| 5 Disadvantages of Bidding Out Your Project |
Unless you are a corporation or the government and your project is worth hundreds of millions or even billions of pesos, bidding out your project comes with a ton of disadvantages. These corporations and government offices have screened or accredited their contractors through their own process before inviting them to bid. With that, they can safely say that the contractors are all credible and capable of executing the project. On the contractor’s side, the reward and opportunity will outweigh the cost of using their resources to provide tender documents even if they are not selected. If you are a homeowner, investor, or a small business owner, you might think that bidding out your project is the way to go because after all, we all want to spend less and get more. However, there are a lot of disadvantages for bidding out your project, here are a few examples:
1. You are inclined to look at cost only
What is the primary factor for selecting contractors in a bid? The cost of course. You tend to look at the big number at the bottom of the last page instead of reading through the fine print. You are interested only in the final price of the proposal. Unlike the corporations who qualify their pool of contractors, you probably don’t have the resources to do the same. If you bid out projects solely because you want to save as much money as you can, you tend to hire the least qualified contractor. As the saying goes, you get what you pay for.
2. You encourage contractors to compete just on price
The contractors you invite to bid for your project knows that you as the client will select based on the best price, typically, the lowest price. What do you think the contractors will do to win the project? They will drop their prices to win the bid. Do you really want your winning contractor’s goal to be “win the bid” instead of “provide the best for the customer”? When you bid out your project, you change the contractor’s mindset from focusing on how to deliver the project to how to win the bid. When they do win, they will most likely have to take shortcuts because they dropped their prices so much that they would not be able to finish the project or make a profit if they did what they originally intended.
3. You commoditize the builder profession
When you buy a commodity; water, fruits, vegetables, your biggest consideration is price, and you could care less where it’s from. Brand is not important, and the price is dictated by the function of its market as a whole. The thing is, a builder is not a commodity, but the public treats them as such. You bid out your project because you could care less about what each construction company represents, what their values are, what their brand is all about. All you care about is price. The problem is contractors are not as simple as raw materials. There are a lot of factors that go in the building of structures, and you should care more about how the contractor handles all these factors instead of their final price.
4. You won’t give the contractor a chance to justify their proposal
I have won and lost bids, and of all bids I have lost, there is only one thing I received, a rejection letter. Not once have I as a contractor been allowed to explain or justify my proposal. Imagine you bid out your projects to three contractors and you have selected your contractor of choice. You send the other two your rejection email without even digging deeper. Who knows, maybe the contractor you rejected offers something that you have been looking for, but because they cost more than the other, they are simply shunned.
5. You turn-off quality contractors and attract low-ball contractors
Because your project size is not as big compared to the projects of big companies, maybe a 5-million-peso house, a 1-million-peso condo unit, or a simple renovation, and creating proposals for you is free, there is not much incentive in joining the bid if you are a quality contractor. Because quality has a corresponding cost, this contractor knows that they will cost more than others. Put yourself in the shoes of the quality contractor, you deliver the high standard materials, you pay your staff right, you are accredited, you pay your taxes, and you know that you are probably up against unlicensed, fly-by-night, poser contractors, would it still be worth it to submit a proposal for free? Instead, you as a client will have bigger chance of attracting these unlicensed, fly-by-night, poser contractors who do not know their numbers and are hungry for work.
If you need the services of a contractor, avoid bidding your project out. Instead, ask around for more information, research on your own, set your budget, know your criteria for selection, talk to a contractor you can trust and hire them. If you must bid, make sure that your architect creates tender documents to be submitted to the contractors wherein the Bill of Quantities are already set by the architect and only the price potion will be filled up by the contractor. This creates an apples to apples comparison.
Archadius Construction Corporation specializes in residential construction and remodeling as well as condominium and commercial fit-outs. For your construction needs, you may reach us through Facebook: https://www.facebook.com/archadiusconstruction. You may also email us at contact@archadiusconstruction.com or call/text us at 0916-321-6094 / 0969-277-4634.
