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Sunday, June 08, 2008

Playing favorites (the right way)

This image isn't reallly related to the story -- but my Google search for appropriate artwork brought me to, an intriguing online source of draft letters, resources, and documentation for RFP/bid preparation and response.

Take a few minutes to review this remark posted a few days ago by a general contractor who plays by the rules regarding bid shopping/peddling.

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.

Here, we see a very real example of the practical issues involved in our business -- and the challenging interface between relationships, pricing, and integrity.

Almost everyone I know is ready to pay premium the security of knowing the work will be completed on time, schedule, and with maximum working harmony. And almost everyone I know also realizes that the lowest price at the outset is not usually the best value in the long term. So, of course, I constantly advocate that your best marketing investment is to maintain and enhance your relationships with your current clients. Then you are most likely to be included on preferred bidding lists and (without cheating but with your special inside knowledge of the client and upcoming projects), know the right price to bid to win future work.

But the question arises: How do you win new work and clients? Should you be willing to submit an unsolicited bid for a proposed project, and if you are low and win it, should you get the job?

Here, as the general contractor above notes, things get really murky. Lets say you are relatively new to the business (on your own) but have much relevant experience, solid personal relationships, a proven track-record working elsewhere, and you are simply willing to work for less than the competition to gain a foothold. Does this story sound familiar?

The general contractor receiving your unsolicited bid, of course, is quite within his rights to decline it -- he didn't ask for it, and assuming it isn't a public project where bidding is totally open, he doesn't have a legal obligation to accept it.

Probably the ethical thing to do in this situation is for the GC to thank you for your bid, and (if it is good), say it is good enough that he will be happy to include you on the list for future projects. From a marketing perspective, then, you'll achieve your objective in gaining attention and business opportunity -- but of course, if you are like most start-up businesses, cash flow now is more important than future opportunities.

A second choice is for the GC to dump the low invited bid, and take yours. If I were the the low invited bidder, of course, I would cry "fowl", with good reason. Perhaps the low bidder though is on the borderline of quality -- and margins are tight, and the new guy is really good.

The third option is for the GC to contact the low invited bidder, and tell him about the low unsolicited bid. This is probably not unethical if this information is provided after the original bid is accepted and the job starts -- the incumbent would want to know someone is out there pushing prices down, and maybe out of respect the successful incumbent sub contractor would be extra careful about client service/value going forward. But of course, as a general contractor you use the information to push the price down of your invited sub trade, you enter bid shopping hell (and get a lower price, I suppose.)

You can quickly see how all of this can get really messy and complex, and this explains in part why marketing has such a challenging and unique place within the construction industry.

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