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Taking the High Road on Low Bids
The pressures to contain construction project costs in today’s economic environment can lead facility executives to reflexively adopt low-bid procurement. And when the project in question is a facility roof — an integral part of the facility envelope that few people see and seemingly fewer think about — awarding the contract on the basis of price becomes easier still. But a low-bid approach can lead to ongoing roof problems and significantly higher life-cycle costs. It requires careful planning for facility executives to balance the imperative to control first costs with the desire to make the best long-term investment.
Although low bids have worked for some facilities, the pitfalls are numerous. For this reason, facility executives are well advised to prepare thorough bid specifications and conduct extensive research on potential roofing contractors.
Everyone knows the time-worn adage, “You get what you pay for.” But not everyone heeds such wisdom, says Karen Warseck, president of Building Diagnostics Associates. “Success with low bids depends upon how clearly the project has been documented. If owners provide a clear set of specs, then low bidding can work.”
But there are caveats, even with clear specs.
Another old adage — “do your homework” — applies during the prebidding process. Keeping that adage in mind, Warseck says there are some standard rules of play when soliciting bids to minimize risk:
- Don’t put out a set of specs that is satisfactory for the application, only to be swayed by bidders who come back and say that they can do it for less with different products. Clearly specify the products to be used, and don’t back down from the established specifications.
- Be sure to use quality contractors. To ensure quality roofing work is performed, says Warseck, owners must find bidders with similar experience and capabilities. “Ask what kind of work they’ve done before,” she says. “Make sure they have done work of the kind and size that’s being solicited.”
- Don’t be cheap. “People who don’t want to spend money get bad roofs,” says Warseck. “There are some people who always go the cheap route.”
Ted Michelsen, a former executive director of the Roofing Industry Educational Institute and president of the consulting company Michelsen Technologies, recommends that owners throw out any quotes that are more than 5 or 10 percent below the average of the next two lowest quotes. This action helps purge lowball quotes or quotes that are mistakes, reducing the chance that facility executives will wind up with a contractor who cannot do the job correctly for the bid amount. Lowball quotes or mistaken quotes can lead to either a renegotiated amount that is higher than the original, or bad work, caused by corner-cutting.
As a point of fact, the two situations above are the most prominent risks when securing a low-bid contract. As owners know, corner-cutting can create early failures, but the problems with renegotiated prices aren’t as obvious. Bid solicitation can attract firms or contractors that are predatory in their pricing. Such firms offer a quote lower than the cost of the job but know that they can make up the difference in change-order costs.
The key, according to Dean Kashiwagi, assistant professor at Arizona State University, is to choose contractors on the basis of performance differences.
When contractors are willing to submit performance information, facility owners are less susceptible to the standard risks of the low-bid procurement approach. Specifically, owners can avoid bids that consider low price without also considering accuracy and performance.
“There’s no performance information in the roofing industry,” says Kashiwagi. That often leads owners to accept bids without forcing contractors to consider construction period, the price of performance, the capability of key personnel or comparison of equal services.
If minimizing risk sounds tricky, precisely defining the scope of a contractor’s quality can require still more diligence. Once the bids come in, weed out low-quality contractors by asking questions of them. Often this is best done by asking them about other projects they’ve done and what kinds of experience they have.
Also critical is checking the background of the contractors. Check the local Better Business Bureau. Check if the contractors belong to national or regional roofing associations. While this doesn’t always prove that the contractor does quality work, Warseck says, it does show that the contractor is committed to the industry and willing to pay the annual fee required by such organizations.
Dick Fricklas, a roofing consultant, also suggests checking with manufacturers. “They will provide a list of qualified and approved contractors,” he says. “And don’t forget to check for proof of insurance and previous experience with the specified roof system.”
Finally, check for licenses. “Anybody can roll around town with a torch or roll of roofing in the back of their truck,” says Warseck.
Kashiwagi agrees, saying that the current roofing environment is leading to greater numbers contractors and owners who treat construction as a commodity, rather than a service.
To help qualify contractors, Kashiwagi says, gather performance-based information, such as:
- Proposed construction time.
- A cost estimate, broken into general areas.
- Risks, ways to minimize those risks, and a general plan of how the project will be accomplished.
- Project manager and site superintendent on the job.
Fricklas says using the American Institute of Architects (AIA) Document A305 – Contractor’s Qualification Statement, can help facility executives determine the quality of bidders. The document provides queries about the contractor’s organizational structure, licensing, experience, references and financial stability.
Other pertinent considerations include asking how many additional jobs the contractor is working on. As with checking for association membership, this question doesn’t assure quality, but it can indicate how much time and resources a bidder can devote to properly plan and supervise a project.
“Get a list of projects and verify satisfaction with the owners,” Fricklas says. “But the best way [to identify quality contractors] is to have a previous and ongoing relationship with two or three contractors, ones that have done satisfactory work in the past. Restricting the bids to these old reliables probably assures not only a good job but prompt response if there is a problem down the road.”
Warseck agrees that recommendations can provide good contractors, but advises owners against blindly accepting a word-of-mouth endorsement, just as owners should not rely upon the phone book as their sole source for roofing contractors.
“I also would ask for references for jobs done by the same crew and foreman, as that will have the biggest effect on quality,” says Michelsen.
It is for this reason that Warseck warns buyers to beware of power-purchasing plans. “Often, the large roofing contractors who provide power-purchasing plans use a local crew, and facility executives have no quality controls when using local crews on such a plan,” she says.
Making Competition Work
When the economy turns sour, roofing contractors and facility executives alike face similar problems. Both industries will trim budgets and keep reliable, key personnel. “When everybody is busy during good [economic] times, bids will be higher and because management is extended, workmanship might be worse,” Fricklas says. “Ironically, right now is a good time to get competitive bids.”
To a certain degree, facility executives who do their homework and ask critical questions will begin to make competition work in their favor. A rigorous selection process can separate the chaff because low-quality or underperforming bidders might not want to subject themselves to the process. The net result is a more competitive group of final bidders.
Facility executives also need to consider their regional roofing seasons when soliciting bids. In Chicago, for example, executives will want to have roofing applied in summer. To obtain the most competitive prices, solicit the bids in January or February, when roofers have little work and are looking for summertime jobs. Don’t solicit bids in June, when roofers are busy. Likewise, owners in Florida shouldn’t solicit bids during the rainy season, when roofers are busiest finding and patching leaks.
Working with Kashiwagi’s model, the Dallas school system recently selected contractors for area roofing projects. The district created a shortlist of contractors as part of the bidding process. In the end, the district paid 14 percent less than their lowest-bid expectations, and the work was performed during a shorter timetable than anticipated.
Procurement based on price can work, but quality will suffer if price-consciousness isn’t mated with performance-consciousness. Much of the success of procurement rests upon the prequalification processes facility executives use. This isn’t to say that low-bid procurement cannot work, only that it requires a dedicated selection process and a fine eye for detail. Specifically, low-bid procurement can work when the owner is willing to pay the cost up front for planning and design — the better the set of documents, the better the contractor knows what is expected.
“Ultimately, owners need to decide whether they want the lowest initial-cost roof or the lowest life-cycle cost roof,” says Michelsen. “Most times, they are not the same.”