December, 2 2021
We all know the benefits to the buyer of a competitive bid process …or at least the perceived benefits. Competitive bids help the buyer get the lowest price and most favorable contract terms for their project. They also provide a vetting process for the contractors and their subs, ensuring the selected vendor is the most experienced and qualified. Sounds perfect, right?
In certain situations and for certain types of products, there is a lot of merit to the competitive bid approach. However, there are downsides and flaws with the competitive bid process that should be considered with architectural signage projects.
From our experience, more often than not, price dominates the deciding factors in signage bid situations, with far too little emphasis on vendor qualifications such as quality, design, experience, and level-of-service. Some of this is likely due to a lack of understanding and appreciation of the overall importance of signage.
Price is of course important, but short-term savings can often lead to increased costs over the long-term.
This begs mention of the well-known quote by John Ruskin on price:
“There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price alone are that person’s lawful prey. It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money — that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.”
Architectural sign projects are rarely if ever a “one and done” type of purchase. Sign programs, especially for large facilities, are constantly evolving and expanding, and often times, a low-bidder doesn’t have the infrastructure or willingness to service the small reorders and ongoing needs of an owner. The owner may get a nice-looking installation on the front end but then struggle to successfully maintain the program over the following several years.
Another pitfall of too much focus on price is the risk of costly, unexpected change orders after the initial contract is executed. Some sign manufacturers consistently use this technique as part of their sales strategy, submitting a low bid to secure a project and then submitting change orders for work that technically should have been part of the initial scope. This can lead to unexpected cost increases for the owner and deviations from the initial design intent.
Whether with a marriage or in business, the most successful relationships are those that are mutually beneficially, i.e. a true partnership. A win-win.
Too often in competitive bid situations, in an effort to secure work, sign fabricators may be forced to live with extremely slim profit margins. While this may guarantee the best price for the general contractor/owner, amanufacturer that is working with slim margins and feeling squeezed may not be able, or too keen, to provide the highest levels of service or quality. And, a vendor who has completed a large project and barely scraped by will likely not go to too much effort to provide ongoing service.
On the contrary, with a design-build process or a negotiated contract, a true relationship is established between all parties involved, thus creating a higher level of trust, more efficient communication and an overall more balanced equation.
Most all reputable, experienced sign manufacturers have built a wealth of knowledge over the years with regards to sign design, construction and engineering: knowing how signs can be built, which materials are most suitable for certain situations, etc.
Generally, with a competitive bid process, the sign fabricator is not able to offer input, or it’s too late to offer input, regarding design and construction that may very well result in a superior, and possibly more cost-effective solution for the owner.
Not too much to say here really, but the administrative efforts to prepare an RFP and review bids take time and money. Many times, doing your independent homework on a small pool of qualified sign companies and then negotiating directly can be a more efficient and less expensive undertaking.
While there is of course good intention and historical justification for programs geared toward boosting business opportunities for minority and/or veteran-owned businesses, there are occasions when bids with specific ownership requirements may eliminate some very qualified companies from competing for a project. If the overall intention of a competitive bid is to ensure the owner is paired with the best solution for his/her particular needs, these types of bids with set parameters may fail to accomplish that key objective.
In the case of a business like APCO, these excluded companies may not have minority or veteran owners but may on the other hand consist of numerous employees and leaders of all backgrounds, ethnicities and walks of life who would all benefit from the company being awarded a large project.
Although APCO does participate in competitive bids, actively pursuing bid work is not part of our sales strategy. Rather, we’ve always found greater success seeking out customers and project opportunities where there is greater value placed on a long-term relationship, good quality, innovative products, and a high level of service. Based on feedback from our customers over the last 55 years, those types of non-bid projects have not only been better for APCO but they have also provided our customers with a better overall experience.