Beware – Suicide Bidding!

The tough economic climate has lead to an upsurge in suicide bidding – tendering at silly prices. Post-tender feedback has highlighted some huge variations in bidders’ prices. This includes a significant proportion at below cost.

This worrying practice is demonstrated in the construction industry by RICS. A survey of nearly 400 quantity surveyors has shown contractors putting in bids below cost:

  • 20% of tenders submitted during 2010–11 were priced at a “sub-economic level”
  • Most suicide bids were 10% below cost but some were 40% under cost!

The findings also show that over 50% have seen a client accepting a “sub-economic tender” knowing it was “potentially unviable”.

Construction industry tender prices have fallen by about 15% since the start of the recession and suicide bidding has already caused some contractors to go bust.

Therefore tender with caution:

  • Be aware of the current intense price competition
  • Qualify your tender opportunities carefully (especially where the price / quality split is heavily biased)
  • Maximise your quality scores

Have you seen suicide bidding in your industry?

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