The fact of the matter is being a savvy consumer is simply a smart way to do business, no matter what the economy.

Anyone who has ever obtained RFQs from several sources knows there is a “competitive range” in which most bids fall.  However, it seems a tempting, rock bottom, low bid always makes its way into forecasting the costs of new projects or when evaluating current sources for design or manufacturing of existing or ongoing projects.

Below are the top five competencies which might be at risk when contemplating that, too-good-to-be-true, low bid.

  1. Rule of thumb:  If any one bid is 15% lower than the middle group of bids, it simply isn’t an apple-to-apple comparison. Something was missed, underestimated or miscommunicated if there is an excessive gap between bids. It’s also possible the lowest bidder isn’t of the same caliber as the middle group.
  2. Compliance. In an industry where compliance and credentials are critical, a suspiciously low bid can be an indication of a lack of compliance, training, certifications or ability to track a project from start to completion.
  3. Experience.  While many businesses expand into new areas of service, an unusually low bid can be indication of lack of experience in a particular project or niche service.
  4. Turn time. A comprehensive project bid will always include the turn time on the project. The low bid could be an indication of how costs are being made up in other areas, such as turnaround times.
  5. The low ball.  In many industries there are suppliers and vendors who low ball as part of their business model.  They simply want the business in the door and then have a policy of overcharging in other areas to make up for the loss leader used to secure the business.

The hallmark of a comprehensive bid by a high caliber, reputable company is the thoroughness of the intake process and a strong mix of plain old fashioned common sense.  Always do your homework with new vendors, learn about their history in the industry and with projects such as the one you are proposing.