GPI 134 – To keep your bids competitive, get outside 3rd party quotes for comparison.

All firms get fat and lazy at times and forget previous economic bad times until market demand quickly drops.  One way to help avoid this is to introduce outside bids to compare to your internal company’s estimate.  You want good achievable estimates but you do not want them getting out of line in the marketplace, which loses your business on the street.

Actively get outside bids.  Bid against yourself.  To keep your estimating department competitive and apply pressure to cut costs and stay viable among your competition, get outside bids.  Have those bids delivered outside the estimating department to ensure everything stays brutally honest and upfront.  Your firm needs honest feedback from the street and 3rd party quotes will do it.  You need the truth and this will do it.  Do this to help your company or the market will slowly eat you as you lay off and succumb to far sharper competitors ready to take your customer base one by one.

Get bids on parts you make yourself – meet the market.  Regularly obtain outside bids on parts you plan to make yourself in order to apply market pressure to your internal estimators and tell your suppliers you get bids to keep costs in line.  You might want to assign this duty to someone outside your engineering group or placed with someone who does not have a vested interest in burying the truth.

Send parts out to be made to test your own firm.  You may also want to send current parts out into the market occasionally to demonstrate the need to keep costs in line in order to continue to get new business.  You need to find out why your firm is too expensive or unable to achieve quality standards on an item.  You need the market to wake your management up in order to compete.  It is healthy and necessary.  Who is cheaper than you and why?

Let your employees know when the firm failed; ask them how they can help.  Tell everyone in your plant that the vendor down the street is cheaper.  This declaration means that this competitor is more likely to take away your business given your firm’s current fat or bloated cost structure and substandard bidding practices.  Let everyone know in the plant that ABC Company down the street can do this job for 20% less (you fill in the numbers).  Do this periodically in order to put pressure on your own organization because they fatten the estimates and ultimately will cause the firm to lose business or price it out of the market.  Your estimators and production people need pressure on them to cut costs.  Incentive programs will do this and outside estimates also help tremendously to keep costs in line.  You must test your bidding to the market to remain competent, competitive and most importantly, profitable.