Thursday, February 24, 2011

Negotiated vs. Competitive Bid

We are often asked to explain and describe
the negotiated vs. competitive bid process as
Anderson-Moore Construction offers both options
to our clients. 



But first, we should establish the difference between the two methods.
A competitive bid requires invited contractors to provide the best possible price for a defined scope of work.  Once all bids are submitted, the lowest bid is typically chosen and the winning contractor signs a contract to begin work.  This method enables the owner to compare prices before work begins. 

A negotiated bid is when an owner negotiates a price for services rendored with a single contractor.  In this method, contractors do not compete against each other for the lowest possible price and owners are not provided comparative pricing. 

Based on the definition of the two methods,
it would seem an owner would always choose
a competitive bid method where the best price is presented. 
Why is the negotiated method even considered? 
What are the benefits to the owner?

First, consider that the competitive "hard bid" process allows the owner to pick the "lowest bid" among numerous competing contractors.  However,
the lowest bid does not ensure the best value. 
As we've all heard, "you get what you pay for". 
If a competitive bid process is chosen, the owner should
take great care to analyze the lowest bid to be certain
quality, schedules, and scope will not be compromised.

In most cases, the negotiated approach provides
the owner with the best value for their money
A contractor providing assistance to an owner up front
in a negotiated situation is in a position to save the owner precious dollars
by identifying changes and cost saving opportunities
BEFORE the project begins. 
This will help eliminate the need for Change Orders
(refer to AMC's previous post titled Change Orders and Value Engineering). 
A negotiated contractor working with the architect and engineer
early in the process will work as the owner's agent,
looking for ways to save the owner time and money. 
The team works together to identify potential problems
before they occur, to provide viable solutions, to prevent costly surprises
and create a smooth process from start to finish. 

Deciding on the best method up front will also help the owner determine 
which firms are the most appropriate for the job -
the "lowest bidding contractor" is not usually the same
as the "value-added negotiated contractor".

In short, owners should decide if they want the
best price on bid day or
the best price when the job is complete. 

NOTE: The actual process of both methods will be discussed in a future post. 


A Bit About AMC:

Anderson-Moore Construction Corp (AMC) is a diversified privately held company specializing in single-source-construction-solutions including general contractor, preconstruction, design build, construction management, tenant improvement, built-to-suit, interior build-out, renovation and retrofit services. AMC has over 30 years experience in commercial, mixed use, medical, retail, hospitality, residential, industrial, faith-based, green building, and non-profit construction in the state of Florida, concentrating in the southeast region including Indian River, Saint Lucie, Martin, Okeechobee, Palm Beach, Broward, and Miami-Dade counties. Anderson-Moore Construction Corp. is also a member of the USGBC (US Green Building Council), is a LEED Certified company and employees numerous LEED AP’s. You can contact us regarding your construction project at 561-753-7400 or info@amcbuild.com. We are centrally located at 1568 Watertower Road in Lake Park, FL 33403. You can also visit our website at www.amcbuild.com .







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