Our Blog

Construction: Lowering your prices during a pandemic

To the builders and the sub-contractors – Is lowering your prices really a good idea?

On a daily basis, I speak with builders, construction companies and other recruiters. It’s all part of the day-to-day networking and understanding of what’s happening right now in the big wide world (or just Victoria in my case) and its where I get most of my information from;

What am I hearing…?

  • Builders are tendering for projects as lean as they possibly can, in order to win the project and keep the lights on.
  • Sub-contractors are putting in astronomically low prices to be as competitive as possible, even to the point the builder has gone back to them and said “…are you sure you haven’t missed anything..?”
  • The Government have talked about fast tracking construction processes and releasing projects, but builders haven’t really seen that start yet
  • One commercial builder had a guide price for what would have been a $2.5m build 12 months ago, with a final price of $1.6m due to low sub-contractor prices. THAT’S OVER 30% lower!
  • There are up to TWENTY builders bidding on ONE open Government tender.
  • There are up to ELEVEN builders bidding on a Government SELECT/CLOSED tender.
  • Builders are letting go of staff, have stood them down, have them on JobKeeper and are even having to choose whether to keep a good Contract Administrator and step them up to a Project Manager position, or let go of a Contract Administrator and have the Project Manager pick up the slack – Tough decisions in most cases.

When you put all of the above in to a proverbial mixer, is the idea of lowering your fees or “sharpening your pencil” really a good idea?

Isn’t the same effort, if not more, going in to the projects you’re working on?

No alt text provided for this image

To the Builders – What happens when the market picks up and the sub-contractor that gave you a really low price (along with the other 3 that did the same) has a better offer from a different project with more fat in it and the other 3 are also no longer keen to make good on their “special COVID price”?

To the Sub-Contractor – Can you really afford to price that project so low, in order to win the job, when you may not be able to deliver upon that promise, knowing full well that if you start and can’t complete, that could be game over for you?

In my opinion, this current climate we find ourselves in is only TEMPORARY. It’s harder to forecast right now, which is why I think we should all be taking a much more measured approach on this and not to forget VALUE.

Plan for tomorrow, rather than trying to make up for yesterday, or else the future may not be all that bright.

Networking & collaboration is key right now.

Pick up the phone, send an email or even just flick a text to someone in your network and do whatever you can, to get another perspective on things – Its works for me.