"Low Ball" Pricing in Consulting Proposals
"Low Ball" Pricing in Consulting Proposals
(OP)
Should consulting engineering firms who engage in so-called "low ball" pricing be discipled? (ie. "low balling" is proposed pricing by a firm or individual that is substantially less than the average of the competing prices, and intended to "buy" the assignment)
Is this a problem in your market area and how do you deal with it?
Regards,
Is this a problem in your market area and how do you deal with it?
Regards,





RE: "Low Ball" Pricing in Consulting Proposals
"Professional engineers, geologists and geophysicists will build their reputations on the basis of the merit of the services performed or offered and shall not compete unfairly with others or compete primarily on the basis of fees without due consideration for other factors."
Interpretation is wide open but I would think that if the bid was made with no expectation of profit (i.e. the intent was to deprive the competition of work) the company would be in violation of this code of ethics. But if the bid is low because their costs are lower or they're willing to accept a lower margin, I can't see that being a violation.
RE: "Low Ball" Pricing in Consulting Proposals
RE: "Low Ball" Pricing in Consulting Proposals
Extrapolating this forward suggestrs that all the expert firms will eventually have to reduce their margins in order to win commissions. The result will include the gradual reduction in reinvestment of profits to develop technology or the erosion of expertise from that market place because high salaries eat into the firms' reduced profits. Can this be good for the Public?
Regards,
RE: "Low Ball" Pricing in Consulting Proposals
You Get What You Pay For.....
And I may add....
Pay a little now or a lot later....
It's not so much the firms fault for low balling, a lot of blame goes onto the customers that accept such antics from these firms. I run into it all the time and since I like being involved with clients and customers, I often get a call during or after low balled projects to help fix them...it often time gets very ugly...What to do? I have no clue....
BobPE
RE: "Low Ball" Pricing in Consulting Proposals
BML
RE: "Low Ball" Pricing in Consulting Proposals
Engineering associations love to promote the idea of the two envelope bid. The first envelope details the firm's qualifications for performing the services. The client selects the firm with the best qualifications. Then, and only then, does the second envelope from that one firm get opened. This envelope, of course, contains the price.
If anyone has ever seen one company that has actually used this system, I'd love to hear from you.
Don't expect your engineering association to help you either; chances are the president or one of his old-boy cronies is also the chief lowballer.
As Bob said, you get what you pay for. Clients will pat themselves on the back for saving 10% on the consultant only to pay millions down the road in increased operating costs, reengineering of systems that don't work properly, and expensive rework to accommodate expansion plans.
RE: "Low Ball" Pricing in Consulting Proposals
RE: "Low Ball" Pricing in Consulting Proposals
Not a very comfortable attitude, but anything else is inefficient and in the long term will do more damage than good.
The real question is - how can the customer tell in advance whether the work will meet his requirements?
Cheers
Greg Locock
RE: "Low Ball" Pricing in Consulting Proposals
Does anybody have a problem with the fact that expertise is often the first casualty which results in mediocre engineering work in the longer run?
Regards,
RE: "Low Ball" Pricing in Consulting Proposals
I agree with what you are saying, but I think you are talking about a qualified firm where what you described would not be considered "low balling." I have seen high price firms (names withheld to protect the guilty) do damage as well.
redtrumpet brought up a very good practice of allowing people to review qualifications. This eliminates the hard line price number from being circulated to lay people that you may have reviewing the proposal that can only grasp price and will vote in accordance with the low bid. I have had the opportunity to bid several jobs this way and they all are still working to this day.
A good indicator to tell in advance whether a company is BS'ing you is to look at their representative that is talking to you.. Chances are he/she is a sales person for the company with little or worse yet no technical experience. This is the start of the downfall in most cases. Take the company to task, you are in the driver seat as a client. Demand that you get representatives to meet with you that are senior and will be working on the project DURING the bid phase. If you get a bunch of junk during the bid phase, chances are your project will too soon be junk.
BobPE
RE: "Low Ball" Pricing in Consulting Proposals
I have also heard of firms that deliberately low-ball for several years as part of a strategy to get bought out by their bigger competitors. This is quite a neat strategy for them, and gives us a short term benefit, in the low price, and a possible long term benefit, in that we have new baseline for costing parts and projects.
Cheers
Greg Locock
RE: "Low Ball" Pricing in Consulting Proposals
Don't curse in here.....You said VENDOR!!!!!! I can't even begin to summarize all the work I have done in my career to fix VENDOR designs. You have to remember, as the engineer the math counts and defines the solution. The vendor only supplies equipment and it has to stay that way to work in my opinion. If you give the vendor freedom to influence design, of course you will have failure and finger pointing in the end. They don't have liability insurance and as long as their equipment is working, no matter what is happening to your process, they have no risk and their lawyers will gladly inform you of that.
The low ball for purchase scheme is a big problem in the industry, but the good part about that is the liability for design transfers to the new company. It may be a little more difficult for the lawyers to find, but they do!!!!
Great chatting with you about this,
Take care..
BobPE
RE: "Low Ball" Pricing in Consulting Proposals
Until about 1978 or 1979, bidding for engineering services was precluded in the code of ethics of several major engineering groups in the US. The feds decided that was an unfair restraint of trade and that engineers could no longer include prohibitions against bidding in their codes of ethics. That's unfortunate.
Some areas have "qualifications based selection". As RedTrumpet (can you shift gears with your right foot?)stated, that routinely gets reamed, one way or another. Even in my state, where qualifications based selection is the law for any project over $10,000 (US), there are ways that procurement people and engineers use to get around the requirements.
RE: "Low Ball" Pricing in Consulting Proposals
We had two vendors, both of which were (laughing) full service suppliers.
One of these had access to a good non-linear FEA consultant , who would model each bush as it was designed and flag up the likely stiffnesses, and any durbaility issues, and could also take a stab at any injection moulding problems with the part.
The other did not. he relied on copying similar parts, modified to get the required characteristics, and then progressive mods to his proto tool to get to the required spec.
I would expect a development program with the first vendor to be cheaper in the long run, even if we had to pay directly for the consultant, since the chances are that the first-off parts would be close enough for useful work.
Therefore, if vendor A came in with a cheaper quote, I could trust it, as it was based on better technology. The risk was less as well (proto tools have a 6 to 13 week lead time, and time is our major risk, although cost is our main driver).
Cheers
Greg Locock
RE: "Low Ball" Pricing in Consulting Proposals
You make good points as usual. I think though, we are talking apples and oranges. In your manufacturing scenario, I would agree. In the more nebulous world of "consulting" where the product is "engineering judgment", it becomes less clear, thus the tendency to allow fees to wander all over the board.
Ron
RE: "Low Ball" Pricing in Consulting Proposals
I'm too young to have grown up in the days of the right foot shift, and my Triumph is one of the new breed from the Hinckley works, not the old Meriden factory. However, a couple of years ago I took a spin on a right foot shift BSA Rocket 3. It took some getting used to, but I managed to pull it off.
Are there some motorcycling stories in your past?
RE: "Low Ball" Pricing in Consulting Proposals
RE: "Low Ball" Pricing in Consulting Proposals
The question originally asked was whether the practice is ethical or not. If you want to do it, you will find a way to justify it as ethical. In my experience, the good news for the rest of us is that most firms only get away with it once or twice - after the client sees what he gets, the low baller rarely gets a second shot.
RE: "Low Ball" Pricing in Consulting Proposals
Regards,
RE: "Low Ball" Pricing in Consulting Proposals
What is less ethical, low-balling your competitor or collusion on pricing? As a purchaser if I specify the job correctly it will be done correctly or I won't be paying. In that instance I would consider you to be the less ethical for basing your bid on your competitions pricing rather than your own costs. Hows that for moral certitude.
RE: "Low Ball" Pricing in Consulting Proposals
It turns that we were smart enough to initially make some very reasonable simplifying assumptions, while the other firm didn't have the talent to realize that their approach was essentially "hunting rabbits with missiles". Their per-hour cost was less than ours, but they needed several times more hours to complete the project (because their approach was all wrong).
I know the firm; the higher bidder in this case was not the more talented.
Brad
RE: "Low Ball" Pricing in Consulting Proposals
Mark