THE BLOG
07/19/2014 11:49 am ET Updated Sep 18, 2014

Getting Bids: Yes or No?

We frequently hear about the need for governments -- local, county, state and federal -- to get competing bids, and too often we learn after the fact that contracts were let without getting bids. But many people ask, "Does getting competing bids really make any difference?" I have the evidence for a definitive answer to that question.

Before telling you of a personal experience I had this week, let me point out that probably every reader of this blog gets bids for themselves. For example, when we are in need of an expensive item (such as a new or used car, a new stove or refrigerator, a new washing machine and drier, or a new computer or printer), most of us will shop around, looking at different models and going to at least a couple of stores or dealers before deciding what to buy. Although we do not usually ask the salesperson for a formal bid, we are, by shopping around, exercising our own process of bid taking.

But sometimes we find it helpful to get formal bids. That happened to me this week.

My wife and I live in a house that, for energy-saving purposes, has zoned heating and air-conditioning. We have one large furnace and air-conditioner for the main level of the house. There is a much smaller furnace and air-conditioner for the two bedrooms and bathroom that are upstairs and are only used when we have company staying with us. And for the partially finished lower lever where my wife and I have our own office work-areas, we have a small furnace and no air-conditioner.

Our house was built twenty-one years ago as part of a subdivision, and the furnaces and air-conditioners are construction-grade equipment -- that is, not of the highest quality. Nevertheless, they have lasted for twenty-one years, but now they have to be replaced.

For servicing our HVAC equipment these years, we have used the same company that originally installed the equipment, and we have been very pleased with the service. Quite naturally, I went to that company for a formal bid.

After receiving the bid, I told my wife I wanted a second opinion and that I was going to contact another well-known company for a second bid. She thought that was unnecessary since we have received such good service through the years, but, if I wanted to, it was all right with her. I got a second bid. It was considerably different from the first one in terms of the type and size of equipment recommended as well as price. Hence, I got a third bid.

The end result of comparing the three bids was a real eye-opener! The second bid was 15.17% lower than the first one. The third bid, using the same brand equipment as the second bid, was yet another 9.06 percent lower, making the third bid an astonishing 24.23% lower than the first one. Although the first bidder suggested using equipment from a different manufacturer than the other two, both brands are considered to be of the highest quality.

One can hardly debate those results! Even when you've had reliable maintenance for two decades from the same company that originally installed your furnaces and air-conditioners, getting competing bids can be an honest-to-goodness financial benefit. We're talking about real money here!

Sure, it took a lot of additional time and energy for me to get three competing bids. Not only did I need to research the names of reliable companies, I needed to compare brands, making certain that we would be getting high-quality HVAC equipment. And the matter of reliable and knowledgeable service was also an issue to consider. Then I had to spend time making telephone calls to arrange appointments. And, of course, when people from the companies came to our house to access our needs so they could submit bids, I had to spend time with them -- about two hours with each person. And when I got the bids, I had to compare them.

But savings of 24 percent -- especially when you're talking about the cost of three furnaces and two air-conditioners, plus humidifiers and air-filters for the furnaces--was well worth the two days I spent: we are talking about a savings of several thousand dollars. But the savings realized by comparing prices and brands for small purchases can also add up.

In addition to the savings that can be realized by individuals and families, I suspect that all people responsible for spending money in organizations, companies, and all levels of government would find it very beneficial financially to take the time and make the effort to get competing bids. It may not always prove to be cost-effective in the long run just to take the lowest bidder; it is also very important to consider the quality of service or goods being purchased.

But the bottom line is this. Based on my personal and professional experiences, whether or not it is cost-effective to get competing bids is a no-brainer: get those bids!

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