Internet Reverse Auctions Can Make Things WorseI just read Mike Murphy's column, from the June 27 issue, about reverse auctions ["If It Walks Like A Duck..."]. From a contractor's perspective, there is a huge difference between a public bid, where all the envelopes are opened in public at the same time, and an Internet reverse auction. In the Internet reverse auction, all bidders can see the other bids. In the sealed-envelope bid process, they can't see the other bids until after they have committed to their bid - big difference.
We used to do a few of the public bid jobs; we always bid to make a profit. Part of that process was to ask ourselves, "If we were to lose this bid by being $X high, would we want the job at the lower price?" And then perhaps go down to a lower, but still acceptable, bid. But we were always guessing at what the other guys were doing.
As Murphy pointed out, there are problems with both systems. Extra costs required for change orders are the only way some contractors can stay in business; they can't make it on the actual bid cost, as there are not enough margin dollars there (in many circumstances). This, of course, contradicts the goal of getting the building done at lowest cost. And, of course, there is the temptation to save money by cutting corners or leaving things out; it's not ethical, and contrary to completing the work as promised, but the pressure to make some money can cause this.
I think the Internet reverse auction will make the problems of low bid worse. It seems to me it will drive quality down, and will perpetuate a system of work being done by contractors who don't make any money on their work (affecting their employees and vendors in a negative way), game the system to survive or prosper (customer loses), and provide the lowest-quality work they can get accepted and paid for (same as sealed envelope, only fewer margin dollars and more incentive to lower quality).
Apple Heating & Cooling
Refrigerants To Switch In 2006I recently read Mike Murphy's editorial titled "13 SEER Affects New Construction" [March 14] and thought it was missing one major piece of info.
When I'm out talking to builders about moving to 13 SEER, I convert them to R-410A also. When a homebuyer is given a choice of R-22 or R-410A, they always choose R-410A because there's no risk of future refrigerant shortage.
Murphy did a great job explaining the upcoming change, but I wish you could add an addendum about what happens four years from now. I think it will be an even bigger industry impact.
Stephen P. Clark
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Publication date: 08/01/2005