Don’t Fall For the Allure of the Low Bid

Written by Dempsey Construction Director of Business Acquisition, Rebekah May.

Human instinct drives the desire to “win” or secure a “good deal,” especially when it elicits positive emotions and the “warm & fuzzies.” But how does that translate when choosing a construction partner? How does the initial allure of that perceived low bid impact the project’s life cycle and the ultimate success of the overall project?

We encounter this every day: the fight against human nature’s natural inclination to get a “good deal” or “fair price” when the best process is to find a partner who provides the best value to the client, their vision, and ultimately their wallet.

We recently took over a project where the client suffered the consequences of choosing a contractor based on the low bid scenario.  When Dempsey dug into the plans utilizing our Estimate Based Approach™, we found that the project was more than $10M over what the original contractor had budgeted.  The client shares their perspective on this situation through the following testimonial:

“Dempsey has been nothing short of a savior for a planned Civic Engagement and Community Center in downtown Chula Vista.  The project, which will provide for a new, consolidated home for SBCS – one of San Diego’s largest non-profits – was behind schedule and over budget when I reached out to Dempsey asking if they’d be willing to consult on some value-engineering measures to get the costs in line with our expected Tax Credit Allocations.  Immediately upon rolling up their sleeves, it became clear that Dempsey had a much larger role than simply reviewing the plans.  Within weeks of working together, SBCS had a contract for Dempsey to take over as the General Contractor for the $25m project.  As the Board Chair and a committee member charged with raising funds to bridge the financing gap for the building, it has been incredibly reassuring knowing that we’re working with such an incredible group of professionals.  Everyone on the project team has expressed their astonishment at Dempsey’s commitment to this project, calling it a “night and day” difference.  I can most definitely state that without Dempsey, the project would not have moved forward, and millions of dollars of tax credits would have been unused.”

This unfortunate situation can be avoided if clients truly understand that a higher budget number doesn’t mean the contractor is more expensive.  It means you most likely have a more sophisticated contractor looking around corners, filling in the blanks, and pricing things correctly; it is better to catch these items in the beginning rather than ending with change orders.

In the article “The High Cost of the Low Bid,” Barbara Jackson dives deeper into how “the low-bid mentality has outlived its effectiveness in the construction business.”

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