The government world has become slightly obsessed with the notion of choosing “the lowest bidder”. In the buyers mind it is a win for everyone. They get their needs met for the lowest possible price and the bidding war is open to anyone who wants to throw their number into the ring. Capitalism at it’s finest. Though I must add a word of warning. In this bid/win market, if something seems too good to be true it probably is.
One thing that capitalism has done for us is it has used competition to eliminate edges that companies have on their industries. The idea being that the best company will win. The reality being that we now have thousands of companies that do the exact same thing, the exact same way, for the exact same price. Business evolution has wiped out those that try to play by their own rules and left only those that play by the rules of operational efficiency and profit maximization.
What does that mean?
It means that any company offering you a significantly lower price on a product or service isn’t offering you the same product or service. Here are a few ways those companies lower their prices, and a few things you should watch out for before committing to the lowest bidder.
Shortcuts on labor and workmanship
Every project has a certain number of requirements that must be fulfilled to call the project done. How you go about fulfilling those requirements is completely up to you. You can assign a few highly skilled workers to work on the project, you can assign many low skilled workers to work on the project, you can assign many highly skilled workers to work on the project, or any combination in between.
It all works out evenly in the end. The highly skilled workers cost more but you can use less of them to complete the project. The low skilled workers cost less but you need more of them to complete the project. The level and quantity of skill you use will also determine how quickly a project can be completed, but of course the more skill used the more dollars per hour spent, so again, it all balances out in the end.
This should all come across as fairly obvious, but the point I am trying to make is that anyone claiming to offer the same quality of work for a significantly lower price is defying these basic laws of economics. Every business’s main agenda is to make a profit on every sale they make, so if someone is offering you a product or service at a price that eliminates their profit, you should be very wary of what they are actually offering you. There is a good chance you are getting low quality products/services in an expedited time, which in the end will cause you to spend more time and money fixing the problem than you would have spent going with a better quality provider in the beginning.
Hidden Costs and Fees
I am going to enlighten you to a very common marketing tactic that most of you have probably encountered.
Car advertisements bombard us daily via television commercials, billboards, or online ads. You can’t escape them, and they all pretty much boast the same things.
They shove their lowball number down your throat any chance they get. The tactic is to get us to see the low number and say, “Wow, that’s lower than anywhere else, I’m going to buy from them.” But be careful, it is important to pay attention. You see that little asterisk at the end of the ad or hear that guy at the end of the commercial that sounds like his voice is being played on fast-forward? If you pay close attention, what you will discover is that that price only applies to individuals who meet every one of their discount criteria that they offer, which is basically no one. While they are not lying about their price, they are being very sneaky in how they hide important details about what you are actually getting for that price or what your price actually is.
Service providers do the same exact thing. They get your attention with their flashy number up front and mislead you on what you are actually getting in the end. These schemes are going on all around us, and it is up to you to protect yourself and your company from being duped. So, I urge you: Be a skeptic, ask a lot of questions, and most importantly, if it seems too good to be true, it probably is.