Does the owner benefit from the lowest bid? Not always.
A company needs to expand it’s facility. Their accounting department has established a project budget that can not be exceeded and, if adhered to, the project is feasible.
The committee agreed that minimizing design and consultant fees would leave more for constructing the building.
The project design begins and takes months or maybe longer to complete. All the painstaking details; drawing upon drawing, revision after revision as the project documents are developed. Better yet, the committee believed the estimated cost from the accounting department would be met.The final design is complete and is now ready to go out to bid.
Bid packages are distributed to interested contractors and the process begins.
The owner is delighted with the many bidders interested in the project .
As bid day approaches the owner’s anticipation rises and is anxious to receive the bid proposals.
Finally bid day arrives and the months and months of planning are coming to fruition.
Bids received and opened.
The bids have a large spread in proposal amounts. Some are much lower than the estimated building cost and many were well above the budget. Great news because some bidders are lower than the established budget estimate and the project could move forward.
Bids are reviewed by the building and finance committees. After careful review, a meeting was set-up with the lowest bidder to cross-check their estimated costs; which ultimately convinced the committee to accept the bid and move forward.
All parties thought this was a win-win situation. The contractor had secured the project and the owner would realized a huge savings on the cost of the project estimate established.
Ground breaking takes place and all is good with the world.
Three months into the project the euphoria has long gone and problems begin to develop. Building inspectors have given numerous notices of deficiencies and reworks are necessary. Subcontractors and material yards begin calling due to lack of payment and are beginning to lien the project. The GC is issuing change order upon change order daily, asserting the referenced sections of work is not included in their contract. Time is slipping by and the project is now headed into the winter months which will further slow down production.
The cost savings that once was, doesn’t look like it’s goning to happen; in fact the project is now likely to exceed the budget.
Headaches, Headaches, and more Headaches……..
The perfect set-up for failure. This is a sad scenario but it happens more than you may think.
Tough lesson learned with a very steep tuition to pay.
Moral of the Story:
One of the most important keys for a successful project, is to establish a realistic and accurate project estimate for budgeting purposes. Chianelli Estimating is designed to do just that.
Chianelli Estimating provides cost estimates which are accurate, dependable, efficient and affordable. Our estimating expertise has acquired the knowledge and construction savvy necessary to provide our clients with project estimates geared for a successful ending.
Building Owners, Architects, General Contractors & Subcontractors can all benefit from using Chianelli Estimating Outsourcing.
Chianelli Estimating is a great estimating solution for all types of clients and building projects.
Remember…… “Long after the sweet taste of low price is forgotten, the bitterness of poor quality remains”