ArLyne's Diamonds

A running commentary of ideas

Monday, July 08, 2013

Cheaper is very costly

Watching TV and learning about all the problems delaying the opening of the Bay Bridge new span, I am reminded of how much I dislike the notion of "lowest bid."  I'm clearly not privy to the details of the proposal but clearly corners were cut in some way.

When I work with government agencies or large corporate bureaucracies, I am often astounded at the rfp and proposal process - where cost seems to be more important than quality.

Why is it that people in contracts and procurement are under the impression that they are saving the company money by insisting on lower costs?   We all know the sign that says:  "Cheap, Quality, Fast - you can only have two of the three."

Cutting costs is all too often cutting quality.  When dealing with reputable vendors, they price their goods and services reasonably.  If they are forced to "low bid" something has to be cut out.  Is it fast?  or quality?  My guess is that quality is what is cut first.

Unlike many of my colleagues, or other professionals, I don't bill my clients for short phone calls or e-mails.  I don't charge for making copies, or sending faxes - unless there are a lot of them.  I create an hourly or daily or monthly fee that I'm comfortable with and that allows me to offer these small things for free.

Of course, one way to "low-bid" is to do the opposite.  Reduce the hourly fee, but charge exorbitantly for all the little extras - like the airlines are currently doing.

Oh, trying to be competitive without resorting to these games is sometimes difficult.

But, cheaper is always very costly.



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