Competitive Bidding -- When the Loser Wins

Mel McGowan of Visioneering Studios described selecting a general contractor (GC) through competitive bidding as the only process where the Loser wins.  In competitive bidding, GC’s often have to employ tactics that cost them money and put the Owner at risk:

• They give away most, if not all, of their profit; and, hence, most of their motivation. 
• They find mistakes and omissions in the drawings and figure out what those are worth and lower their bid accordingly figuring they’ll be able to charge a premium through change orders. 
• If they their bid “wins” they may buy-out a sub-contractor.  This means the GC does the work that the sub contractor would have done and reaps the profit that would have otherwise gone to the sub.  For the Owner it’s bait and switch.

There will always be some projects that have to be competitively bid.  It is the only 100% objective way to compare contractors.  When public (taxpayer) funds are involved, accountability is paramount and, therefore, only a 100% objective process will do.  Any distinction that one GC has that would add value to the project – experience, technology, creativity, organization, excellent safety record, etc. – is excluded from the selection process.

The general contractor loses because, if awarded the job, he will have to do the work for the least profit.  But the real loser is the Owner because, when someone is working for little or no profit, their only motivation will be cut corners and find ways to add cost to the building.

There are other ways to select a general contractor that rewards to the GC for helping the Owner be successful. If you want to learn how to choose a general contractor in a way that maximizes value for the Owner, contact us at Blue Ridge Architects.