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The Cost of Low Bid

March 20, 2013

I have been fortunate to work with many premier engineering, design and construction firms.  While they truly have the most talent in their niche, the most innovative thinking and the most advanced technology to support their people, they all struggle with the same professional millstone:  low bid.

I have been car shopping lately.  Now, I truly understand that I can pay low price for a vehicle, but I should have an accompanying level of expectation when it comes to performance.  It won’t have the top end technology, the parts and design will not be the highest quality, and it will probably require more maintenance than a vehicle that costs more.  How else could it possibly be the lowest price?

Our current healthcare environment is also starting to incorporate cost into our selection of healthcare providers.  If I retain the services of a doctor that is lower cost, what accompanying level of expectation do I have?  Well, perhaps the doctor is less experienced.  Perhaps they don’t have access to the latest technology, or perhaps they are not able to spend quite as much time collecting information and coming up with a diagnosis.

So what is the cost of accepting the low bid for engineering, design or construction services?

Well, perhaps the people won’t be as experienced.  Perhaps the firm won’t have the latest technology, or won’t be able to use it on your project. And perhaps the design won’t be quite as well done, which will lead to higher construction and maintenance costs.  Perhaps the firm won’t make as much (or any) profit.

But let’s take a leap.  Let’s assume that all firms make about the same profit, have about the same level of skill in their employees, and have the exact same technology available to them for the project.  Many of our clients believe this anyway.  Then why not take the low bid?  What else could possibly be in the equation?

Soak time. Time to really think about a project to create the best solution.  Time to pause and consider “what ifs,” instead of regurgitating the last design or construction approach, or the first that comes to mind.  Soak time drives innovation and optimum solutions, design and construction solutions that really consider the individuality of the project, and leverage the uniqueness of the design paramenters – that incorporate a higher level of safety.  This is what delivers lower construction costs and lower maintenance costs for the next 30 years.

The real cost of selecting the low bid for design and construction services is the limits placed on the professional time invested to create the best solution, leading to increased cost in every other phase of the project lifecycle.

As an industry, we need to document this with hard data and publish the heck out of it to owners.  And as an industry, we need to break the cycle of selecting low bid when we are procurring services.

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