Low Bid Delivers Low Blow
I’ve long watched customers make the mistake of thinking that a ‘low bid’ means the same as the ‘lowest price’, or worse yet, ‘best value’. In actuality, the low bid can sometimes be the highest price depending on the circumstances. This is a frequently played numbers game that will fly under the radar on a daily basis. But why? How is this possible?
If you’re not comparing apples to apples on your bid, you might be overpaying. Make sure that everything is included in the bid for a true price comparison and that any fees for items such as fuel and maintenance be discussed and clearly defined within the quote. Examine the highest bidders quote closely to see if any items are included there that have been either omitted or itemized (with a fee) in the low bid. We’ve all heard the old adage, “the death is in the details”, and this is sometimes truer than people realize. Some equipment rental companies have even mastered the game of “quote low, bill high”.
Other factors that need to be taken into consideration are the soft costs associated with a low bid; such as on time delivery, responsiveness, equipment uptime and quality, etc., (which I’d argue are more directly related to the actual job cost reductions than the bid price savings anyhow). Now let’s examine how a 4-week rental agreement on a track loader would cost more from the low bid than the high bid. Here’s what most customers ask for when they’re looking to bid out a piece of equipment:
Of course, the rental companies can have hidden costs aimed to close the deal without shedding any light onto the total amount that will be due at the end of the rental period. Read the fine print on the contract to make sure that everything is in order. Companies are required to disclose any fees that may be associated with the equipment rental or any otherwise assessed. Some rental companies can even go a step further to get as much money as possible out of each transaction. For example, a deal rental company just wants to make the sale; once they’ve quoted what he/she is specifically requesting, they may assume that it’s then ethical to ‘charge whatever they want’ for items you didn’t specifically request as part of the bid.
Considering the same pricing from the chart above, let’s look at how the same 4-week track loader rental would have looked if the customer had done a true apples to apples price comparison:
Now, let’s assume that the piece of equipment is returned on time at exactly 4-weeks. The equipment required 10 gallons of fuel and no other items were added to the cost (no excessive cleaning needed or damage fees were assessed). Here’s how much each line item would actually end up costing the customer:
As illustrated, the lowest bid is actually the most expensive option; while the highest bid is option. Next time you are considering accepting the low bid, make sure that all items are included in that quote. This can give you a true picture of what the total costs will be at the end of the rental period. It is important to make sure that you are comparing apples to apples and not apples to oranges as the case would seem.
Avoid falling victim to the ‘quote low, bill high’ trap. Establish a good working relationship with a locally-based equipment rental company that doesn’t play the ‘gotcha’ game. If you don’t know which company to trust, ask the employees some questions about the business. Even ask if there should be anything else that would need to be considered during the quote process, such as fees that are not readily apparent. Do your research online to make sure the company has good reviews. Do some comparison shopping and know your options before you decide to partner with an equipment rental company? While it may be tempting to think that the low bid is the best value, more often than not, it’s simply not the case.