Qualification-based Procurement Gaining Ground, Integrators Say
Sep 14, 2006 11:42 AM, By John McKeon
“The ultimate goal of any contractor is to be hired based on their qualifications, capabilities and past work,” says Doug Carnell, general manager in the Chicago office of SPL Integrated Solutions.
That goal isn’t always realized, however. Most AV systems integrators who pursue corporate, education, and government work find themselves, with some regularity, coming up against a variety of procurement strategies and structures that project owners have devised in their desire to assure themselves of both a quality project and the best possible price.
In many parts of the construction industry, that traditional design-bid-build process, which separated the design function, competitive bidding, and construction, is giving way to design-build. DB seeks to produce both time and cost savings by streamlining the process and entrusting both design and construction to the same contractor.
“Design-build type projects work,” Carnell says. “There are different ways in which you can do them, both with a consultant and without, but they are the most cost effective, customer-satisfying way to approach a system integration project.”
As part of both design-build and other bid-focused procurement strategies, owners often develop lists of “pre-qualified” bidders, firms with proven capabilities who will be invited to bid on jobs.
“We are absolutely seeing the pre-qualification process get much stronger,” says Merry McCleary, president and CEO of AVYVE in Norcross, Ga. “I think there was such a run of poorly done work that people are finally realizing the value in working with quality [qualified] companies.”
That doesn’t mean some owners haven’t experimented with less desirable strategies. A few years ago, for instance, Internet-based “reverse auctions” enjoyed a brief vogue. In such an auction, a client will post job specs on a website and potential contractors will bid downward toward the lowest possible price.
Some clients still do this. Not many, says Carnell, “but unfortunately they are out there. I think procurement software systems pitch them to their customers as a way to reduce clients’ overall cost and a better way to manage vendors. Those systems have always been out there and somewhat on the fringe.”
“We’ve never been involved in reverse auctions,” McCleary says. In fact, about half of AVYVE’s projects are sole-sourced based on referrals and the company’s reputation, she adds.
Seeking out the lowest possible bid may present some quality risk to the client, but it can also be a path to disaster for bidders, according to Carnell.
“I am always amazed at contractors who end up bidding on these, at how low they will go. Just the other day, I was part of a bid and the winner went 1.5 percent over cost. Even if that contractor was bidding from his couch, and his business was in his garage, I have to think that his cost to run that business was more than 1.5 percent overhead. History shows that businesses that sell at nothing eventually become casualties in our industry.”
McCleary notes that when clients focus on qualification, they usually select their AV partner and contract directly with them, rather than delegating these functions to an architect, general contractor, or other intermediary. And Carnell sees more emphasis on qualification the higher up the project ladder he goes.
“The largest the project, the more a firm’s qualifications, reputation, and capability are viewed as having more weight,” he says.