As a Commercial General Contractor, we’re often asked why we steer away from the process of Hard Bidding and opt for a more negotiated process to serve our clients. At the surface, hard bidding seems like a great idea and could create healthy competition. However, at The Douglas Company, we firmly believe that hard bidding is actually detrimental to our clients, causes inflated project costs, and can create a reactive environment to project management.
What is ‘Hard Bidding’?
Before we get to why, first let’s discuss what ‘hard bidding’ entails. Hard Bidding is a process that includes sending out a complete set of construction documents to a list of anywhere from two to five General Contractors. The companies will then go to the subcontractor market for pricing and put together a proposal, which will be compared side-by-side by the ownership group. These companies know that these situations are extremely competitive and the project is most often awarded to the contractor with the lowest overall price.
The idea of getting the lowest price from the start looks great on the surface, right? We all love a good deal. However, in this case, it proves the saying “you get what you pay for”.
Why We Aren’t a Fan
As much as developers believe they are getting the best pricing on their project with this approach of selecting a General Contractor, it is rarely the case for a couple reasons…
The first of which is that when contractors are forced to compete in this model, their approach to bidding may become overly aggressive. For instance, it’s unlikely that they’ll seek out missing information from the drawings if it will increase the bottom line number. This lack of proactive attention to detail will create a greater instance of change orders which come at a premium cost and can cause disruptions to the project timeline.
Further, with more General Contractors going out to market for pricing, you’ll start to see variation in individual subcontractor pricing. And this variance could be due to a number of things – relationships, owed favors, accounting for missing information in plans, etc. To verbally illustrate this, imagine that you have multiple General Contractors going out to market for pricing; GC #1 may get the best pricing on site work and framing; GC #2 may get the best pricing on plumbing and roofing; GC #3 may get the best pricing on HVAC and electrical. All of these variations in pricing are due to the above reasons. Comparing them side-by-side could then conceivably cause confusion for the owners or developers, creating more unnecessary back-and-forth between all parties. All this could have been avoided if one GC had gone out to market with your project instead, as there would be only one path for every interested subcontractor to supply pricing to get the work. This General Contractor would have received the best pricing the market had to offer. Instead, you’re stuck with several options and none are the actual best pricing.
What’s the Alternative?
At The Douglas Company, we believe in a more negotiated process that begins at project conception and allows for a healthy relationship between Contractor, Owner, and Architect.
This way also provides you with a valuable resource – an additional partner throughout the design phase that’s just as invested in keeping an eye on the bottom line as you are.
That contractor relationship is an integral part throughout the design and preconstruction process — supplying cost information as you go, cost analysis for one system vs. another, VE recommendations, constructability feedback, etc. In this scenario, you’d receive early feedback on whether certain finishes are driving the cost of your project out of reach or if you may want another system option that’s just as effective but less expensive. This early proactive attention to detail will vastly contribute to the success of your project, keeping things on-time and in-budget.
In our minds, hard bidding leads to headaches and dollars down the drain. As a General Contractor whose core purpose is to contribute to the success of our clients, we urge you to save yourself the pain and choose a negotiated approach for your next project.
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Don Diedrick |
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