A recent experience got me thinking about the competitive bid
process. I met with the potential clients and we hit it off, so
I encouraged them to keep me in the loop during the design
phase in case I could help with pricing options. The client
chose an architect I know and like, and I was optimistic things
would go well.
Months later, I got the completed plans and learned I was one
of five companies invited to bid. One builder immediately
dropped out after learning how many others were involved. I
don't know what the other bids came in at, but we were all well
over the anticipated budget for the job. The client was mad at
the architect and unsure how to proceed. Sometime after that I
got another plan to bid - this one essentially a
back-of-the-envelope sketch of a dramatically simplified
version of the job. I did the repricing, but at the moment the
job is in limbo.
Hardly out of the ordinary for contractors, right? And we keep
doing it this way because - well, we've always done it this
way. I might be willing to continue if I thought the process
brought value to the client, but I'm increasingly convinced
that competitive bidding from completed plans doesn't serve
A Variety of Perspectives
Let's start with the clients. They hire someone to design the
project. That person, whether an architect or not, may have
wonderful design sense but a poor idea of what the work will
cost - which is to be expected, because pricing is somebody
else's job. In my experience, architects typically
underestimate by 30 percent to 100 percent. So the clients pay
for a set of plans complete enough to be put out to bid, only
to discover that they can't afford the design. By then they've
blown the design budget, so the necessary redesign is done on
the cheap, which typically produces incomplete or inconsistent
plans that are even harder to estimate accurately.
And what of the bids themselves? I doubt that they provide any
useful comparison. For example, take the job I described:
Despite reasonably detailed specs, two of the bidders clearly
didn't bother following the architect's directives and the
other one missed several mistakes and inconsistencies in the
plans. Those variations alone probably counted for several
percentage points difference in the bids. While I could
potentially use these oversights as selling points for my own
thoroughness, it's still an uphill battle to convince a
prospect that your bid, while higher on paper, is actually a
In his article "Farewell to Competitive Bidding"
(JLC, 7/97), Massachusetts contractor Paul Eldrenkamp
provides a great set of "rules" for how clients regard
1. The high bid is always inaccurate and unfair, no matter
2. The low bid is always more accurate than the high bid,
unless it's lower than the client's budget by a greater margin
than the high bid is higher than the client's budget, in which
case it's less accurate, but more fair.
3. The accuracy and fairness of any bids in the middle depend
on where they fall in relation to the high and low bids and to
the client's budget.
Most of us have experienced this. And yet some of my clients
have chosen our company even when we were the highest bidder,
so clearly price is only one of several considerations.
Comfort, trust, personality, and - of course - previous
experience and references can all outweigh price differences.
So why should contractors put themselves through the
competitive bid process? Why doesn't the customer interview
several and pick one early on, when his or her utility could be
put to full advantage?
The architect. Architects aren't served well, either.
They've got ticked-off clients and a design that will either
never get built or have to be scaled back - often in poorly
thought-out ways - in order to come in on budget. And because
the client is often not well-disposed toward paying the
architect for the many little details that need to be worked
out during construction, the design may get further diluted.
Wouldn't the designer be better off having a contractor
involved from inception, to ensure that the builder has bought
into the final design, understands it well, and can price it
GCs. I hardly need mention the contractor. If three
builders are invited to bid, at least two of them (and often
all three) are wasting their time. Estimates are free,
naturally, because - again - they've always been free. And
because we need to cover the overhead for all these free but
unsuccessful bids we're preparing, the clients who do hire us
end up subsidizing those who don't.
On the design side, we can critique the plans as drawn, but by
the time we see them it's generally too late to make
substantial changes. At that point making comments just annoys
the architect and discourages the client. So we get two weeks
to absorb all the details and nuances of a design that took six
months to create before throwing a binding number at it. Often,
many details are still taking shape.
Is There Another Way?
Here at my company, we like working with architects, we like
the projects they bring to us, and we generally like the
clients as well. But with each large job we do, it becomes
clearer that the current model isn't working - at least not for
So what would work better? There are any number of choices,
depending on the size and abilities of your company.
Just say no. This is the approach Eldrenkamp advises
in his article, and it's hard to argue with his logic. He
explains how he came around to the realization that past
clients, not architects, were his most reliable source of good
leads and that he should focus his marketing efforts there. If
that meant getting fewer big "glory" jobs - or none at all - so
Likewise, I sometimes question whether our company would be
better off with more small- to medium-sized renovations and
fewer big remodels and new homes. The disadvantage to this
approach is that I would be doing a narrower range of projects
and not much new construction, if any.
Design-build. If the same people are both designing
and building the job, they are much more likely to know what
everything costs as the design progresses, and they are much
more likely to meet the budget. Moreover, a company's
"signature" details should become better and cheaper through
There are potential downsides, though: The contractor assumes
the overhead and liability for the design team; the builder
moves from being a "trade partner" of architects to a
competitor; and designs may become less sophisticated and
varied. Also, going the design-build route could just
internalize the problem - friends of mine who work in larger
design-build firms have described tensions within their
companies between the design and build sides.
Insisting on early and continued involvement in the design
process. This is the approach with the most appeal to me,
although it's perhaps the hardest to implement. I've had
limited experience and success to date, but my modest proposal
is that the client picks a contractor to be involved from early
in the process. The contractor gives input on how design
affects price, offers advice based on experience with various
materials and techniques, and helps with issues of form vs.
function. Ideally the same contractor, after acting as
consultant, would become the builder - but it needn't be
The contractor would be compensated, either hourly or with a
fixed fee for a defined service or number of hours. To me it's
clear that this would be a worthwhile investment: It would save
time and money by eliminating the need for late-stage
redesigns. And if the client still decided to put the project
out to bid at the end of the design phase, the scope of work
would be much more clearly defined, making the bidding process
go more smoothly for the contractors involved.
Integrated project delivery. An architect I've
discussed these ideas with has been looking at "integrated
project delivery" as a possible model. The American Institute
of Architects describes IPD as "a process that collaboratively
harnesses the talents and insights of all participants to ...
increase value to the owner, reduce waste, and maximize
efficiency through all phases of design, fabrication, and
construction." IPD teams, according to this definition, can
include members "beyond the basic triad of owner, architect,
and contractor. ... Integrated projects are distinguished by
collaboration between [all parties] commencing at early design
and continuing through to project handover." While this
approach was developed for large commercial jobs, it could be
useful in complex residential work as well. (To receive the
AIA's IPD guide, fill out the form at http://info.aia
If a future without bidding sounds too good to be true,
perhaps that's because it is. There may never be a way for
contractors to avoid competing on price. Most homeowners are
still convinced that they'll be taken advantage of if they
don't go to bid. And architects are still attached to the
current model; changing it would require that designers and
contractors alike put their cards on the table in ways they may
not be comfortable with. Ultimately, though, I believe it's a
future worth working toward. The earlier in the process we
builders get involved - and the less time we waste competing
with each other - the more we can focus our energy and
resources on the work at hand and the greater the likelihood
that the project will be successful.
Dan Kolbert owns Dan Kolbert Building & Renovations
in Portland, Maine.