TrueNorth Development
President

Scott Sedam, president of TrueNorth Development (www.truen.com), spends most of his time working in the trenches with builders, suppliers and trade contractors. His Lean Builder blog appears weekly at HousingZone.com. He welcomes your feedback at scott@truen.com.

Rebid redux — Lean Tuesday with Scott Sedam

As a dedicated practitioner of Lean process and methods, one of the more aggravating things I sometimes hear is a builder bragging about how they are obviously “Lean” because they have gone through three, five, or seven rounds of rebids. Everyone had to do rebids during the past five years of the housing recession. After all, customers have in effect rebid the builders continually. Because foreclosures and short-sales still make up a significant part of the market, that means that the rebidding from the consumer end continues.

But rebids address only one piece of the total cost equation – bid price. As stated in the June PB article, “10 Elements of a Total Cost Model,” “The only thing that purchasing on low bid price alone guarantees is that you will never operate by lowest total cost.” 

There are nine other factors to consider in choosing a supplier or trade contractor, the costs of which can easily exceed what you initially gained in the rebid. Here is the summary from that article:

  1. Bid price
  2. Capability and capacity
  3. Schedule and delivery
  4. Safety
  5. Communication
  6. Participation in product development
  7. Process integration
  8. Quality
  9. Pre-close rework
  10. Post-close warranty

You tell me. Just how many of these cost factors are addressed in a rebid? At this point in the housing recession, a rebid is not Lean and in fact, obstructs Lean process. When you ask a framer or a plumber or a supplier of roofing material to rebid, you ask him to reduce his sales price, thus his margin, on the same labor and/or material that he provides today. That does not improve product or process. Lean, on the other hand, cries out, “LET’S DO SOMETHING DIFFERENT.” Let’s find a better way to build it, to schedule it, to ship it, to use a different material, to remove a step, to do more with less, to save a trip, to save a day, etc. etc. and in doing so, reduce cost for everyone. It’s harder than a rebid and takes a lot of thought, but it’s far more rewarding. The idea of Lean as merely “Rebid Redux” is another mistaken notion – just one of the 10 that are addressed in my upcoming September article in Professional Builder, “Busted! The 10 biggest myths in Lean Building.”

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