While it’s accepted practice to seek out the best deal when shopping for a car, house and toothpaste, we receive feedback from frustrated colleagues when owners base their general contractor selection off the lowest fee, or lowest bid.
The challenge in front of the A/E/C community, is to demonstrate to the owner the value of paying more for your services. This is very difficult when you are selling a service to those who have limited industry experience. Should we embrace that we have to provide the lowest fee to win the final selection? Is being selected by low fee always bad, or is there a silver lining? Here are some things to consider from our perspective on why hiring based on lowest fee isn’t all bad.
- New Markets. We have seen design and construction firms with an iron grip on certain project types, be it libraries, police or recreation centers. Yet, we work with great firms and talented people who never seem to have an opportunity to demonstrate their abilities on these project types. In fact, many won’t submit because their qualifications can’t compare. What if you had an opportunity to overcome a qualification-based selection process and break into a whole new market without teaming or changing your processes? You might reconsider by submitting a lower-than-normal fee, thus creating a tempting offer.
- New Subcontractors. In the CMAR process we see favoritism to certain subcontractors by certain general contractors. As these subcontractors become complacent and understand how to bid against the usual two go-to firms, prices creep up and, as a general contractor you lose a competitive edge. Consider blaming the owner and the competitive process as the motivation to venture out and work with a new subcontractor you’ve had your eye on.
- Performance. We have often seen higher levels of service from teams that are “given a chance”. Typically, the subcontractor or consultant does not take their new opportunity lightly. They have something to prove.
- Represent the Owner. Owner’s want their design team and general contractors to represent them and their project goals. We rarely see design teams present how they procured their consultant team in a way that demonstrates a consideration for fee. Demonstrate your effort to get the client the best value and they will remember it, even if you are not the lowest fee.
- Recession ready. Working with the same consultants and subcontractors time and time again limits your perspective of the market and does not do much to prepare you when the next recession comes. There are many smaller, more nimble firms that you might be missing out on. Be ready to win work when price is a significant driver.
- Bid ready. When interviewing general contractors we often hear “100% of our work is negotiated”. This statement rarely passes the “so what” test. Owners respond to firms that know how to bid work; it indicates that they have a pulse on the market and are willing to find the right subcontractor for their project.
Most of us believe that we have the “right price” but sometimes we get edged out by a firm that is simply hungrier. Keep focused, strategically position yourself to increase your value on a proposed project, and respect the simple fact that this is a competitive market.
~ Paul Wember, Owner’s Representative