Unite to tackle low balling
At the end of January I retired as president of Consulting Engineers of Ontario (CEO), a position that I had held for almost seven years. I consider it a privilege to have represented the consulting e...
At the end of January I retired as president of Consulting Engineers of Ontario (CEO), a position that I had held for almost seven years. I consider it a privilege to have represented the consulting engineering industry, which in my opinion exemplifies the highest standards of integrity, quality and service to clients.
When I joined CEO the association faced a number of challenges. Key priorities set by the board of directors included raising the profile of consulting engineering with policy makers in government, and improving the consultant selection processes employed by clients. With tremendous support from volunteers on the boards and committees, many successful provincial and national programs have contributed to achieving those objectives.
A few years ago, to encourage clients to abandon price-based selection models, CEO endorsed Value Based Selection, a system that includes price, weighted appropriately, as one of the factors in the selection criteria. As a direct result of this action, CEO reached a landmark agreement with the Ministry of Transportation of Ontario. Since January 2001, the Ministry has evaluated proposals on a scoring system that clearly rewards good performance, allocating 50% for past performance with the Ministry, 30% for a proposal’s technical merit, and 20% for price. CEO and the Ministry are committed to working together to monitor and refine this program. CEO is convinced the approach will provide major benefits for both parties, and supports it as a model to move other clients away from inappropriate price-dominated systems.
Unfortunately, the other side of the process has not seen a corresponding level of improvement. Companies continue to “low-ball” pricing to win proposals. This frustrates efforts to achieve fair returns for the industry, and has resulted in the consulting sector’s offering the lowest salary levels in the engineering profession, making it very difficult to attract the talent we need to sustain our businesses. These low prices also threaten the quality of deliverables from our industry. During my term at CEO, we searched for solutions to restrict the practice of low-balling: we even (somewhat facetiously) considered publishing a “low-baller of the month” award in our newsletter.
We tried to change attitudes, but we continued to see project awards in which companies, small and large, won assignments by offering unrealistically low prices. In a recent award for preliminary and detailed design services for a number of municipal road projects, the sum of the lowest prices submitted was one-half of the sum of the second lowest prices. The total cost to the municipality was 70% below their budget for consulting services.
Low-balling must be addressed. We take great pride in the value we provide to clients, but too often we do a poor job of managing the financial rewards to ourselves. Our clients are willing to pay fair prices for quality work, but they find it very difficult, particularly in the public sector, to turn down a bargain-basement price from a competent firm. There are no easy answers, but it is clear that a solution requires agreement and commitment from all members of the industry. This can only be achieved through ACEC and the provincial member organizations. To be part of the solution, companies must become active players in those associations.Don Ingram, P.Eng.