Masonry Magazine October 1999 Page. 14
Competitive bidding is a system that encourages unethical strategies to achieve "success," including a "who-can-stick-it-to-who" mentality that starts early in the bid process and remains throughout closeout. Many in our industry have become transformed into closet con-artists, constantly on the lookout for ways to skirt the bid process (and our competition) in order to gain necessary market share. Now, no matter what side of the fence you're on regarding CB, it's clear that this is no way to conduct business or life.
Here are some other observations regarding competitive bid:
It's become an actual bid strategy by many builders to simply not bid any (clear) omissions in the bidding documents, knowing full well that there'll be a change order to the owner after the bid is let. Now some of these items are captured in time to be put out as addenda - but many (most) aren't. The bidding builder's reasoning goes like this: if he does make the extra effort to account for error, it almost always results in the bid price going up, losing the bid, and rendering all his hard work for naught.
So he doesn't correct the error and indeed ends up low at the letting and is awarded the job. The document errors that allowed him to be low aren't discovered until well after the post-bid negotiations begin. At this point, the bidder asks for more money. The owner and architect are too deep into the process to begin anew with the next highest bidder and besides, there's still the cost-difference between the first and second place bidders that would have to be added back in. Also, keep in mind the tremendous pressures that always exist on all the players to break ground on the project. So, the owner bites his lip - accepts the add from the contractor and moves on.
The situation above becomes even more convoluted when the post-bid negotiations also include value-engineering (cost-saving) ideas that are now needed because the architect's budget estimate (the estimated budget cost for the project originally given to the owner by the architect) was too low. Which happens a lot! Now, the typical post-bid confusion is heightened due to the alteration, re-pricing, re-drawing, and general mass chaos created in the name of cost-savings. With all the re-pricing going on, it makes it that much easier for a scheming low-baller to make up ground lost from being too low in the first place.
I've been to a lot of bid lettings and the simple fact is that, sometimes, there are tremendous spreads between the lowest and the highest proposal amounts read. This phenomena alone should immediately throw up a "red flag" to the owner signifying potential problems with the bid documents.
Despite what many people believe, we (builders) really have little competitive advantage over one another when it comes to cost. With minor exceptions, we all purchase the same building materials, labor, sub-contractors, and equipment for about the same outlay. In truth, most of the time, the difference between winning and losing is more a product of minor differences in overhead, profit margins, work load, and just plain aggressiveness.
There are no tricks, no warehouses full of deep-discounted materials, and no mystical technical knowledge that really distinguishes one builder from another. Indeed, if you are searching for a difference, your time would be better spent examining the more non-technical attributes such as integrity, experience, and reliability.
Unless there is a thorough pre-screening process for the bidding competitors, the owner can quickly find himself with a veritable melting-pot of quality, experience, and competency among those participating. A horrifying visual example of not having this pre-qualification requirement is where the long-established, venerable, bondable, and experienced building company gets beat out by Bill & Ted (who were just laid off from the GM) and since Monday now call themselves B & T Builders. This is truly a situation where the owner "gets what he pays for!"
It is quite expensive, in terms of office overhead and employee time, for builders to prepare estimates for competitive bids. Couple this with the motivation provided by possibly losing the potentially profit-generating work, and you have adequate (at least in the builder's mind) justification to seek "advantages" over competitors through less than laudable means. It's quite easy to surmise that the other guy is doing it!"
In the past, I've read discussion regarding the possibility of owners offering a stipend of some me kind to all those (invited) bidders who bid their projects to cover some of the overhead expense. Although an excellent idea, to date, I've never received (or ever heard of any builder receiving) remuneration for their estimate expense. Let me know if you have.
Many old and established building companies simply don't do competitive bidding anymore (for the all the reasons we've discussed). And why Continued on page 32
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