A commodity is a basic good used as an input in the production of goods and services.
Companies use commodities in the manufacturing process to turn them into everyday goods. Commodities are priced uniformly worldwide, but that is not the case for professional architecture and engineering services. And yet, procurement departments continue to commoditize architecture and engineering professional services and bid them as a commodity!
Architecture and engineering services are unique!
These professional services are unique and should be procured differently. When an architect or engineer enters a project, the scope of the work has not been entirely defined. Therefore, no specific parameters have been defined to base a valid price estimate. Price bidding may work only when there is a very tight and clearly defined project scope in a particular project phase.
Many procurement departments believe that bidding architecture and engineering professional services is best. But bids are not always the best selection system. Qualifications-Based Selection (QBS) is the better system for procuring professional architecture and engineering services.
The critical element in the design process is the creation of a collaborative spirit between professional and client. If price is an initial consideration, design professionals’ proposals will attempt to assume the client’s needs. Minimal standards will most likely be used, because a firm cannot judge exactly what the client wants. Advanced technologies or new features which could save a great deal of time and money over the life of the project, may not be added because another firm not including those features, may offer a lower price.
High-quality designs by architects and engineers can have a dramatic savings effect on maintenance and operations over the life-span of a project. The design professional fee amounts to only a small percentage of the overall project cost, but the result of the design can greatly impact the life-cycle costs.
A study on project costs comparing low-bid and qualifications-based procurement procedures – in Maryland and Florida – demonstrated conclusively that the low-bid process can ultimately be more time consuming and cost more than qualifications-based procurement (i.e., when considering the final cost, with change vs. the negotiated price which has a well-defined scope of work).
When architects and engineers compete for projects by a qualifications-based method, price is considered and it is taken in to account after the most qualified firm is selected. A fair and reasonable fee is then negotiated with the most qualified firm.
The main advantage of the qualifications-based system is that the design professional and the client work in a collaborative spirit to maximize the quality, value, cost effectiveness and usefulness of the final product. Professional design services should be selected on qualifications and competence. The QBS model is widely accepted and adhered to by the Federal government and more than 35 states. The qualifications-based selection method can assure the acquisition of the most capable professional and obtaining a price that is “fair and reasonable” to the client.
Bidding architecture and engineering professional services as a commodity is a mistake!
-Glenn Ebersole, Director of Business Development