The real cost of lowest bids
Better quality costs more, but the additional expense is often worth it
Many purchasing people tell us their job is to get the best possible products and/or services for the best price. It’s become so ingrained, we don’t realize those two goals are often mutually exclusive. Better products and services often cost more, and quite often, the additional expense is worth it.
The cost of replacing failed components often includes substantial labor and maybe even travel expenses. These add up quickly, especially when you’re replacing the same items over and over.
To illustrate, the owner of my exercise club seems committed to buying from the lowest bidders. He built a new facility and shortly after opening 11 years ago, things started failing. For example, within a month or so, several faucets had failed. One might be understandable, but several are just too much of a coincidence.
I won’t take you through the sordid tale of casualties over the years, but let’s just look at the latest fiasco. The original hot tub started leaking and needed to be replaced. Well, he finally bought a new one, ripped the old one out and had the new one installed. I imagine the installation crew was also the lowest bidder.
It took a lot longer than scheduled, but the day came when it finally worked, and the owner paid them off. Too bad he didn’t wait a few days because that’s all it took. Several months later, it seems to be broken an awful lot. I don’t use it, but I get to listen to the complaints.
Suppose he had bought a better tub and hired the best crew to install it. He would have spared himself a lot of additional expense and frustration for himself and his customers. There’s no payoff to buying junk, even when it looks good.
I talked to a guy on crutches who blamed his injury on the collapse of his sun deck, and he wasn’t the only one hurt. He was upset because it was only a couple of years old.
It seems he contacted a number of carpenters and took the cheapest one. Not to pick on anyone just starting out, but sometimes there’s a reason those rates are low.
I asked if he paid the asking price or negotiated something “better.” You guessed it: something better. Well, he probably negotiated for nails instead of screws, and perhaps thinner supports without realizing it. Contractors hate to work for less. These “deals” often mean lower-quality materials. They’re not giving much up; you’re the one giving things up.
I couldn’t help contrasting this story with one I had heard years ago. Another guy had bought a mansion, and renovated it, but he wasn’t happy. He needed a garage.
He found a design he liked and solicited bids from local builders. He carefully reviewed the responders and the guy he liked best wasn’t the lowest. This contractor had a pleasing personality, and his references were outstanding. Yeah, it was more expensive, but he had a good feeling about it. When he awarded the job, he told the contractor, “I’ll give you 10% more, but I want you to build it as if you’re building it for yourself.”
“I wouldn’t build this garage for myself. I’d build it a little bigger, so you wouldn’t have to squeeze to get in and out of your cars. I’d make a few other modifications too.”
“Give me a proposal.”
Well, the proposal included a substantial increase in costs, but most of these were for more and better materials. Apparently, it took very little additional labor to build the better garage. Instead of just hiring a builder, he got the builder to work with him to modify the design to give him what he really wanted at little additional costs.
Admittedly, you can’t work this way with everyone, but this is the kind of supplier you really want. You don’t want them to just meet the spec; you want them to work with you to make the spec even better.
Ronald J. Bourque, a consultant and speaker from Windham, has had engagements throughout the United States, Europe and Asia. He can be reached at 603-898-1871 or RonBourque3@gmail.com.