIA A201 standard terms

[Paste contract text here]

Compare to Standard Terms

Compare this contract's indemnification clause to the standard
AIA A201 indemnification language:

Contract says: "[paste the clause]"

Is this broader, narrower, or equivalent to AIA standard?
What specific risks does this create for the contractor?
What modification would you recommend?

Quick Check: AI flags a “no damages for delay” clause in your contract. This means if the owner causes a delay (late permits, design changes, access issues), you can get a time extension but NOT additional compensation for the delay costs (extended general conditions, idle crews, storage). How does this affect your bid? (Answer: Build delay risk into your price. If the project has a realistic chance of owner-caused delays, add a contingency line item — typically 3-5% of contract value. Or negotiate the clause to allow delay damages for owner-caused delays exceeding 14 days. Knowing the risk BEFORE bidding is the value AI provides.)

Bid Management

Bid Invitation Analysis

I received a bid invitation (ITB) for a commercial project.
Analyze the following and tell me:

1. Scope summary — what exactly are they asking me to bid?
2. Key dates — pre-bid meeting, site visit, bid due date
3. Bid requirements — bonds, insurance, qualifications
4. Special conditions — MBE/WBE requirements, prevailing wage, project labor agreements
5. Red flags — unusual terms, tight timelines, vague scope

[Paste ITB here]

Subcontractor Bid Comparison

I have 4 subcontractor bids for HVAC work on a commercial
build. Compare them:

Bid A: $185,000 — ABC Mechanical
[paste key terms or scope]

Bid B: $172,000 — XYZ Climate
[paste key terms or scope]

Bid C: $198,000 — ProAir Inc.
[paste key terms or scope]

Bid D: $163,000 — Budget Air Services
[paste key terms or scope]

Create a comparison matrix showing:
- Price breakdown (equipment, labor, materials)
- Scope inclusions/exclusions
- Equipment brands and models specified
- Warranty terms
- Timeline and crew size
- Flag any bid that's missing scope items the others include

Change Order Management

Generating a Change Order

Write a construction change order:

Project: [name and address]
Owner: [name]
Contractor: [your company]
Original contract value: $[amount]
Change order #: [number]

Description of change:
Owner requested an upgrade from standard vinyl windows to
triple-pane fiberglass windows throughout the second floor
(12 windows total).

Include:
- Detailed description of the change
- Cost impact (material difference + additional labor)
- Schedule impact (if any)
- Reference to contract change order provisions
- Signature blocks for owner and contractor

Tracking Change Orders

I have 7 change orders on a project. Help me track them:

CO-1: Owner-requested — upgraded flooring — $8,500 — approved
CO-2: Unforeseen condition — rock excavation — $12,000 — pending
CO-3: Design error — structural beam relocation — $15,000 — disputed
CO-4: Owner-requested — added outlet locations — $2,200 — approved
CO-5: Code change — additional GFCI circuits — $3,800 — pending
CO-6: Owner-requested — upgraded kitchen cabinets — $11,000 — approved
CO-7: Weather damage — replace waterlogged insulation — $4,500 — pending

Create a summary showing:
- Total approved vs. pending vs. disputed
- Revised contract value
- Who's responsible for each (owner, unforeseen, design, code)
- Recommended approach for the disputed and pending items

Specialized Contract Tools

ToolWhat It DoesBest For
Document CrunchAI reads contracts, highlights risk clauses automaticallySubcontractors reviewing GC contracts
DowntobidAI-powered bid management and sub coordinationGCs managing bid invitations
ConstructionBids.aiAI matching contractors with bid opportunitiesFinding and winning new work

Document Crunch users report reducing contract review time by 80% while catching more risk clauses than manual review.

Practice Exercise

  1. Take a recent contract or subcontract and run it through AI — what risks does it flag?
  2. Compare two subcontractor bids for the same scope using the comparison prompt
  3. Generate a change order for a scope change on a current project

Key Takeaways

  • AI turns a 4-hour contract review into a 30-minute focused reading — it finds the 5 pages that matter in a 45-page document
  • Pay-if-paid vs. pay-when-paid, indemnification scope, and liquidated damages are the top clauses AI should flag
  • Bid comparison with AI reveals hidden exclusions — the lowest bid is rarely the best bid
  • Change order documentation takes 5 minutes with AI — delay it and you lose your right to claim
  • For high-value contracts, AI flags issues and your attorney confirms — AI is the first pass, not the final word

Up Next

In the next lesson, you’ll learn to use AI for site documentation — daily reports, progress tracking, and the paper trail that protects your business.

Knowledge Check

1. You receive a 45-page construction contract from a developer. You normally spend 3-4 hours reading it line by line. How should you use AI?

2. AI flags a 'pay-if-paid' clause in a subcontract: 'Subcontractor shall be paid within 30 days of Contractor receiving payment from Owner.' What's the risk?

3. You're evaluating 5 subcontractor bids for electrical work. Prices range from $42,000 to $68,000. The lowest bid is $15,000 below the next one. What should you do?

Answer all questions to check

Complete the quiz above first

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