Sometimes A Bidder On A Work Contract May Bid Lower Than ✓ Solved

Sometimes a bidder on a work contract may bid lower than

Sometimes, a bidder on a work contract may bid lower than what would maximize his/her profit from the contract and the reason for that is to create goodwill (to increase expected future business from the buyer). How would you value the goodwill that is obtained in this way? Guided Response: Think about an example that pertains to you. If there is expected goodwill would you be prepared to bid lower to get a contract? Explain your reasons. In 300 words or more, please, provide your response to the above discussion question.

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In the competitive world of bidding for work contracts, the decision to submit a lower bid can be a strategic move aimed at generating goodwill. This approach serves not only as a tactic to win a particular contract but also as a way to build a robust long-term relationship with the client, fostering a sense of trust and reliability that might incentivize future business opportunities.

One clear example that underscores the value of goodwill can be drawn from the construction industry. Consider a scenario where a smaller contractor bids on a project significantly below its estimated cost. While this initially appears to undermine potential profits, this contractor may have assessed the long-term benefits. By delivering quality work at a lower price, that contractor demonstrates capability and reliability, potentially securing a future influx of projects from the same client as they are compelled to recommend this contractor to others based on their satisfying experience.

The value of goodwill in this context can be intricate and deeply rooted in both quantitative and qualitative assessments. Quantitively, goodwill can be viewed through the lens of potential future revenue derived from repeat contracts and referrals that arise from a satisfied client. Qualitatively, it illustrates the trustworthiness and quality assurance that comes with a history of positive interactions. While it may be difficult to assign an explicit monetary value to goodwill, its benefits manifest through repeated business engagements, enhanced reputation, and an expanded client base.

In assessing whether I would personally be prepared to bid lower to secure contracts, I reflect on the nature of my business and the competitive landscape. If I believed that winning that contract would open up additional avenues for partnership and future revenue, I would be inclined to submit a lower bid. Nevertheless, this decision would come with careful considerations regarding cost management and resource allocation to ensure that my business remains sustainable despite the lower margins on initial contracts.

Ultimately, the concept of goodwill in bidding highlights a dynamic interplay between short-term sacrifice and long-term gain. Therefore, strategically placing value on goodwill can indeed justify the decision to bid lower in hopes of securing not just a contractual agreement but also a lasting business relationship.

References

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• Porter, M. E. (1998). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press.
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