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Beyond “Low Bid” What Now?

Beyond “Low Bid”

What Now?

 

The idea that always choosing the low bidder on a construction contract would protect budgets and prevent corruption has run its course. It is now almost an axiom of the construction industry that the hidden cost of broken schedules and cost overruns resulting from contentious extras often turns the “low bidder” into the “highest cost” producer. With the passing of the age of the “low bidder”, contractors, owners, and designers must now identify alternative performance factors that determine whether a quality project will be delivered on time and on budget. In other words, if price is no longer the primary procurement factor – what is?

 

Responding to RFPs When Low-Bid Is Not the Deciding Factor

 

“Estimating construction cost is not an unknown skill for most construction firms. However, the ability to show and prove the capability to perform at a high level is a skill rarely possessed within the construction industry. (Managing the Profitable Construction Business, Thomas C. Schleifer, Ph.D., Kenneth T. Sullivan, Ph.D., John M. Murdough, CPA, Wiley, 2014, 224-225).

 

When composing a response to an RFP, most contractors tend to brag about their company and ramble on, page after page, referencing every job they’ve completed as evidence of their competence. Evaluators tend to lose focus after a page or two and struggle to differentiate the qualifications of one contractor from another when it comes to the specifics of the project being considered.

 

“Performance information, when used properly, provides the clearest differentiation of potential future capability of a contractor. When the performance information is extended beyond the general construction firm and addresses the key project team members, key subcontractors, other key people, the proposing firm presents a highly differentiated proposition to the client evaluation committee that alleviates their need to find differences.

 

“In other words, successful contractors in the changing construction industry must be able to document their performance and use their performance information to differentiate themselves from their competition.

 

“The clearest method to differentiate an expert contractor from a non-expert or less experienced (or less competent firm) is through the ability to identify, prioritize, and minimize risk.” (T. Schleifer et al.)

 

Beyond Low-Bid Response

 

Expertise-based Project Deliveryis a complete procurement and project delivery approach. Rigorously tested and refined over the past 2 decades by the researchers at the Simplar Institute, theXPDapproach has been utilized on over $6 Billion in projects.

 

The primary goal of the best value XPD™approach is to clearly differentiate expert vendors from their competitors based upon price & performance criteria.But what are the best criteria to differentiate vendor expertise?

 

  1. Hire Experts

 

Research has found that successful projects and services have a common theme – the expertise and quality of the individualsthat were assigned to the project. The XPD™ approach is highly focused on the expertise of the team that will be assigned to performing your project or service.

Project performance is primarily driven by the capability of key individual project team members and their ability to identify, prioritize, and minimize project risk.”  (The Best Value XPD Approach, Implementing the ’Next Practices’ in Procurement, simplar.com)

 

  1. Write Anonymous Proposals

 

Many vendors believe that owners have ‘favorite’ vendors, and that the award will be made to the same firm(s) that have consistently won in the past. This perception (whether real or not) impacts the number of vendors that propose, the quality of vendors that propose, and the quality of the proposals themselves.

 

In the XPD™approach, vendors are instructed to provide anonymous proposals. No company names, staff/personnel names, product names, or past project names are permitted in the evaluated documents. This allows evaluators to score the documents based on the merits of the document itself, and not based on the company name.

 

  1. Limit Pages

 

As the frequency of poor performing projects or services increases, the natural reaction is to add more and more proposal requirements on future solicitations. This, of course, leads to long-winded vaguely worded proposals that evaluators end up discounting. Keep proposals short and to the point.

 

In theXPD™ approach, the evaluated proposals are limited to 2-5 pages. 

 

Let Simplar Help 

 

Through workshops and hands-on training, the Simplar team will assist your personnel with implementing and mastering the most advanced procurement and project delivery practices. To learn more about the XPDapproach contact the Simplar Institute on this site.