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The bids aren't in bad faith. They are just over-rationalized and under-justified until the number is small enough to be in the winnable range. Middle Managem
by DigitalJack 9y ago
The bids aren't in bad faith. They are just over-rationalized and under-justified until the number is small enough to be in the winnable range. Middle Management talks out of both sides of their mouth, demanding lower estimates, while demanding integrity of results (wink wink).
They don't really want integrity, they want to get a number that won't get them yelled at by their boss. The integrity bit is a pass the buck clause.
So the estimator is in the position of trying as hard as they can to lower the estimate. "Well, if we assume xyz unreasonable assumption, then we can lower the amount by this amount."
And then there are "risk" shenanigans. You itemize all the risk items, declare an arbitrary probability of happening. Then management rolls those up, and declares that they are not going to fully fund the risk and instead "carry" it forward.
Fully funding basically would mean multiplying the likelihood of occurring by the cost, and adding all the items up. Which is already iffy as the probabilities aren't based on much except a w.a.g.
So you win the bid, the risks are realized, and weren't funded. blow out.
Standard practice. And because everyone does it, the honest bidder is the loser. Losers go out of business. So the whole bidding practice is self selecting for cheats.
If you say, "this is unethical, I'm going to do my best to give a realistic bid", you lose.
- SOLAR_FIELDS 9y agoShould be easy to fix, if the contract for work includes a "penalty for being wrong for circumstances completely within the bidders control that they should have seen". Austin government did this for its MoPac toll express lanes and got them for way cheaper than what they should have paid: https://www.bizjournals.com/austin/news/2017/09/27/big-settlement-reached-in-mopac-expansion-end-in.html https://www.bizjournals.com/austin/news/2017/09/27/big-settl... However, the project ran over for two years longer than it should have (it was supposed to be completed in September 2015, and they are only just now wrapping it up). So I guess no one really won there aside from the Austin transportation budget guys, except the populace hates them now for traffic jamming the place up for two years longer than they said they would.
- pbhjpbhj 9y agoIsn't completion something that is at least in part in the bidders control. Did they employ all available personnel and work 24 hours?
- SOLAR_FIELDS 9y agoSort of, when they could. In this case there were penalties for going longer on the project. Main problems ended up being weather (heavy rains) and lack of knowledge of the soil - many changes were made to the project because the contractor (C2HM) did not do a proper soil survey where they were going to be digging.