“We’ll lose money if we have to. We just need the work.”

This statement was made to one of my architectural colleagues recently by an engineer clammoring to win a small project for which our client was insisting that we get another outside bid. As an engineer surrounded by architects, I sometimes have the opportunity to review the proposals of other engineers who don’t necessarily know that my firm has engineering in-house. A few things came as a shock to me with this particular guy’s proposal. First of all, his fee was incredibly low - almost half of what I had proposed for a similar scope of work. Next was his attitude; it reflected that he was willing to do just about anything - even lose money - just to get the work. Finally (and the most surprising thing of all), this guy was a Vice President for one of the most well-known, well-respected engineering firms in Southern California. Two years ago, this company was known for charging a premium for their services, which they regularly did. Now, they aparently were willing to lose money in order to win a project; a sign of the times I suppose.

A similar event occurred to a friend of mine who was trying to land a project with a municipal client with whom he supposedly had a good relationship. He was competing against a firm that the client openly admitted was not nearly as qualified to do the work. When the competing firm’s fee came in at 30 percent less than my friend’s, the client’s reservations quickly diminished and the other firm got the job.

Under normal circumstances, 30-40 percent of prospective clients will choose an engineer solely on the basis of price (these also tend to be the most difficult clients to work for). In an economic recession, however, price tends to become a much stronger deciding factor as more clients face pressure to cut costs and bid-out their consultants. In response, an increasing number of engineers seem more than willing to drop their fees to land the work, even if it means forfeited profits. Thus a downward spiral ensues that diminishes the value of our services accross the board. So, what do you do when a client bids you out and demands that you lower your fees? 

• Get something in return. Don’t arbitrarily cut your previously stated fee without a corresponding reduction in scope or some other concession from your client. Doing so sends a message to your client that is guranteed to come back and haunt you. First, it tells them that you’re a liar since your previously stated best fee wasn’t really your best fee. Second, it tells them that they would have been stupid to not ask you for a reduction.
• Provide upfront value. Getting your hooks into a project before it even becomes a project is one of the best ways to ensure yourself a position on the team. Do some free upfront legwork or research that makes your client’s life easier. It’s always difficult and costly to switch engineers. Get in early.
• Ask to review your competitor’s proposal. It never hurts to ask and you would be surprised how often a client is willing to do this. Many times, a client will only look at the bottom line. They are more than happy to let you wade through the fine print and find critical omissions or overly restrictive language in your competitor’s proposal that will end up costing more in the long run.
• Win the relationship, even if you lose the job. Don’t pout or whine if you end up losing a job based on fee. You’re probably better off anyway. Focus on maintaining a professional relationship with the client. You never know when they will call again - maybe to fix what your low-ball competitor screwed up.