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Race To The Bottom: Is There A Better Way To Bid?

Special Guest Blogger: Bill Wilhelm, Commercial Maintenance Agreement Specialist

Many companies, building owners, and municipalities use a bidding process called RFP (or Request For Proposal) to get pricing for HVAC service agreements. In many cases the only criteria is that the vendor with the lowest price wins the bid. It sounds good, right? This keeps everybody’s numbers sharp and because the owner gets the lowest cost for their services, they win. Or do they?

In my experience, with this type of bid, there are usually one or two high bids, one or two low bids, and a group of bids in the middle. It is my opinion that the high bids are usually from companies who did not seriously research the RFP and are throwing in a safe number. The middle pack are usually the vendors who got it right. The low bids tend to come from the guys who made a mistake or a vendor who is just trying to survive by working for wages.

The Problem…

The problem is: the vendor who made a mistake and missed something to win the bid will most likely need to make up the shortfall by marking up additional services higher than usual or by cutting corners on their HVAC services. And a lot of times, cutting corners on preventative maintenance leads to expensive equipment failures. The guy who is working for wages is often one step away from closing shop or does not employ qualified technicians. I can’t speak for you, but neither vendor would be my choice to handle my critical building assets.

Getting the Best Service

So, if you don’t go strictly with the lowest bid, how do you get the best service for the best value?

Some building owners are now using a RFP process that is not solely based on the lowest price. They have found after some hard lessons that in the big picture there are many factors that contribute to the best value in an HVAC vendor. Recently, I spoke with an experienced purchasing agent for a large university who shared with me their process for determining the best choice for an HVAC vendor . They use a weighted criteria formula to evaluate all the vendors who responded to their RFP for HVAC service and maintenance.

Some of the criteria they used were:
PRICE – 50%
REFERENCES (THEY REQUIRE 10 FROM SIMILAR BUILDING OWNERS) – 40%
YEARS IN BUSINESS – 5%
SIZE OF THE COMPANY – 5%

They provided a number of hypothetical service calls for the vendors to provide pricing on and requested the minimum estimated hours for the preventive maintenance, information about the vendor’s guaranteed response time, and hourly HVAC service rate. All of the above criteria was then used by a committee to choose the vendor who would provide the best service at the best price.

I think this is a great way to best evaluate and choose a qualified vendor. Although every building owner should develop their own specific criteria, I believe that using a system like this will serve you far better than just choosing the lowest bid. It is fair to the building owner and fair to the companies who are committed to providing proper service to their customers. Bid evaluations like this will make our industry better!

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