Masonry Magazine October 1999 Page. 9
The Problem with Competitive Bid... and the never-ending quest for value
by Steve S. Saucerman
I am a builder and that's difficult enough but the problem with being a builder and discussing competitive bid is that anything negative that I may say against this age-old construction award procedure can come off like whining and runs the ever-present risk of sounding like the bitter, knee-jerk protestations of someone who just came in second at a bid-letting. But despite this hazard (and my handicap), I'll give it a try. The problem is the competitive bid process itself. It has to be politically correct "issues". And it appears I'm not the first to have noticed. Indeed, it's difficult to pick up any construction industry publication nowadays and not encounter some discussion on competitive bid and its shortcomings. The articles cover similar subject matter and generally trumpet the benefits of negotiated and/or design/ build work while chastising competitive bid. They come replete with the varying slants, prejudices, and convictions of the author (just like this article), but regardless the theme or eventual conclusion of the piece, there is always a recurring anthem a common thread allying all of these discussions: the element of trust.
The trust (or more accurately the lack of trust) I'm referring to is that between the players in a typical construction deal the project owner, builder, and architect. The problem? We don't trust each other. We say we do, but we don't. But why? Well, there are a myriad of reasons encompassing a long, sordid history and reactionary human elements that go into explaining why. Unfortunately, a truly complete and comprehensive discussion would be hardly containable in one book, let alone one magazine article. So suffice it to say that there have been some misunderstandings.
But this complexity does pose a problem for the person attempting to explore the subject. With the cause and effect so sweeping, complex, and ethereal, it can be quite difficult to focus on the "big picture" (the linear argument of competitive bid) without being drawn off into peripheral and spontaneous side-issues. So, for clarity sake, let's break down our discussion into smaller, more manageable illustrations taken from my own experiences to show, from the builder's standpoint at least, how and where trust can fall prey to eroding and degrading elements. Though admittedly biased, I hope that through these illustrations the reader can glean a better understanding of the mind set of the GC and the effect of the competitive bid process on the typical builder.
So, with these ground-rules in mind, I'd like to offer some reflections on the competitive bid process (CB) and why CB, by it's very nature, drives damaging and detrimental wedges between the construction team players (the owner, architect, and builder) who's true goal should be to work together as a team to achieve a successful and similar end.
The Competitive Bid Process
When applied to the construction industry, competitive bidding is the simple pitting of two or more building companies against one another in a pricing competition for a particular building project. From (ideally) identical bid packages commonly consisting of architectural working drawings, specifications, and other information such as addenda the competing companies analyze, estimate, and agonize over the documents in an attempt to arrive at a true and competitive price for the completion of the project. Before a pre-determined deadline, the combatants deliver their completed bid form(s) to the owner's representative. In their signed proposals, they include all requested cost items along with any additional information requested of the contractor by the owner and architect. This may include items such as bonding info, sub-contractor listings, material suppliers, applicable affidavits, and more. Once received, the bids may or may not be read aloud. If read aloud, for all the world to hear, the opening is known as an open letting. At a closed letting, the bids are opened by the owners (or their representatives often the architect) in private session at an unannounced time and location. Once read, the results then may or may not be made public to the bidders.
Now, of course, the good thing from the builder's point of view about the open letting is that he knows (from a pricing standpoint, at least) where he stands. In the closed letting scenario, it may be days, weeks, or (yes) even months before the bidders are notified with results. Sometimes they're never notified. These occasional long, silent waits are quite frustrating to the builder attempting to schedule manpower requirements based on known work load. This lack of communication by the architect and owner (either yes or no just tell us something!) is one small example of the erosion of trust that can occur through a (perceived?) lack of respect for the effort that the