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Comment by yAnonymous | Hacker News Reader

>Lowest-bid mechanisms [...] aren't working as intended.

That's true for public projects as well.

Often the client will be happy to get a cheap offer, only to be surprised that the project is delayed, requirements are not met and there are huge follow-up costs.

And then sometimes all sides know that the project can't be done for what the lowest bidder offers and the whole bidding process has to be done again with restrictions that prevent the cheapest bidder from applying again.

Lowest-bid mechanisms sound great in theory, but absolutely don't work out practically and we all pay the price for it by getting a bad return on our tax money. On top of that, the system doesn't even prevent corrupt politicians from funneling government jobs to their friends.

Then again, good luck finding a better system.

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Lowest-bid tenders are kind of like democracy - a terrible system, but the best we have invented so far.

If someone is spending their own money, then going with a vendor that feels the most competent is going to deliver a better overall result than lowest-bid. But if someone is spending other people's money, then too much subjective freedom in choosing the vendor greatly simplifies corruption, and it's not obvious whether the end results will be better.

What lowest-bid tenders critically need is competent, motivated people working for the government writing the Request for Proposals. People who know the field, know the risks and complexities, and know the "tricks" used to underbid and overrun. People who write tenders that push an appropriate amount of risk and liability to the vendors - not letting themselves to be taken advantage of, but also not adding too many penalties that make vendors pad their estimates just in case and reach for expensive lawsuits if something happens.

If you have that, then there is a good chance that the bids will work out for all parties. But if not, then shady vendors will steamroll over the customer.

I kid you not that there are such things as "proposal schools" and proposal-preparation companies that teach you how to win as low bidder by being "minimally compliant." Then, when the customer finally understands what they are (not) getting, you can hit them up for "change orders" that have to be negotiated. Bottom line strategy is be the low bidder at all costs, and recover your buy-in costs and and also make profits from change orders.

The real villain is letting CPFF (cost plus fixed fee) contracts rather the fixed-price contracts.

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