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By: Daniel Josephs, Chief Operating Officer and Executive Vice President of Spruce Industries
Public Bids and Sustainability: Soft Costs, Hard Lessons

Two painters walk into a hardware store and each purchase a can of paint.  Painter “A” purchases the cheapest white paint on the shelf.  Painter “B” purchases a can of sustainable premium white paint that costs 15% more than the cheapest white paint.  Both painters head out to their project satisfied that they made the right choice. 

Six months later, Painter “A” is back in the hardware store purchasing a can of white paint because the wall he painted with the cheap white paint has faded and he is upset.  Meanwhile, Painter “B” is onto his next project and hasn't looked back. 

What’s the lesson?  The lesson is that just because you are saving 15% upfront, does not mean you are saving 15% overall. While Painter “A” saved 15% on his initial can of paint, he spent more time, more money, and more manpower needing to do the job again.

This anecdote is analogous to the public bidding world, as most public bids usually only ask for a cost on a specific product.  If the bid only asks for white paint, how can we expect the purchasing agents responsible for these public bids not to award the bid to the lowest cost?

While we cannot expect purchasing agents to be the experts on all purchase items (like the subtle differences between white paints), there is a strong case for them to make purchases taking into account what are termed soft costs and future costs.  Simply awarding a bid based on the cost of the can of paint or any product, without knowing both associated soft costs and future costs, leads to poorer outcomes.

The combination of soft costs and future costs is the definition of sustainability. Being more sustainable can extend the life of your facility, reducing maintenance costs. Being more sustainable can improve the health of the people working in the facility, lowering health insurance liabilities.  Being more sustainable can improve your reputation in the community, which could open up doors for new hires and an increase in sales.

There needs to be a way for soft costs and future costs to be included in the public bidding process. Manufacturer A’s white paint will save you 12% in labor over the course of a year and is guaranteed not to fade in 6 months.   Manufacturer B’s white paint, is less expensive upfront, but will cost you more in future labor and will fade in 6 months.  Based on this added information (and the totality of soft costs and hard costs), a purchasing agent becomes better equipped to make a decision that will lead to a better outcome. 

It is time to revise the current approach to public bids and sustainability. It is no longer acceptable to just add an extra line on a bid for the "green alternative". It is no longer acceptable to give "green alternatives" a 10% cushion on pricing. 

It is time to evaluate products based not only on their current cost today, but what that product will cost in future labor to use that product, in future costs to replace that product, and in people costs, who live and breathe where that product is used. 

We need to change the process because it is worth knowing the true cost so there is an improved net result. We need to change so that we paint a future that involves all inputs instead of only the ones that remain from another time when we were not knowledgeable about factors impacting our environment, health and sustainability.