Letter to the Editor
I am not much of a debater, but the subject of your "Government Affairs" article in the March issue of Masonry is one that I like to discuss [March 2005, page 8]. I enjoyed reading your article and would like to share my thoughts on the subject with you.
In your article on reverse auctions, you pose several points of interest. Speaking personally and professionally, do I want to see this method of bidding on a regular basis? No. Do I think it is bid shopping? Maybe. However, do I think the owner benefits greatest from this process? In my experience, no.
To date, I have participated in four reverse auctions, one of which my company was the successful bidder. All four of these auctions were for a national retailer. Honestly, I got a "rush" out of the experience and, if asked, would agree to participate again.
One reason I would participate again in a reverse auction is because, in each case, the masonry contractors were prequalified. For many of the traditional, sealed bid process projects that my company bids on, the bidders are not prequalified, which leads to a few companies bidding the project that have no business doing so, and they are typically the low bids.
Another reason why I would participate again is because a scope of work was issued that bidders could not deviate from. With a defined scope of work the general contractor (GC) is comparing apples to apples in evaluating bids. If you surveyed GCs about masonry proposals on a typical job, usually none of the contractors quote an identical scope of work. Some furnish rebar, others don't. Some furnish flashing, some don't. My company's quotes include all materials and labor, while many competing masonry contractors' bids don't provide materials. How can a GC properly evaluate these quotes?
As for bid shopping: that occurs on every job every day, regardless of the bid process. So what is different about the reverse auctions?
And, yes, in the four reverse auction projects that my company has bid on, I believe that the owner got a fair value for the masonry; however, I also believe that each of the contractors would build the job again today for the same price. Actually, in the case where my company was the low bidder, we got the best end of the deal. I was prepared to quote the project for $480,000. The bidding started at $600,000, and when the bidding stopped, we had won a contract for $540,000. Of course, I immediately thought that I had made a mistake. Had I made a mistake, this bidding process would have saved my company from absorbing the loss. At the end of the project, I determined that I had estimated my original bid appropriately, and we were able to realize a $60,000 bonus on the job.
Finally, you wrote that this bidding process could lead to contractors cutting corners, jeopardizing both the structure and the safety of workers. Wouldn't that also be the case if a contractor bids a project the typical method and leaves 10% or more on the table? Reverse auctions do not lead to an increase in the probability of cutting corners. For the reverse auction project that my company built, there was a safety inspector making weekly visits to the site and a full-time masonry inspector on site. There was no way to cut corners and put the structure or employees at risk.
If handled properly reverse auctions could work in the industry, and I believe the ones that my company has participated in were correctly handled. A prequalified list of competent contractors, a defined scope of work, routine safety inspections and a full-time masonry inspector made the system work. I wish every project that I bid on were handled the same way.
Thank you for the article and your time. I hope all is well in Washington.
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