By Stefan Schumacher
A recent research study from FMI, which provides consulting to
the engineering and construction industry, brings up an interesting
question for contractors. Just how low are you willing to bid to
earn a project? The study suggests that since the recession owners
have been under more and more pressure to get low prices for their
projects.
As you know, of course, being the cheapest and being the best
are not necessarily synonymous. Furthermore, what seems like a low
cost upfront may turn into a big expense down the line if the job
is not done right.
So how, as contractors, do you handle this new environment? How do
you convince clients of the importance of quality? Or do you give
in to the bottom line? Email met at
sschumacher@moderntrade.com.
Read the study for more details:
The latest research study "Win-Win: Project Delivery in a
Recession and Beyond" from FMI, the largest provider of management
consulting and investment banking to the engineering and
construction industry, found that the recession has at least
temporarily changed the momentum of the trend toward greater use of
collaborative delivery methods in favor of low-bid or
design/bid/build.
Contractors especially warn that this changing trend may have
repercussions in raising the "cost of conflict." With more
contractors chasing fewer projects, owners find themselves in a
buyers' market for construction services. Under pressure to get the
lowest price for their project, owners are looking for the lowest
bid, and often that means a greater use of the traditional
design/bid/build delivery method.
In this new study of construction delivery methods, FMI asked
both owners and contractors about changes in delivery methods since
the recession. One conclusion of this study is that a solitary
focus on low-bid doesn't always mean lowest overall project cost.
However, owners are under pressure to do more for less. According
to both owners and contractors, recessionary pressures could be a
setback for greater collaboration and cause greater conflict
pitting owners against contractors in the bidding game.
For contractors, it is still an uphill climb to reduce the
perception that low price is the most important factor in
construction procurement. While all owners seek the best value for
their capital investments, many understand that greater
collaboration leads to more project success. In a low bid
environment, it is likely that more contractors will go bankrupt.
Those that survive will be more productive and efficient in low bid
markets and make better use of collaborative and partnering methods
to deliver best value.