It can be very financially tempting to prioritize a low bid over the overall workmanship of a contractor’s job or their general reputation. Construction is, after all, quite a financially demanding endeavor and most property owners would welcome any chance to save a few bucks. It is, therefore, not surprising that owners tend to have this practice of focusing on the lowest or cheapest bid possible when marketing to a prospective builder. However, you are about to get an idea of why low bidding can be a zero-sum game in both the short-run and the long term.
A Low-bid Rarely Works to a Contractor’s Advantage
It is not rare for a contractor to operate under the idea that the lower their bid is, the more likely they are to win many jobs from prospective property owners. However, not only is such a mentality misleading but can also be very dangerous, to begin with. You see, this will rarely work to a contractor’s advantage as the loss of margin sustained from such a project will often cannibalize their ability to complete the project to the required standards.
A Project Won on a Low-bid Often Starts on the Wrong Foot
Developers and property owners will frequently propose a low-bid procurement approach thinking that it will increase their chances of landing competitive contractors. Nonetheless, the only thing that this approach does is send the wrong signals to anyone who is interested in your project, such as;
· The contractor is less valuable than a fully-fledged design firm or architect
· The property owner does not value your time enough to offer fair compensation for the work done
· The contractor has less say or control over how a project can be executed
In other words, either way, you choose to look at it, a project that is won using a low-bid approach often starts on the wrong foot.
A Low-bid Approach Creates Unnecessary Tension Between Different Stakeholders in the Project
Right off the bat, a low-bid procurement approach guarantees avoidable tension between various stakeholders in the project. Whether it is developers, owners, general contractors, designers, or even subcontractors, it presents an insurmountable challenge that ends in untold chaos at the end of the day.
References: Levelset, Seacoastconstruction
