Evaluating Bids in Construction and Facilities Management

In construction and facilities management, bid evaluation is one of the most consequential decisions an organization makes, yet it is often reduced to a single metric: lowest initial cost. While this approach may appear fiscally disciplined, real-world outcomes consistently demonstrate that lowest-bid selection frequently results in higher long-term costs, increased operational risk, and reduced asset performance.

The Budget Trap

Budget constraints are a reality for every facilities and construction professional. Procurement teams are under constant pressure to deliver projects within fixed financial targets, making low bids inherently attractive. On paper, the logic is simple—lower cost equals savings.

In practice, however, the lowest bid often reflects incomplete scope coverage, optimistic assumptions, or cost reductions that compromise quality and safety. These shortcomings rarely surface during procurement. Instead, they emerge later as change orders, operational disruptions, or premature system failures.

Hidden Costs of “Low Bid” Quality

One of the most common consequences of cost-driven selection is quality degradation. Aggressive pricing frequently leads to the use of lower-grade materials, reduced inspection rigor, or less experienced labor. While these decisions may satisfy initial budget requirements, they often result in higher corrective maintenance demands, shortened asset life, and reduced reliability.

Over time, particularly for mechanical, electrical, and life-safety systems, operating and maintenance costs can increase by 20–40% compared to systems installed with appropriate quality controls.

Low bids also commonly conceal scope gaps and omissions. Essential project elements such as commissioning, redundancy, documentation, or long-term serviceability considerations are often excluded or underdefined. These omissions are not always intentional; they are a predictable byproduct of bid strategies that prioritize price over completeness. The result is equally predictable—post-award modifications, schedule delays, and cost growth that quickly erodes any perceived savings.

Long-Term Operational Exposure

Short-term cost savings achieved during procurement can also create long-term financial exposure. Increased downtime, regulatory non-compliance, and early capital reinvestment are common downstream effects. In facilities management, where assets are expected to perform reliably for decades, these impacts are particularly damaging and often invisible during initial bid review.

Evidence from safety and compliance enforcement reinforces these observations. OSHA investigations, Department of Labor enforcement actions, and EHS compliance cases frequently identify insufficient safety controls, training gaps, and maintenance deficiencies as contributing factors in incidents and violations. While these cases span multiple industries, the pattern is consistent: underinvestment driven by lowest-cost selection increases risk, disrupts operations, and leads to substantial financial penalties.

Moving Toward Total Cost of Ownership (TCO)

Organizations seeking better outcomes are increasingly adopting more comprehensive bid evaluation approaches. Total Cost of Ownership (TCO) analysis allows decision-makers to account for acquisition, operation, maintenance, downtime, and end-of-life costs. Life-Cycle Cost Analysis (LCCA) extends this perspective across the asset’s usable life, capturing cost behavior that far exceeds initial capital expenditure.

Risk-based evaluation further strengthens procurement decisions. Assessing contractor safety records, financial stability, quality assurance processes, and historical change-order frequency provides meaningful insight into execution risk. When combined with performance-based criteria—such as on-time delivery, system reliability, and post-completion maintenance outcomes—these factors offer a far more accurate picture of true project value than price alone.

Strategic Governance in Procurement

Organizations that successfully move beyond lowest-bid selection typically embed value-based evaluation early in the procurement process. Cross-functional bid reviews, weighted scoring models, and alignment between procurement, engineering, and operations teams are common characteristics of mature programs. In these environments, bid evaluation is treated as a governance function with long-term operational implications rather than a transactional purchasing exercise.

The belief that lowest initial cost equates to best value is a persistent misconception in construction and facilities management. Projects selected on price alone frequently generate higher lifecycle costs, increased risk, and diminished performance. By incorporating long-term cost analysis, risk assessment, and performance-based evaluation into bid selection, organizations can protect capital, improve reliability, and deliver sustainable value. In an environment of rising complexity and accountability, this shift is not optional—it is essential.

References

Construction Management Association of America (CMAA)
Durdyev, S. (2021). Review of construction journals on causes of project cost overruns. Engineering, Construction and Architectural Management.
U.S. Department of Labor – Enforcement and Compliance Data
Occupational Safety and Health Administration (OSHA) – Construction Incident Investigations
EHS Daily Advisor – Regulatory Enforcement Case Studies