Short answer
Designers and project managers should advocate for procurement processes that balance cost with quality, collaboration, and long-term value, rather than defaulting to the lowest bid.
- Field
- Commercial Production
- Source
- University of Canterbury Research Repository (University of Canterbury) (2013)
- Method
- Constructivist Grounded Theory
- Sample
- 50 participants
- Evidence
- Strong effect
Prioritizing the lowest initial bid in construction procurement, while seemingly cost-effective, often leads to fragmented industry structures, adversarial relationships, and ultimately, reduced efficiency and quality. This commercial production research insight is drawn from a 2013 study published in University of Canterbury Research Repository (University of Canterbury). Using Constructivist grounded theory with 50 participants, researchers explored how this design variable affects real-world outcomes. The key design takeaway: Designers and project managers should advocate for procurement processes that balance cost with quality, collaboration, and long-term value, rather than defaulting to the lowest bid.
Lowest Bid Procurement Fosters Adversarial Relationships and Inefficiency in Construction
Prioritizing the lowest initial bid in construction procurement, while seemingly cost-effective, often leads to fragmented industry structures, adversarial relationships, and ultimately, reduced efficiency and quality.
University of Canterbury Research Repository (University of Canterbury) · 2013
Key Findings
- 01The construction industry is characterized by fragmentation and adversarial relationships.
- 02The prevalence of the outsource model relies heavily on small, specialist subcontractors.
- 03Competitive tendering, heavily weighted towards the lowest initial cost, is a common procurement method.
- 04Organisations develop proactive, reactive, and opportunistic strategies in response to power asymmetry and environmental conditions during procurement.
- 05Industry actors' rationale for their actions is influenced by a complex interplay of relationships and factors.
Application
Design takeaway
Designers and project managers should advocate for procurement processes that balance cost with quality, collaboration, and long-term value, rather than defaulting to the lowest bid.
How to apply
When developing procurement strategies for construction projects, actively seek to incorporate criteria beyond just price, such as contractor experience, collaborative approach, risk management plans, and proposed quality assurance measures.
Project actions
- 01When evaluating potential suppliers or contractors for a design project, consider their track record for collaboration and quality, not just their price.
- 02Think about how the procurement process itself might influence the behaviour of your partners and design the process to encourage positive outcomes.
Method & Evidence
Variables
Strengths & Limitations
Strengths
- +Utilizes a robust qualitative methodology (grounded theory) to explore complex industry dynamics.
- +Provides rich, in-depth insights from a diverse range of industry stakeholders.
Limitations
The findings are specific to the construction industry in New Zealand and may not apply universally. The qualitative nature of the research means that the 'immorality' aspect is based on participant perceptions and interpretations.
Reliability & validity
The study's validity is strengthened by the use of grounded theory, which aims to develop theory from data, and the diverse sample of participants. Reliability could be enhanced by further triangulation of findings with quantitative data on project performance metrics.
Think critically
To what extent does the 'lowest bid' procurement strategy inherently create an 'immoral' or unethical environment, and are there alternative procurement models that can effectively mitigate these negative outcomes while still ensuring financial accountability?
Design Principles
"Procurement decisions should prioritize holistic value and collaborative potential over purely lowest initial cost."
This insight is crucial for project managers and procurement specialists. Understanding the negative consequences of a purely cost-driven approach can lead to the development of more balanced procurement strategies that consider long-term value, collaboration, and risk management, ultimately improving project outcomes.
What This Means for Your Design
Choosing the cheapest option for building projects often causes more problems than it solves, leading to arguments, delays, and lower quality work because companies focus on cutting costs rather than doing a good job.
How to use in your project
- 1.This research can be used to justify the selection of a particular procurement strategy or to analyze the outcomes of a chosen strategy in your design project, highlighting how cost-driven approaches can lead to negative consequences.
Add to My Project
Quick Cite
Paragraph starter
The research by Hinton (2013) on the New Zealand construction industry highlights a significant challenge: procurement strategies that heavily favour the lowest initial bid often foster adversarial relationships and fragmentation, ultimately compromising project efficiency and quality. This suggests that for our design project, a procurement approach that balances cost with value, collaboration, and risk management will be more conducive to achieving optimal project outcomes.
Source
University of Canterbury Research Repository (University of Canterbury)
Convenient immorality: a substantive theory of competitive procurement in the New Zealand construction industry
journal · 2013
View sourceQuestions About This Research
- What does the research say about lowest bid procurement fosters adversarial relationships and inefficiency in construction?
- Designers and project managers should advocate for procurement processes that balance cost with quality, collaboration, and long-term value, rather than defaulting to the lowest bid. Evidence: University of Canterbury Research Repository (University of Canterbury) (2013).
- Why does "Lowest Bid Procurement Fosters Adversarial Relationships and Inefficiency in Construction" matter for design?
- This insight is crucial for project managers and procurement specialists. Understanding the negative consequences of a purely cost-driven approach can lead to the development of more balanced procurement strategies that consider long-term value, collaboration, and risk management, ultimately improving project outcomes.
- How can designers apply this research?
- Designers and project managers should advocate for procurement processes that balance cost with quality, collaboration, and long-term value, rather than defaulting to the lowest bid.
- What were the main findings?
- The construction industry is characterized by fragmentation and adversarial relationships.. The prevalence of the outsource model relies heavily on small, specialist subcontractors.. Competitive tendering, heavily weighted towards the lowest initial cost, is a common procurement method.. Organisations develop proactive, reactive, and opportunistic strategies in response to power asymmetry and environmental conditions during procurement.
- What research method was used?
- Constructivist Grounded Theory with 50 participants.
- How strong is the evidence?
- Evidence strength is rated Strong effect, based on a 2013 journal from University of Canterbury Research Repository (University of Canterbury).
- What should I do differently in my next project?
- When developing procurement strategies for construction projects, actively seek to incorporate criteria beyond just price, such as contractor experience, collaborative approach, risk management plans, and proposed quality assurance measures.
- What are the limitations?
- The study is specific to the New Zealand construction industry and may not be directly generalizable to other geographical or industry contexts. The focus on 'immorality' as a descriptor might also be a strong framing that could influence interpretation.