When the Lowest Price Becomes the Highest Cost

I’m not suggesting that this has ever happened to you, or your organization, but we are living in an increasingly complex world where technology and the need for flawless coordination have quickly become mission critical for many of us in our professional and personal lives.

We‘ve become accustomed to getting competitive quotes on almost everything we purchase in order to get the lowest price, aka the best deal, and by logical extension the lowest cost.

But what happens when the complexity of what we’re buying or trying to build does not fit neatly in a box or category? How do we use our ‘lowest price’ procurement model to get the best deal then? Is the lowest initial price the only cost we have to consider?

The even bigger question is “At what point does our procurement process hold us back by maintaining an out-of-date status quo and become an obstacle to change, innovation and a way forward into the future?”

Some industries are being held back more than others by the way the current procurement model is deployed. Construction is a great example. The competitive pricing model has held construction to the same ways and methods of doing things for over 70 years and kept it from being able to embrace new ways of designing, building and utilizing new technologies and processes. Just look at the struggle BIM has had in getting off the ground as the go to process for collaborative design and building despite it’s huge advantages over the current adversarial system.

Another great example is despite all the talk about a promised prefabrication revolution in the construction industry over the past 10-20 years you’d be hard pressed to see it in action even though the benefits are obvious and the technology exists. We’ve managed to barely scratch the surface.

Why, what or who is the problem?

In a word everyone. Everyone involved in the entire design and building process has been trained to do it conventionally (the way we’ve always done it) from beginning to end, including the client.  We’ve all become so well-organized and competent at designing and building conventionally that change, even small changes, appear risky, scary and hard.