The Perils of Invitation For Bid

For many organizations contemplating a central utility plant, boiler upgrade or similar infrastructure project, an invitation to bid appears to be the best option to find the right price/value.  Unfortunately, the invitation to bid process often leaves building owners with a poor construction experience.

By it’s nature, Invitation For Bid (IFB) is a process with limited involvement – the requesting company or organization creates a scope of work with clearly defined characteristics and vendors supply bids.  Typically, the contract is awarded to the lowest bidder that meets the minimum criteria for performing the work, with price being the primary determining factor.  As one large organization explains in their procurement documents, “An IFB is used when there is no substantive difference among the products or services.”

Because the process is very price-oriented, contractors may prepare a bid with an eye toward providing the work in the most cost-effective manner, which can translate into keeping labor and material costs low.  However, experienced contractors know that building owners are better served by getting the best value for dollar spent, not just the lowest price.  Higher value awards can be slightly more expensive, but ultimately result in a better end product, fewer cost overruns and more experienced labor.

Contrast the  IFB goals with those of a Request for Proposal (RFP).  RFPs recognize that evaluation strictly on price for contract awards may not result in the product desired.  An RFP allows the organization to identify both what is included, and how the work will be completed, including the approach, skills and experience.   In addition, an RFP is the first step in the process, rather than the last step (as with an IFB).  The proposals are evaluated for technical and cost factors, as well as other factors and negotiation.

Greenland Enterprises recommends the RFP process for organizations and businesses who ultimately want to receive the best value for infrastructure investments, and to ensure the construction company is a true partner in success.  If you are considering releasing an RFP for a central heat and utility plant, give us a call.  We can often help identify key items that should be included in an RFP, but are sometimes overlooked.