Cian BrennanFounder, Quantum Contract Solutions · Founder

The vicious cycle of tendering in Construction

Name: The vicious cycle of tendering in Construction
Uploaded: 2023-01-25T03:10:21+00:00
Duration: 44 s
Channel: Cian Brennan
Description: In this spoken monologue, the presenter argues that relying solely on competitive bidding or tendering to win construction contracts inevitably leads to…

25 Jan 2023 · 1 min

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In this spoken monologue, the presenter argues that relying solely on competitive bidding or tendering to win construction contracts inevitably leads to business failure. He explains that the lowest‑price winner operates on the smallest margin, which limits investment in skilled staff and quality equipment, causing a decline in work standards, reputation, and future work opportunities—a downward spiral. He illustrates the problem with a reverse‑auction example where contractors undercut each other until they acknowledge they will lose money, hoping only to preserve reputation for future projects. The speaker concludes by urging construction firms to develop alternative acquisition channels beyond tendering to become more resilient and successful.

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If you're in a construction industry and the only way that you win work is by bidding or tendering, you will eventually go out of business. What happens is when you win work that way, it's the person who has the lowest price or the smallest margin, let's say, that wins the work, which means you have the least amount of margin to pay for better people, get better equipment. So your standard of your work goes down, which means your reputation goes down, which means you don't get work in the future. Eventually it's a downward spiral. I once saw a reverse auction where they basically show people what other people's prices are and you can go below each other, below each other, all the way down. And we ended up having a kickoff meeting. The first thing they said is we're going to lose money on this. We're not going to make any money. We're just hoping that we'll have a good reputation with you guys for the next project. Stupid business mistake. Don't do it. If you can have other acquisition channels other than bidding and tendering, you're going to be a more robust construction company and do much, much better.