THE CHEAP PRICE SPIN-OFF

Does this describe the way your piping projects go?: The job is awarded based solely on the lowest price without regard to service or quality.

Many purchasing decisions of piping, plumbing and fire protection systems are set up this way, and the purchaser really does not know how to discern what constitutes a quality installation versus a shoddy one.

• The job is installed and when completed, does not work as intended.
• The purchaser tries to get the contractor back to “fix” the problem.
• The contractor explains that he/she did it according to the “specs” and any repairs will be at “cost-plus.”
• Many calls go back and forth causing a high level of aggravation and frustration on the purchaser’s end.
• Finally, after the one-year warranty expires, the purchaser hires someone else to come in to diagnose the problem, and that’s when the true problems with the installation come to light.
• The purchaser does not like hearing the truth and tries to get someone else to come in; only to hear a similar message to what the first guy said. And so it goes until the “boss” makes an issue of it and demands that the problem gets fixed. Of course at this point, money is usually not an object. It’s “who can fix the problem and how fast can it be resolved”.
• If the “boss” doesn’t make an issue of it, a situation arises that lowers the production quota, creates a higher operating cost and/or high “aggravation factor.” And then, something is finally done about it.
• In the end, the total cost of the project, including the cost of fixing the shoddy workmanship, is much higher than if the job were done correctly in the first place.

This is the typical chain reaction when price is the top consideration in a building project – and it doesn’t have to be that way. The easiest solution to this problem is to get the job done right from the beginning!

5 Rules To Remember When Buying Piping/Plumbing/Fire Protection Services

1. Be prepared to accept minimum quality when you deal with the lowest bidder.
2. You will usually get a higher quality job if you choose your contractor based on trust, relationship and confidence…not just low price.
3. The lowest price doesn’t necessarily translate to the best price.
4. If competitive bidding is so effective, why not take bids from architects, engineers, lawyers and doctors?
5. All contractors are not equal. Some are much better than others. The best ones usually make a higher profit margin and they should—they deliver a better completed project!

High Profit Margins

But, that said, in good times and bad, there never seems to be a lack of decision-makers who really believe that they can wring the last nickel out of a project and still get the building of their dreams.

They think that the construction industry has such high profit margins that there’s plenty of room for contractors to reduce profits and provide “bargaIns.” The plain truth, however, is that gross margins in our industry are among the lowest of any business. Construction costs are not fixed; each job is different and the associated costs are only an estimate. At best, it’s legalized gambling.

Low Bidders: Meet Value-Adders

You’ll find that there are two kinds of construction companies—the low bidders and the value adders—and that there are no real “bargaIns.” The low bidders do anything they can to get the job, without regard to the necessity of providing quality workmanship or meeting schedules. The value adders, however, focus on understanding and meeting all of the owner’s needs, with enough upfront money budgeted to fulfill their expectations.

The Cheapest In Town

Here is the life-cycle of a Low Bidder’s project:

1. They find cheap subs and “beat” their price down;
2. They can’t afford supervision of the work or continuity of the crews on the job;
3. They have no margin in the job to be able to take care of the real needs of the owner, leading to…
4. Change orders at unreasonable prices (they have to get enough money from somewhere!); and…
5. And, the worst thing—excuses.

What About Value-Added Contractors?

Value-Added contractors, on the other hand, are characterized by trying to determine the owner’s real needs and devising a plan to solve his or her problems.

1. They are typically not the cheapest;
2. They use qualified subcontractors at a reasonable price;
3. They give the project lots of attention and supervision to ensure the final product meets the owner’s expectations;
4. They are reasonable and fair in their change order costs; and most important…
5. They are dependable and take responsibility for what they do. They know that cheap prices have to come from somewhere and that somewhere is at the expense of service.

While competitive in price, the Value-Adders are typically not the cheapest in town (as is neither your doctor nor your attorney). They do, however, differentiate themselves by taking full responsibility for what they sign up to do.

Those who consistently furnish dependability, coupled with enough budgeted fair pricing to be able to complete the job exactly the way the owner expects it to be completed, provide the best jobs.

Be efficient with your time, and trust PSI to be efficient with your piping project. I promise in the long run, you will be thrilled. Have more questions? Drop us an email, psi@PipingSystemsIns.com or give us a call today at 508.644.2221.