The Big Picture

The High Cost of the Low Bid

Many companies, large and small, have purchasing policies put in place by senior managers who think that hiring vendors based on the lowest bid makes financial sense. What many do not take into account is the fact that vendors offering the lowest bids may actually cost a company more money in the long run.

Hidden Costs

Lowest bids often include less detail, which turns into additional costs once the job is underway. Some examples of hidden costs that can occur include:

· Errors, and the time it takes to correct them
· Vendors that do not follow up when there are problems
· Poor response time to company questions and concerns
· Inadequate tracking, which delays the project schedule
· Little or no free design assistance
· Additional costs for necessary items or for correcting "unforeseen" problems, not included in the bid
· Additional time, for inspections and acceptance, not included in the bid
· Company time to follow up on problems with the vendor
· Company time to report cost overruns to management
· Cost to have work completed by, or replaced by, a different vendor

Most technology or multimedia managers and directors are aware of the potential for cost overruns due to hiring audio/visual companies and others who have provided a low bid, but may not be the best for the job. They also know that the lowest bidders often cut corners, and therefore quality, in order to complete the job within the contracted price. Getting companies, and policy makers, to look at the big picture is the key to getting the best vendors for a fair price, not always the lowest price.

Better Solutions

One option for improving the process is working with a vendor in a negotiated bid agreement, instead of soliciting competitive bids from multiple vendors. A vendor that can prove, over time, to result in the lowest "system" costs becomes a long- term partner, even though they are not on the company payroll.

Vendors who have this relationship with company management are more likely to provide free design assistance, offer consulting on issues before they become problems and tool up for additional capacity when needed. These vendors are also more likely to monitor and inspect their own work, so as to ensure their position for future projects.

Building A Partnership

Companies often think that any work they can complete with in-house personnel will be more cost effective than outsourcing. For many projects, where high tech expertise is critical, finding a vendor that works as a partner can in fact be very cost effective over time. For this to occur, technology managers and their selected vendors need to work together to provide a consistent, quality product for the end user – the company executives who rely on them.