Why Businesses Shouldn’t Just Pick The Lowest Bidder

Why Businesses Shouldn’t Just Pick The Lowest Bidder

When businesses need to spend a lot of money on a process or product, they will usually put the purchase out to bid. Creating a bid for a specific product is easy because the company can insist on certain specifications or brand names to make sure it gets exactly what it wants. But if the bid is for a service, then things can get complicated as each bidder tries to find a way to submit the lowest price possible. Businesses should realize that a low-price tag may end up costing you a lot of money.

Cheap Means Cheap

In the business world, it is true that you get what you pay for. In some instances, a cheap product or process can be acceptable as long as the job gets done. But for the most part, settling on the cheapest price means you will get the most inefficient and unprofessional service possible. You get what you pay for, and when you insist on paying the very lowest price, you will get the very lowest results.

Taking The Cheapest Price Does Not Always Save Money

One of the areas where cheap contractors cut corners is safety. If you accept the lowest bid in hopes of saving money and a major accident causes your work site to get shut down, you could wind up losing tens of thousands of dollars or more a day. When a contractor cuts corners, some part of the job suffers to the point where the job might never get completed.

Thinking Of The Long-Term Results

In order to keep costs on a bid down, contractors and manufacturers will use low-quality materials and cheap construction or manufacturing methods. Those materials and methods might satisfy the bare minimum requirements of your project, but they are not going to give you the long-standing results you would get with better quality materials and methods.

A project that uses the cheapest materials and bare minimum construction or manufacturing methods will not last nearly as long as a better quality effort. You might have projected that your project would give a result that would be productive for 20 years, but everything could be in need of replacement in only five. At that point, you have to pay to have the project done over again well before you had planned and you will lose a great deal of money.

There Are Ways Of Saving Money And Getting Good Results

Businesses tend to look at projects and products as single entities and look at bid pricing in the same way. If a company truly wants to save money on a bid and still get a quality result, then that company needs to hire experts to review line item bids.

A line item bid is a bid where every part, process, and material in a project is priced out to create the final overall price. With this type of bidding, the company can have each bid reviewed and choose the lowest price bid that offers the best value. This would prevent the company from trying to blindly save money while sacrificing results and quality.

Employee And Customer Safety Are Sacrificed With Cheap Bids

When a business starts to grow, the amount and scope of the bids it takes tend to expand. While this is a great sign of progress, taking the cheapest bid can derail that success and create nothing but disaster.

New equipment or structures built using the cheapest bids may not be able to withstand the weight of the company’s growing success. When companies cut corners, everything is affected, and the threat of a building collapse or an important piece of equipment failing becomes very real.

The Company’s Reputation Is Affected

A company gains a reputation in its area and in its industry based on a variety of factors. The quality of the products the company sells and the level of service come to add to a company’s good or bad reputation.

A company that gets a reputation for always taking the cheapest option is going to find it difficult to attract top talent when it comes time to grow. A reputation for cheap products and taking the cheapest bids for projects travels throughout your industry, and it can come to define your company. If you allow that to happen, growth for your company is going to be extremely difficult and finding quality people to move your company into a successful future will also be almost impossible.

Think Of Your Company’s Future With Each Bid

Over time, the habit of always taking the cheapest bids will start to take its toll on your company. When safety issues begin to emerge, and people start to get hurt, your insurance costs are going to skyrocket. As word gets around that your company always takes the cheapest bids, it is going to be impossible to bring in new employees who take pride in their work and want to take pride in the company they work for.

Over time, the costs associated with rectifying problems caused by always taking the cheapest bids will start to go way beyond the original bid costs. You could wind up spending two or three times as much as you thought you saved just to fix problems that start to occur over the years because of cheap work and materials.

The simple fact is that businesses should never take the cheapest bid in any situation unless a full examination of each bid has been done. You might find those moments where you are handed a gift, and the lowest bid for one of your projects actually is the best value. But those moments are few and far between, and counting on always getting a good value with the lowest bids is a gamble you cannot win.

Smart businesses analyze each bid and determine which bid offers the best value for the money. You will find that very rarely is the lowest bid actually the best value. In most cases, the best value is a bid that is not the cheapest, but it will give your company the reliable results it needs for many years to come.

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