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February 16, 2017

Fixed Price Contracts and their effects on the Tensile Industry.

Fixed price contract tendering is used throughout the tensile market.  Whilst fixed price contracts have their benefits, could it be these contracts that are harming the tensile industry?  Do they benefit and enhance the future use of Tensile Architecture or do they actually restrict its development?

 

Fixed priced contracts can make for inflexible and immovable projects.  With no room for managing changes or requests, the outcome of any project is potentially in jeopardy before it has even begun.  With no ‘wiggle room’, there can be little scope for any new requirements that arise during implementation, which should rightly lead to price re-negotiation and changes to the project’s schedule.

Excessive focus on maintaining a fixed price will most likely come at the expense of quality, creativity and timeliness with the value of the work often becoming less important than the price.  

 

Whilst it is the norm for a fixed price contract to be to the detriment of the supplier, a fixed price model may also cost the buyer more than anticipated.  The contract could be completed early or the materials cost less than estimated.  At Airsculpt we vie to give the customer the best experience possible, delivering the highest quality work under the given constraints.

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We believe in our ETFE products so much that we aren’t interested in trying to undercut other suppliers.  We want to enhance and expand the use of ETFE, not win as many projects as we can to the failing of the market.

 

Fixed prices contracts are of particular concern now; in the shaky economic times as we head for a ‘hard Brexit’.  With the likelihood of leaving the single market, the possible forced change of the value of the goods and services is at stake.  Any materials or supplies coming from Europe necessary for the production of the project could increase in cost after the contract has been signed.  

While a fixed-price contract gives a buyer more predictability about the future costs of the good or service negotiated in the contract, this predictability may come with a price. The seller may realize the risk that he is taking by fixing a price and so will charge more than he would for a fluid price, or a price that he could negotiate with the seller on a regular basis to account for the greater risk the seller is taking.

 

Is ETFE starting to suffer?

Because the middleweight companies in the tensile industry have been undercutting each other to win tenders, the market has begun to suffer.  These companies are desperate to win bids, and it seems will cut their price to the very lowest budget in order to do so.  And who suffers?  The end customer. 

Airsculpt has watched this happen, whilst keeping their prices true to the product we produce.  Our structures are well designed, long lasting, and fit for purpose.  If companies spend all of their resources patching up old mistakes, how will they go onto win new projects and provide the best service possible?  Simple – they won’t.

 

How can we succeed?

A message to the end customer – Be cautious of Vendors whose bid is too low. They might be low-balling the project just to get in the door, and they will bombard you with Change Orders afterwards. It could also mean that they don’t have a good grip on the requirements or they are really not that competent in the tensile field. Regardless – probe deeper.

If you think it’s possible to identify a single date, somewhere off in the future, upon which you’ll receive everything you’ve requested and for a fixed price, then you’re setting yourself up for failure and disappointment.  The tensile industry, and every other industry for that matter needs to make themselves flexible to change.  To cost a structure, one would need to know in great detail exactly what is needed to be built, so that your estimates for the work can be accurate. It must be realised that despite the very best of efforts, it is impossible to define everything you want, in detail and up front, and get it exactly right so there will be no changes in the future.  Unforeseen errors are exactly that – errors which cannot be foreseen.  

 

Depending upon the projects specifics and its financials, Airsculpt has the ability to work with an open book policy. We will work with you to bring your ETFE structure to fruition, and we will tell you how much it costs to do it, whilst managing your project from concept to completion in the most productive and effective way.   

 

By agreeing to a fixed cost contract, you’re effectively saying that all good ideas happen at the beginning of a project, and hedging all your bets on one hole.  Project managers, architects and designers.  We are all problem solvers, and problems can arise at anytime.  By doing away with fixed cost contracts you are allowing space for innovation and creation.  

 

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