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| The Myth of Bidding
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Building a new office or manufacturing facility may seem like an overwhelming task, but it doesn’t have to be if you take advantage of the expertise available from a qualified construction firm. You can make your time and money more productive by making your most important decision your first decision — hiring the best contractor for your project. Everyone has to live within a budget and cost is always a consideration. Buy many owners are focused merely on price, choosing their contractor based on the lowest overall bid, often neglecting the bottom line of quality. It's a common mistake.
Choosing a contractor on the basis of price sets a bad standard from the start. What's more, the lowest overall bid is not necessarily comprised of the best pricing. One would normally think that competitive bidding is the way to ensure the cost efficiency throughout the project, but more often bidding doesn’t even provide you the lowest price or the best price.
The chart below details the bids submitted by four general contractors. The line items are priced by these contractors for work from their preferred sub contractors and material suppliers. Adding all of the components, each contractor submits a final bid:
Following the traditional bidding process, contractor 2 shows the lowest price and therefore would be granted the project. Yet, take a closer look. Although contractor 2 shows the lowest price of $855,000 out of all the contractors, it is still not the lowest possible price. Study the shaded numbers in the four columns. By looking at each contractors component price, it shows the lowest price is really $834,000 or $21,000 below the lowest bid! The real picture becomes much clearer and the myth behind bidding is uncovered – the lowest bid is not always the lowest price.
Even if the bid is the lowest possible, is it the best price? Not necessarily. The competitive price from a high quality subcontractor is often a better value than a low bid from a poor sub-contractor. How does one know that the subcontractor's site work will meet the standards you expect? How much trust should be placed with the contractor when sub-standard work — a result of low budget — is something you're forced to deal with for year to come. However, this is quite easy when you take the time to investigate the contractor’s previous work history. By carefully choosing a construction firm based on the quality their work, their reputation in the business community and their shared vision of your goals, you can develop a trusting relationship and work together selecting the best subcontractors to suit your needs of price and quality workmanship. This will only assure you the best price for the best job done.
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