| |
Pitfalls of Bidding
to Attain a Fixed Price Contract
By Robert C. Foreman, Architect
Download
this page as a
PDF file
In another article we
wrote about the pitfalls of negotiated cost-plus contracts. In our opinion,
bidding is not the best means of project delivery for many of our clients
because bidding has the most potential problems of any means of construction
delivery. Only government agencies are required to bid. There are better
options available to everyone else.
1. Although many Owners believe bidding will assure the lowest price, this
is not necessarily true. Depending
on market conditions at the time of the
bid, bidding may result in a cost which is higher than other means
of
project delivery.
2. The low bidder is often the bidder who has left important items out of
his price. The low bidder who has
left the most out of his price spends the
rest of the job trying to make up for his omissions by cutting
corners or
“beating on” his subs and suppliers to get them to lower their prices. This
is not to the Owner’s
benefit.
3. Bid jobs often have more change orders because the Contractor is trying
to find ways to make up for
whatever he failed to include in his price.
Change orders often cost more, for the same reason. Contractor’s
profit on a
bid job often depends on the change orders.
4. Bid jobs are more likely to result in disputes and claims and the
Architect sometimes finds himself in an
adversarial relationship with the
Contractor. This can create more headaches for the Architect who would
like the
Contractor to do reasonably good quality work, and to
follow the Contract Documents. Some
Architects will
increase their fee if the Owner decides to bid the project.
5. Bid jobs tend to have lower quality workmanship. If every sub and every
supplier is the one with the lowest
price, then lower quality work is the
inevitable result.
6. Bid jobs tend to take longer to construct. Bidding itself can take 4 to 5
weeks, followed by several weeks
before contract execution and then several
more weeks before actual construction begins. Construction can
take longer
than it should if there are disputes and claims.
7. The Owner sees no cost savings after a bid job gets started. Any cost
reductions achieved by the
Contractor do not benefit the Owner. The Owner
may not get the full advantage of cost savings from
deductive change orders,
usually not getting back full value for work that is deleted from the
contract.
8. A bid job is more likely to go into default when the Contractor is unable
to complete the job. This is usually
because he or his subs run out of money
due to their bid price being too low or prices having increased
for
materials for which they were unable to lock in the lower prices before
increases occurred.
Most of our clients choose not to bid their project because they are aware
that bidding increases the possibility of lower quality, increases change
orders, increases construction time, creates an adversarial climate and can
result in higher design fees. They have learned that there are less
stressful project pricing and delivery methods with many positive benefits
not available through bidding.
|
