Why the Lowest Bid Isn’t Always the Best

hqdefaultA low purchase price is so enticing; who doesn’t want to pay less for the promise of more? Think about pretty much any product – for example, a new TV. The cheaper TV might save you a few bucks now and look just as good as its higher priced competition. It might even last as long, making it easy to think that there is no correlation between the best quality and higher prices.

CptvdisplayUnfortunately, the same case can’t be made with most construction projects. All too often the lowest bidder overlooks a key aspect of the project, making them either go well-over their budget or attempt to cut corners to ensure they don’t lose money on the deal.

At Seacoast Construction, we’ve had bids come in higher than our competitors on occasion, but that’s because we ensure all costs are included – so that there are no surprises later on. This also allows us to guarantee that we will meet our promised deadlines within budget.  Because we pride ourselves on honesty and integrity, we are up front from the beginning about our service costs.

When construction companies offer a lower bid, they are not always taking all project costs into account. For instance, one example we’ve seen multiple times over the past five years is for large ticket items such as generators. The manufacturer will send a quote out with a price of, say, $200,000 and most bids will have a line item with just that. Unfortunately, shipping and sales tax for these large ticket items can easily range from $30,000-50,000.  Many bids will miss the fine print which can significantly complicate the budgeting process. Further, some GCs’ bids won’t account for potential problems that can be uncovered when fully researching bids (such as mechanical, electrical, and plumbing drawings being done by different engineers and therefore over-lapping and impossible to build to plan).

If the bidder has missed something altogether or excluded some items to provide a lower price, the project is likely to end up over-budget and over-schedule. This is because there will be extra work required to make the changes needed to meet your requirements that were missed or done incorrectly during the pre-construction phase.

Here are a few points to take into consideration when it comes to low-bid pricing for construction projects:

A low bid doesn’t mean the company is the most capable

Make a bid comparison to see where the differences lie between contractors

Some lower-priced contractors may hire illegal or unqualified workers

A contractor company may be unable to comply with the associated legal or regulatory requirements

Another aspect to keep in mind when evaluating lower bids is something called “suicide bidding.” This happens when a company intentionally submits a bid for less than it costs to do the work. The rationale is that it will be an easy bid to win and will help maintain skilled labor while also allow the contractor to attempt to make money back during the contract.  Unfortunately, when this type of bidding backfires, everyone involved is affected by negative results such as poor building quality, poor service, multiple disputes, and a contractor who may not be able to pay their debts.

Going with the most realistic bid can help ensure you receive a higher quality of work with a longer lifespan and avoids taking any risks that might be detrimental to the integrity of the project. At Seacoast, not only do we pride ourselves on our outstanding work quality, we provide honest bid prices for exceptional service and on-time project delivery.  Our goal is your satisfaction, not your frustration.

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