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5 Cost Proposal Warning Signs

Prioritizing engineering cost over quality can increase your total project expenses and limit the value you receive. While we encourage a quality-based selection process during consultant hiring for these reasons, if cost remains your deciding factor it’s important to recognize the warning signs.

Below, we discuss five cost proposal red flags. Specifically, signs that what an A/E firm is offering might not be feasible or might only be possible at the expense of the quality you receive. Awareness brings you one step closer to knowing with certainty that you’re receiving the best value!

You Receive an Offer Well Below or Above the Mean

Project owners often solicit cost proposals and receive one exceptionally high and one exceptionally low offer, mixed with a number of offers that fall close to one another. We often encourage our clients to throw out the abnormally high and low cost proposals straightaway. This usually means firms didn’t carefully evaluate your project scope, or perhaps they don’t have enough relevant project experience to piece together an accurate cost. High offers may have included unnecessary or optional services. For the lowest cost proposals, at best they're likely making this offer to grab your attention.

If you’re against dismissing any bids, at the very least uncommonly low bids demand careful examination. They can signify inexperienced team members, excluded services, or misunderstanding of scope. Have you looked closely at the experience of the team with the lowest-cost proposal? Have you compared this proposal to proposals closer to the mean?

High and low proposals might also be a sign that your RFP or solicitation lacks important information. Did you provide a thorough scope? If a high number of questions have been submitted or if consultants have reached out with questions, have you held a pre-proposal meeting to provide clarity?

High and low submission comparison chart
When reviewing and evaluating cost proposals, very high and low submissions demand careful examination – if not outright dismissal from consideration.

Price Components Deviate From Your Scope of Work

There are times when competing firms quote services that are entirely irrelevant to your scope. Too often, this is a warning sign that the consultant doesn’t understand your scope or didn’t take the time to carefully examine your project details. Have other consultants included similar costs/suggestions, or is the low/high cost proposal you’re considering the only one?

Suggested changes or additions to your scope can be an important and value-added service, but the firm must be able to provide quantifiable proof (i.e., the value to you in terms of cost and quality) without disrupting or undermining your original scope.

Wishful Thinking Reigns Over Practical and Realistic

The proposals you receive will always vary; experience, design alternatives, and approaches are different from consultant to consultant. However, it’s important to differentiate the practical and realistic from wishful thinking. If an A/E firm promises more services, value, and hours than any others at a cost far lower than any others, what they’re offering might be too good to be true.

Did they forget an important piece or phase due to an incomplete project scope? Did they rush their response without careful evaluation? Does the proposed team have relevant experience – not just the firm but the actual team members? If a consultant promises lofty value-added services, can they define how this will impact your project and prove they can be delivered?

The Number of Hours Committed Vary Greatly From Consultant to Consultant

Look closely at the number of hours each firm has submitted to your project. As with total cost, something isn’t adding up if most A/E consultants fall into a certain tier while one or two have vastly more/less hours committed. This might signify lack of effort in terms of reviewing your scope, or a lowball offer that lacks careful planning/foresight and can’t be delivered without significant change orders.

This warning sign is one reason project owners are trending toward lump sum contracts as opposed to paying for hourly rates. So long as your scope has been carefully developed, lump sum contracts limit scope creep (a subtle process that starts with small scope adjustments mid-project but results in projects that take far longer to complete). Lump sum contracts also place more risk/accountability on the A/E consultant, as scoped services that come in over budget contractually become their responsibility.

According to 900 A/E industry executives, scope misalignment between project owners, A/E consultants, and construction contractors is the “key factor” contributing to cost increases and cost uncertainties.

Recycling a Previous Scope or Request For Qualifications (RFQ)

While the previous four signs speak about A/E consultant efforts, number five asks you to look closely at your scope of work. It’s not uncommon for project owners to reuse or repurpose project scopes or RFQs when soliciting bids because it saves time.

Generic or non-customized scopes and requests for proposal (RFPs) can lead to highly inaccurate cost proposals. They can also lead to projects with a high amount of change orders during design and construction. What often follows are missed budgets and lengthier schedules, among other unexpected expenses.

About the Author

Benita Crow

Benita Crow, PE*, is an SEH vice president and lead's the company's operations in Iowa, Minnesota, Nebraska, North Dakota and South Dakota. She has been with SEH for 20+ years and in the industry for 25+ years, leveraging this experience to expand the company's excellent customer service, geographic footprint and capabilities to best meet the needs of her client partners. Contact Benita

*Registered Professional Engineer in MN, WI