Beware The Low Bid

For one thing, when a company selects the lowest bidder it is typically ignoring that firm's past history, one which is often marked by late and unsatisfactory completions, disputes and even litigation. There are other risks too, associated with arbitrarily accepting the lowest bid:

• When you agree to the lowest price the most basic risk is that you don't typically know why it's low. For example, during an economic crisis many bidders may be in panic mode and willing to do virtually anything to win a job. Later, it may be impossible for them to meet their commitments. We are working on one such project now, where the firm initially hired to do it simply walked away, leaving a half completed job--and a jobsite that was a real mess.

• The second feature associated with lowest bids is their potential negative impact on the design and soundness of the structure being built. History offers many examples of lower cost, but substandard materials and workmanship resulting in great expense and inconvenience, and in some cases serious injury and even death.

• Finally, and of growing importance, there are various instances where using the lowest bid approach has had a harmful influence on the environment, including soil, air and water quality.

Fortunately, there is an alternative and it does not mean going to the opposite extreme and assuming that the highest bidder will do the best work. The answer instead is to find a bidder that has taken the time to fully understand the project's scope and complexity and can therefore make the most accurate bid. In addition, a successful bidder should be able to pass a number of other critical tests, including:
• Experience with projects similar in size and scope;
• Knowledge of the local area;
• Solid financial resources;
• Specific quality assurance and safety policies and procedures;
• A reporting arrangement that assures requirements are being met throughout the project;
• A history of accountability and project completion – on time and within budget; and
• Acceptable references coupled with an absence of unresolved disputes and frequent litigation

In summing up, the best decisions will be based on a careful review of the various bidders' capabilities, including their experience and overall track record, as well as their reliability and financial capacity. Price tells you nothing about any of these factors and, unfortunately, may expose you to costs that go well beyond the difference between the lowest bid and one that was more realistic and submitted by a more reputable firm.

James G. Petrucci is president and CEO of J.G. Petrucci Co. Inc., a development and design-build firm headquartered in Asbury. The views expressed here are the author's own.