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?