Architectural Articles

Competitive Bidding vs. Negotiation

Estimating and controlling construction costs is a crucial step in the design-build process for any building. Obviously the owner wants a superior product within a set budget without major problems along the way. This can be accomplished by careful design and quality construction with effective communication and cooperation between the owner, the architect and the contractor.

In my experience, I have found competitive bidding between general contractors to be less satisfactory than a negotiated bid with one pre-selected general contractor. In competitive bidding, a complete set of construction drawings and a booklet of material and installation specifications is issued to several general contractors recommended by the architect or owner. Each submit private bids which are opened in the presence of the owner. An apparent low bidder is identified. Then the low bid is examined and questions are resolved before acceptance. A separate contract is drawn up between the owner and contractor for construction. Any deviation from the bid documents (drawings and specifications) are "change orders" that may require revisions to the architectural drawings and often additional construction cost.

In a negotiated bid process, the contractor is selected by the owner based on the contractor's good reputation. He can be brought right after the schematic design phase and before construction documents are complete to provide commentary and preliminary cost estimates. Once construction drawings are complete, he can provide a detailed cost breakdown on a spreadsheet based on the CSI format, which specifies 16 categories of building components. Comparative bids can be obtained from subcontractors if necessary. To lower costs and bring the building within the budget, choices of materials can be discussed and construction details and methods can be examined. The owner negotiates material and appliances choices and their costs with the general contractor. Again, a separate contract is drawn up between the owner and contractor for construction. The architect remains as the owner's agent to observe the construction and approve the contractor's invoices (if desired) through to final inspection.

Here are a few additional points of comparison:

Competitive Bids

Negotiated Bid


More initial cost will be incurred by the owner in higher architectural fees because the drawings have to be more detailed and the specifications have to be more thorough in bid documents to ensure accurate bidding.

Architectural fees can be reduced if a trusted contractor is chosen early because some basic construction detailing can be assumed and specifications can be more general.


The contractor is not brought into the process until after the entire set of drawings and specifications are complete.

The contractor can be brought in earlier, after schematic design, to offer input into construction efficiencies and preliminary costs.

Working Relationship

In competitive bidding, an adversarial relationship between the architect and contractor is often set from the beginning. The contractor may bid low with the hope of finding errors or omissions in drawings to be rectified by costly “change orders” during construction. The architect, as the owner's agent, may be less trusting of the contractor's motivations. The lack of trust between the architect and the contractor often has a serious negative impact on the results.

If the architect and a single contractor are both chosen early, a basis of trust can be established at the beginning. Everyone will have the same goal of working together cooperatively to produce a quality product. If changes are foreseen, the architect and contractor will be more likely to work together to solve a problem that will satisfy the client and control costs.

Construction Costs

After the bid is accepted, inevitable changes will require revisions in the drawings and probable increases in the total construction cost above the original bid. Quality and total costs are more difficult to control.

In a negotiated bid, all parties will more likely work together to maintain quality and control costs during construction. The owner will have more involvement in the decisions about changes and their cost implications. No increased costs will happen without the understanding and the acceptance of the owner. Cost control becomes more manageable.


Even though subcontractors can be reviewed in the original bid, there is pressure on the general contractor to use subs that are the least expensive to win the contract. The contractor will sometimes use the leverage of increased construction time and costs to pressure the owner to accept inferior workmanship after it has been built.

Quality within reasonable cost is everyone's goal. Decisions will be made collaboratively when these issues arise.

Competitive bidding may have its place in larger public projects, but it seems less appropriate for private residential or commercial projects. Although the negotiated bid process is not utopian, it does produce better results. I want the process to be collaborative where everyone has a stake in producing the best building possible within the budget. If we are all smiling at the end, it will have been successful project.

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