To the delight of many contractors, the Associated General Contractors Education and Research Foundation and the Foundation of the American Subcontractors Association released results of a study that found online bidding auctions are not all they are purported to be.
During the past few years, some building owners have used online bid auctions to secure lower prices for all types of construction work, including roofing. The use of online auctions alarmed many in the construction community—contractors who were able to see others' bids and lower their bids in response took the risk of sacrificing quality and materials to win a job. NRCA has been a vocal opponent of online auctions and supported the study as a member of the Associated Specialty Contractors Inc., one of the organizations that provided funding for the study.
The study was the first phase of a two-part study conducted by two professors from Louisiana State University, Baton Rouge. The researchers reviewed published articles, papers and reports related to the auctioning of commodities and services while keeping in mind the cost benefits that many claim justify the use of online auctions. The reviewed materials, which excluded advertising vehicles and promotional pieces, revealed online auctions are used in 11 primary areas: airline tickets, computers, construction services, utilities, legal services, office furniture, raw materials, nuclear waste removal, machine parts, surgical operations and U.S. government treasury transactions.
After reviewing the documents and the costs related to online auctions, the researchers found little support for the claim that online auctions save users money.
The study results state: "There is no proof that the use of online auctions provides cost savings for construction services. Furthermore, there is no valid method of measurement for such calculation. ... There are inconsistencies and lack of detail in reported cost savings, including gross vs. net savings, method of savings calculation and comparison criteria."
The second phase of the study will gauge the effects online auctions have on the construction industry, such as the effects on building processes, project relationships and work quality.
Professional Roofing will report those findings when they become available.
Ambika Puniani Bailey is editor of Professional Roofing magazine and NRCA's director of communications.
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