Posted by: joelfreedland | May 12, 2010

Holes you step in during the bidding process

 

We talk about how important it is when it comes to safety in the field and making sure steps are taken to prevent anyone from falling into a trench (or hole) on the jobsite. We also have to protect people from falling into a different type of hole when it comes to the bidding process by making sure we use multiple facts and information when deciding who would be awarded work.

Imagine during the bidding process we ran caution tape around the following thoughts to help prevent someone from falling into the holes listed below.

The holes we tend to step in:

  • Only focusing on the numbers. Quite often when we bid things out, pricing has the biggest impact towards the first impression on who should be awarded the work. But, should that be the Number One reason? Is it ever the only reason?
  • Changing a Building Partner (trades, sub-contractors, vendors) for a tiny savings. Before starting the bidding process, you’ve got to ask yourself, “What is the right dollar amount that supports replacing an existing Building Partner?”
  • Trying to justifying that a savings of $100 – 200 on an activity when you multiply that by the volume of homes you estimate that you will build. Swapping a Building Partner for a cheaper vendor can actually be very costly. If all the other attributes with the current Building Partner are good and they are continually improving, wouldn’t it cost more than the $100-200 savings to get the cheaper vendor up and running?
  • Wanting to re-assign a Building Partner for the wrong reasons. This includes making the change over personality, rather than performance; not liking that they were hired by someone else, rather than you; you had a conflict once; their price is the highest among the same type of Building Partners you currently have but not in comparison to the market place; you found a real cheap price in the open market.

The holes we tend to dig:

  • Getting too close to a Building Partner and making decisions to use them based on emotion, versus the facts
  • Making promises to a Building Partner that we shouldn’t
  • Ego, power, control are things we sometimes use to decide who gets the work
  • Promising volume to get a lower price even though you may not be able to deliver that or the BP doesn’t eventually earn the additional work through their performance
  • Getting bids in the market place from competing trades, vendors and sub-contractors with no intention of using them, even if the facts justify it
  • Promising the world to a potential trade bidding the work and then not following up when you decide not to change, or decide to go with another competing company
  • Don’t use the bidding process in its entirety

The lowest price could end up becoming the most expensive. You must compare apples to apples and review all the facts. When it comes to pricing, it must be clear on the bid sheets what the Building Partner should be quoting: the quantities, the square footage, the product, the plans and elevations, what they supply, what the builder supplies, the allotted time frame for their activity, and their warranty obligation and time period.

Article was contributed by New Home Building Consultant, Joel Freedland

© May 2010 Homebuilding Partners, Inc.   twitter-logo

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Responses

  1. […] This post was mentioned on Twitter by Todd Inman. Todd Inman said: Holes you step in during the bidding process « Lean Homebuilding: Changing a Building Partner (trades, sub-contrac… http://bit.ly/afDWlm […]

  2. I like this post and I believe it to be very true. I have scratched my head over this one for many years. Some builders will pay an extra $200.00 for a feature on a refridgerator but will save the $200.00 when deciding on what trade to use. What sense does this make? Which decision has the greater potential for disaster? I think thee most important decision any builder can make is which sub contractors to use. Especially when considering Framing, plumbing, A/C, and electrical.


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