How many times have you heard or used the phrases, “We are too high” or “We can’t get low,” as an excuse for losing a bid or a presentation? I have heard it (and used it a time or two) over my career and it has been a long career. I recently heard it again in a focus group that I was leading and got flashbacks that I thought I might share with you.
First, I would make the case that you do not want to be the low bidder on any project in the design-bid-build process. My favorite saying from one of my clients is that, “The low bidder is most likely the one who screwed up and overlooked something in their bid process that will cost them and their clients dearly when construction gets underway.” Then there is one from a mentor of mine who said, ”The high bid is either a 'courtesy bid' or someone who thinks we are idiots.” This was usually followed by, “Throw out the high and the low bids and then do a spread sheet for me to evaluate.”
Five decades later, the same conversation is still held daily across the AEC industry whether the project is residential, institutional, commercial or industrial and whether you are owner, architect, general contractor, sub or tenant.
I will say again that you don’t want to be the low bidder on any job - not if you are a sub who is creating professional careers for skilled workers who do quality work for your clients, not if you have a strong safety program, not f you pay medical and workers' comp insurance and pay overtime, not if you have a legitimate workforce development program, and especially not if you want to make a reasonable profit and stay in business over time. You will not win the project, and if you do, the risks are serious.
Second, if you lost a bid then it is usually because you gave them a “courtesy high bid,” did not know your client’s proclivities, did not have the best team or foreman, could not meet the schedule, or flat out were not capable of performing on the project.
There are more subtle reasons as well: The project manager or the owner did not have you on their preferred bidder list or had you there only for show for an audit committee who might scrutinize the bidder list in the future. Your firm also might have screwed up on a previous project. I have found that owners and general constractors have really long memories that might even go to succeeding generations. Your indexes might be too high. You might have been tagged by OSHA, or the newest Project Manager on the client’s team just plain doesn’t like you or one of your guys.
And if you are on the owner side of the equation, “low bid” doesn’t guarantee success. In a recent post entitled “Think Low-Bid Delivers the Lowest Cost? Think Again,” Tom Conzelman, PMP discusses the problems with the “Low Bid” mentality in the AEC industry.
He says that the downsides include low profit margins, smaller margins for error, lower performance results (quality), an eroding workforce, and cautions against the “Low Bid only” or “Lowest Responsible Bid” approach to construction.
So, the next time you either want to respond to a “Low Bid” project RFQ or one of your owner clients wants to use the “low-bid” approach, think again about your response and whether you even want to play in that game.