The Hazards of Under Estimating

In today’s highly competitive market it may appear that a lowball estimate is the way to win more business. Here are six reasons to avoid lowball bid submissions.

  1. Undercutting on the install. The rush to complete each part of the installation in less than the estimated time could lead to low quality installations to reduce labour costs.
  2. Underpricing materials. Underpricing material can lead to quality problems, cost over run and material shortages. Low quality materials often take longer to install than good quality materials.
  3. Job expenses not being covered. Underestimating job expenses could result in owing money to other companies for services rendered after the job is completed. Underestimating job expenses could result in unexpected financial losses.
  4. Overhead not being covered. Not covering your overhead leads to financial losses. Those losses could prevent you from having the capital to bid on other jobs or result in having to lay people off.
  5. Hoping to make it up on change orders. Change orders cost more due to schedule changes, material changes, estimating changes and labour costs. Change orders rarely compensate for underbidding.
  6. Reputational damage. If your company is seen as a chronic underbidder other companies may not respond to your submissions and could drop you from their bid list. The decrease in bid requests will result in lost income.

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