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Are contractors putting cost before quality?

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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.

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