The true cost of the race to the bottom... ...and what to do about it

In the construction industry, the race to the bottom has become an all-too-familiar story… Projects are awarded based on the lowest bid, and while it might seem like a win for clients at first, the reality is that everyone loses… contractors, clients, and the projects themselves...?

When you chase the lowest price, you’re not competing to deliver the best outcome - you’re competing to make the biggest mistake… or even worse… intentionally pricing at no margin..

But here’s the thing... it’s not just about picking the cheapest option. It’s the combination of less time, less budget, and ignoring the impact of these decisions. Contractors end up cutting corners... and the project overruns, costs skyrocket, and good contractors go under.

It’s a lose-lose situation.

And then, the cycle repeats... Bidding wars drive prices even lower, pushing contractors into an ever-deepening race to the bottom... What's worse is that some clients cherry-pick value-driven factors (like experience or sustainability) during procurement, but at the end of the day, it’s still about cost.

This approach isn’t just impacting individual projects... it's dragging down the entire industry... Contractors under pressure pass the burden onto subcontractors, and before you know it, the quality and standards across the board drop.

So, we need to step back and ask... is the cheapest option really worth it? Maybe it’s time to rethink how we approach bids... focusing on feasibility, value, and long-term success.?

I think there’s a better way...

1. Focus on feasibility and value, not just price

If the project isn’t feasible from the start, it’s already set up to fail. A project with a solid budget that balances quality and profitability will always outperform one that’s built on cutting corners. Decision-makers need to look at the long-term... think about maintenance, durability, operational efficiency...

When reviewing bids, don’t stop at the lowest number... dig deeper. How realistic is the budget? Is there a plan to manage risks and ensure quality? Because, let’s be honest... the cheapest option means nothing if the project falls apart halfway through.

2. Use transparent, collaborative contracts

Contractors often end up holding the bag when things go wrong... We need transparent contracts that share the risk fairly and encourage collaboration between everyone involved.

Let’s be clear... the contract needs to reflect reality... not just the budget. Contracts should focus on collaboration and risk-sharing, making sure everyone’s on the same page from day one—not just about cutting costs, but about delivering value.

3. Adopt a value-based procurement process

The lowest bid doesn’t always deliver the best outcome... A value-based procurement process looks at the bigger picture, weighing factors like experience, risk management, and sustainability. Contractors should be chosen for their ability to deliver high-quality work, not just for slashing prices.

So, when assessing bids, let’s use a weighted system that prioritises experience and feasibility, not just cost. Because let’s face it... you’ll get better results from a contractor who knows how to handle a complex project.

4. Embrace first-principles estimating

Instead of using old data... first-principles estimating builds a budget from the ground up based on actual work. This approach prevents over-design and under-budgeting... which are often the reasons projects go sideways.

Make sure you’re working with contractors who use first-principles estimating... it keeps the project realistic and on track from day one.

5. Reward contractors for quality and innovation

Contractors shouldn’t be forced to use the cheapest materials just to stay on budget... When we reward quality and innovation, we get better results—results that last. Milestone incentives... bonus structures... rewarding the right behaviours is how we get better projects.

Build quality incentives into your contracts... Reward contractors for meeting or exceeding standards, not just penalising delays. In the end, everyone wins.

Time for a mindset shift

The industry needs to shift its mindset... You can’t solve one problem in isolation. It’s not just about tweaking budgets or fixing contracts... everything needs to align—from procurement strategies to risk management. When we reward feasibility, collaboration, and quality, we set the entire project up for success.

It’s not about spending more... it’s about spending smarter. Let’s stop competing to make the biggest mistake... and start working towards outcomes where everyone wins—from the client to the contractor to the community.

If you’re ready to shift your approach and focus on value-driven, sustainable outcomes, let’s talk. Together, we can ensure your project is set up for success from day one—on time, on budget, and built to last.