Bid shopping or relationship marketing

Last night, I emailed readers who had reviewed our emailed invitation to participate in a survey about bid shopping/peddling the copy of the story that we are publishing in Canada.

You can download the story Bid Shopping and Peddling: The Construction Industry's Ethical challenge, here.

I received several interesting replies, including the following two observations:

Sebastian Lessard from newhomeassociation.ca wrote:

I wanted to give you my opinion on bid shopping and peddling. I am not a general contractor, builder or sub-trade. I have however been in the business for many years servicing New Home Builders as a Sales and Marketing Consultant.

My experience with one particular home builder came to mind when looking over the results of your survey. This particular builder (Alary Construction) in Gatineau, Qc managed to steer away from those types of problem.

His motto was: "get to know the companies and the people that manage them, make sure they get to know you and your business values and you'll succeed in creating strong, trust worthy relationships. These relationships will lead you to success. they will generate the highest quality work, thus bringing YOU, recognition and appreciation from your clients." or something like that!

I fully agree with this principle, where if you show your partners(sub-trade) your intents of establishing a long term relationship they will bend over backwards to ensure the preserve your trust enabling them to grow and succeed.

Business is not about short term objectives but rather longevity and prosperity. In the case of Alary Construction, they made the choice of investing time to get to know companies and their leaders and selected companies that met their business values and beliefs. 6 years later they are still working with 90 per cent of the same trades, producing high quality work and ultimate customer satisfaction.

It goes to show that Bid Shopping and Peddling is a practice done by choice. Home builders and general contractors should not sacrifice quality, integrity and a potential relationship on prices they receive. They should spend more time evaluating, meeting and understanding the value of business relationships and how they are worth a lot more than the few thousands saved on one particular job.

I know that money talks but I've always found that actions and trustworthy relationships create an unmeasurable wealth for all of those who decide to abide by these principles.

Once again this is a simple man's opinion many would say.

When I posted this observation in the latest Construction Marketing Ideas Newsletter, a contractor unrelated to the above posting responded.

Mark

This is an interesting position and a great way to do business.

I think it is reasonably present in the ICI market as well. The opportunities to build these relationships are readily available in development, design/build and construction management contracting.

However competitive bidding changes that. Depending on one's definition of "bid shopping" preference buying combined with competitive bidding is difficult.

Is bid shopping post tender only? Is disclosure of a competitors bid prior to closing considered bid shopping?

For example:

Accepting that all is correct and above board with all involved.

GC's invite bids on an upcoming tender. Both invited and unsolicited prices are received. The preferred trade may not be low. It may even be extremely close pricing. The prime wants to continue to work with and support the preferred trade and continue to build this relationship. But is this fair to the lower bidder? Many issues come into play in this circumstance with no clear win/win situation. Depending on the final decision some one will be unhappy.

These observations reflect the dynamic but very real conflict between the traditional "low bid wins the job" business model, and the more advanced, marketing-focused relationship approach to the industry. I suppose purists concerned about bid shopping/peddling will argue that game playing based on relationships is unfair and unethical, but the fact remains that this business is made of human beings, with initiative, energy, and distinctive personalities and values. Great business is rarely achieved by relying on a job-by-job "low bid wins" approach -- I sense I wouldn't be in business with my publications or writing this blog if that was the case.

The construction industry, as well as owners and purchasers, run into problems when relationships are tied to game-playing to reduce costs in a win-lose approach to business, or (from the other perspective), things are played with superficial openness but tricks and manipulation cover the real picture. Maybe it is time for us to stop speaking from both sides of the mouth and reflect on our goals, objectives and values. If you really want "low price wins the job" then live by these rules; if you put priority on relationships and teamwork, then don't play games just to get a lower price. I expect there will always be businesses which try to play by their own (unfair) rules. But the businesses who respect both relationships and bidding integrity, I expect, come out ahead in the long term.