I’ll never forget walking into an unfinished job site where frustration hung in the air. My client had insisted on awarding a large commercial build to the lowest bidder, convinced it was the smart financial move. Instead, a few months in, the project was two months behind schedule and the budget was blown up with change orders. The “low bid” choice had spiraled into an expensive lesson, exactly the opposite of what was intended. Unfortunately, this scenario plays out far too often in our industry.
Many people assume that going with the lowest initial bid is the smartest way to save money on a project, but that approach can end up costing more in the long run. What looks like a bargain upfront often leads to budget overruns, schedule delays, and unexpected issues once the work begins. And I’m not the only one who’s seen this play out. Industry research shows that projects awarded solely on price tend to run into more cost growth than those where the contractor was chosen based on overall value. That low number on the bid sheet might seem appealing, but it can hide real problems that surface once the project is in motion. In this post, I want to challenge the “price-first” mindset and share why focusing solely on the lowest bid can backfire, and how I help clients take a value-based approach to procurement to get the results they expect.
The Hidden Costs of Choosing the Lowest Bid
At first glance, the lowest bid is alluring. Who doesn’t want to save money? But in my experience as an owner’s rep, a bid that comes in dramatically lower than the others is a red flag. Often, something important is missing or glossed over in that number. Those “savings” up front can evaporate quickly once construction begins.
Change orders galore. The most common hidden cost of a low bid shows up as change orders. Some contractors intentionally bid low, even at break-even or a loss, expecting to recoup their profit through change orders once the work begins. After winning the job with a rock-bottom price, they start charging extra for anything not explicitly in the contract. Each change order typically comes with a hefty markup for overhead and profit (15–20% is common). I’ve seen projects where a contractor started with a razor-thin bid, then issued change order after change order for items that arguably should have been in scope. By the end, the final cost far exceeded what a slightly higher (but more honest and comprehensive) bid would have been.
Missing or low-quality scope. Often a low bid simply hasn’t included everything. The contractor might omit certain scope items or use the cheapest possible materials to get the price down. Inevitably, those gaps surface during construction and addressing them costs extra time and money. For example, a contractor might leave out an allowance for high-grade HVAC equipment or assume a cheaper flooring material. Once the project is underway, you’ll either pay more to get the proper quality or be stuck with subpar components. One industry article put it well: a low bid does not always mean low cost, and often comes with hidden risks and long-term complications that outweigh the initial savings. Incomplete plans or vague details in the bid become opportunities for expensive “surprise” add-ons later. In short, if a bid looks too good to be true, it probably is. Something important may be missing.
Delays and disruptions. Another cost of picking the lowest bidder can be schedule slippage. Unrealistically low bids sometimes come from less experienced or under-resourced contractors. They may underestimate how long the work will take or lack the manpower to stay on schedule. The result? Delays—and in construction, time is money. Every month of delay can mean extended financing costs, delayed revenue, or additional rent at a temporary facility. I’ve had to help clients pick up the pieces when a low-bid contractor fell far behind; the owner ended up paying rush fees and overtime to get back on track, erasing any initial savings. Inexperienced contractors who bid low also tend to struggle with coordinating subcontractors and managing the project efficiently, leading to mistakes and slowdowns. A job that drags on will inevitably drive up costs and cause plenty of stress.
Poor workmanship and rework. The lowest price might also indicate that a contractor is cutting corners on quality. Perhaps they’re using cheaper, lower-quality materials or less-skilled labor to trim costs. That often results in subpar work that doesn’t meet standards and requires fixes later. I’ve seen situations where “budget” contractors delivered such poor workmanship that portions of the work had to be torn out and redone, effectively paying twice for the same work. The low bid can quickly lose its luster when you’re fixing defects or dealing with chronic maintenance issues because something wasn’t built right the first time. The low bidder may be using questionable methods, poor equipment, or cutting corners, which leads to a higher risk of accidents and shoddy results. In the worst cases, safety can be compromised. An accident on site or a structural issue caused by subpar work can bring a project to a halt, and that’s an expense no one budgets for.
The bottom line is that the lowest bid often carries hidden price tags. You might “save” a bit on day one, but you pay for it later in change orders, delays, quality problems, or all of the above. By the time the project is done, the owner has often spent far more than if they had hired a qualified contractor who offered a fair (even if slightly higher) bid. Ultimately, taking the lowest price can be more costly in the long run. Poor quality construction, for instance, can mean added costs for maintenance or premature replacement, and those are never cheap.
A Value-Based Approach to Procurement
How do you avoid falling into these traps? From my experience, it comes down to focusing on value rather than just cost. When I’m acting as an owner’s rep, my main job is to help pick a contractor who brings the most to the table overall, not just the one with the lowest price on paper. This means looking beyond the dollar figure on the bid and evaluating what each contractor brings to the table in terms of expertise, reliability, and risk mitigation. I often tell clients that we’re not buying a commodity. We’re essentially hiring a partner to execute a complex project. The cheapest partner on paper is not worth it if they can’t deliver.
Over the years, I’ve developed a structured way to evaluate bids based on multiple factors. Yes, we care about cost—we have a budget to respect—but we also weigh a host of other criteria that determine whether that bid will translate into a successful project. Here are some of the key factors I assess when comparing contractors:
- Relevant experience and qualifications: Does the contractor have a proven track record with projects of similar type, scale, and complexity? If I’m overseeing a new healthcare facility, I want a builder who has done hospitals or labs before, not just small retail shops. Relevant experience means they are less likely to be tripped up by the project’s unique challenges. A well-qualified team will have learned from previous projects and can apply those lessons to foresee and prevent problems.
- Quality of workmanship: What do past clients say about the quality of this contractor’s work? I review portfolios and even visit past project sites when possible. It’s important to know that they don’t cut corners and that their craftsmanship holds up over time. Paying a bit more for a contractor with higher quality standards can save a fortune in avoided rework and maintenance down the line.
- Schedule adherence and capacity: Can the contractor realistically meet the project timeline with their current workload and resources? We check that they have sufficient staffing and the project management prowess to hit key milestones. An on-time (or early) delivery saves money by avoiding extended overhead and letting the owner use the facility as planned. I also look at their history: have they consistently delivered on schedule? A pattern of delays is a red flag, even if their bid is low.
- Comprehensiveness of the bid: I dig into the details of what’s included in each bid. Is it a complete scope, or are there allowances and exclusions that could become change orders later? A thorough, well-documented bid that might be higher often indicates the contractor has thought the project through, which means fewer nasty surprises. Conversely, a thin bid with lots of “TBD” or missing line items tells me we’re likely to pay extra for those items later. I prefer a bid that accounts for known challenges upfront rather than hiding them. Transparency up front is a sign of a contractor who won’t nickel-and-dime us later.
- Risk management and flexibility: Construction projects always involve risk, like design changes and unforeseen site conditions. I evaluate how each bidder plans for and prices risk. Do they have contingency plans? How do they handle change on projects? Some contractors are proactive and collaborative in solving problems (instead of reflexively issuing change orders). I also research their litigation or claim history. If one bidder has a pattern of disputes or excessive claims, that’s usually a “thanks, but no thanks.” I want a team that will work with us to keep the project on track, not one that treats every hiccup as an opportunity to charge extra.
- References and team strength: We talk to previous clients and ask: Did the contractor do what they promised? How was the communication? Were there a lot of unexpected costs? Getting candid feedback from past projects is invaluable. I also look closely at the proposed project team – the project manager and site superintendent in particular. A highly experienced, attentive team can make all the difference. I’d rather have a great team from a company that costs a bit more than a mediocre team from the cheapest bidder. The people on the ground are the ones who will make the project a success.
By weighing these factors alongside price, I can identify which bid truly offers the best value for the client. It’s often the case that the contractor who is a bit more expensive up front ends up saving money over the life of the project through superior management and fewer problems. This approach is essentially what we call “best value” procurement: selecting the contractor who provides the optimal balance of cost and quality. And it works. Studies have found that when owners use best-value selection, their projects experience far less cost growth than with low-bid awards. One landmark study revealed that paying just under 1% more for a best-value contractor yielded an average of 37% less cost growth during construction compared to the lowest bid. Think about that: a slightly higher bid from a qualified, well-prepared contractor can actually result in a far cheaper final cost. That statistic matches what I’ve seen firsthand.
Let me give a real example. A few years ago, I was representing an owner on a major office development. We received bids from several reputable firms. The lowest bid came from a contractor with little experience on high-rise projects. Their price was tempting, a few percent below the next bidder. Another firm’s bid was higher, but that team had an excellent track record on exactly this type of project and had identified some tricky site conditions in their proposal. I advised the owner to invest in the more qualified contractor. Sure enough, the chosen team navigated the complexities smoothly. They finished the project on schedule with almost no change orders. The final cost came in very close to their bid. In contrast, I have no doubt that if we’d gone with the “cheaper” contractor, we would have been hit with numerous extras for those site conditions and likely suffered delays as they figured things out on the fly. In the end, the owner saved money (and stress) by paying a bit more up front for the right team.
As an owner’s rep, my responsibility is to protect the client’s interests and deliver a successful project. Sometimes that means having tough conversations about why the lowest bid isn’t the best choice. I’ll walk the client through the potential risks and long-term costs that come with that bargain bid. More often than not, when they see the whole picture, they understand that true value matters more than the initial dollar amount.
In the world of construction, you generally get what you pay for. The “best price” is the one that gets the job done right, on time, and with quality, not necessarily the one that looked lowest on bid day. A value-based approach to procurement might not satisfy the urge to pick the lowest number, but it pays off when your project doesn’t suffer from budget overruns, legal disputes, or structural failures. My advice to fellow owners and developers is this: don’t let a low bid seduce you without a deeper evaluation. Ask yourself, what is this low bid not telling me? What risks am I buying along with that apparent discount?
At the end of the day, the real win is finishing your project without unnecessary costs or headaches, not just feeling good about picking the cheapest contractor. When you focus on value instead of price alone, you’re setting yourself up for a smoother build and a stronger final result. After working on large CAPEX projects for years, I’ve seen time and again how the lowest bid can turn into the costliest decision. But when we take the time to choose wisely and look at the full picture, we give our projects a much better shot at long-term success.