Sunday, January 15, 2012

Gilsey House: The Bid Process

One of the best lessons I learned from the ten years I spent designing buildings for public and institutional clients was using the competitive bidding process to the owner's best advantage. When you're working for a governmental client, finance laws often require a specified level of competitive bidding be applied to projects, both to protect against corruption and to help ensure that the taxpayers' money is spent wisely.

In that spirit, we solicited five bids (instead of the usual three) for the project at Gilsey House. The scope of work (replacing everything on the property, from floors to ceilings, windows to walls) suggested that contractor's bids had better be thorough and the client's decision needed to be carefully considered. With five bidders, we were able to immediately eliminate the highest and lowest bids, while still leaving three bids occupying the middle range to compare in more depth.

Of course, eliminating the highest bid is easy for the client; convincing them to also axe the lowest takes quite a bit of explaining. When we look at the three middle bids, all of which hover around the same median price, we get a pretty good glimpse at the actual, final cost of the project. Thus, even if that tantalizing low bid were accepted, I would prepare the client for an eventual construction cost that was more in line with that average of the middle three.

We also take great care to analyze the low bid to try and understand WHY the number came out low. After all, all of the contractors are local, drawing from the same labor pool and buying from much the same material suppliers. Deviations in subcontractor costs are to be expected, but within a reasonable range. In the case of the lowest-priced contractor on the Gilsey House project, careful parsing of the submitted documents revealed that the bid actually did not include many items that had been specified in the Contract Documents. Once we added the missing elements back into that bid, it started to look considerably less attractive. We also couldn't help but note that the omission of critical items from the bid did not bode well for that contractor's attention to the level detail that the project would require.

So with the three remaining bids, we coordinated with each contractor to hone their numbers down to work toward the client's budget, balancing internal cost savings with necessary scope reduction. This process is critical, obviously, for the project to stay on budget. But perhaps more important, it is a great way to get an idea of how each contractor will be to work with - how willing they are to sit at the table for as long as it takes to make the project work. We never want contractors to make promises that they cannot keep; the worst contractor is the one that's losing money on your job. Still, we want a partner that will work as hard as we do to make our clients happy.

Ultimately, we had three great bids to work with, that represented each contractor's best effort to meet as much of our client's needs as was possible. After that, the decision is both easier (they're all qualified and willing) and harder (they're all qualified, and willing!)

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