Bidding Wars: What Are They Good For?
I recently read this blog about soliciting bids in the midst of our current “housing bubble.” The article advised homeowners against low-balling when examining contractors’ bids for their work. It reminded me of where I was working when the housing boom finally started to go flat. At the time I was working in southern Oregon. It was a hotbed for new construction during the boom as retirees and newlyweds flooded the area, known worldwide for its landscape and moderate climate.
The town also flooded with contractors. Anyone with a hammer and a pick-up truck was in the business. But when things started to collapse (last I heard the number of homes on the market was up roughly 1000 percent), many contractors were left holding their hammers. That’s when the undercutting started. Bids dropped like Wile E. Coyote off a cliff.
Suddenly we were losing work, right out from under our noses, because everyone was trying to cut costs. For a time, quality of work gave way to quantity of work, often awarded to the lowest bidder. Not surprising, this only complicated things. Just a few months later we found ourselves being hired to finish work left incomplete by low-balling contractors who were either fired or just disappeared.
The moral of the story here is that underhanded bidding is not only unfair but unhealthy as well. Unhealthy for business, unhealthy for everyone involved. Even in a time of recession, the traditional rules of bidding still apply and contracts are not won, nor is work retained, simply through low bids.
Now, of course competition is high, demand low, and everyone has to lower their prices, but good contractors know the business and know reasonable prices. It is these contractors that work with each other and form a community of builders that will weather such times as these.
It doesn’t take long, as illustrated above, for low-balling, high-risk contractors to be weeded out. The essential fact remains: The best way to win a contract is by establishing a good rapport with the homeowner. And that still comes from being honest, knowledgeable, and diligent in your craft.
Tags: bidding wars, community, competition, generating business, good contractors, low bids, lowballing, quality, recession, trust, undercutting