Steven Crombie, ORBA
Special to Ontario Construction News
There’s an uncomfortable truth at the heart of construction procurement, one that few say out loud, but almost everyone in the industry understands:
If you fully price the risks of a project, you probably won’t win it.
In a traditional design–bid–build system, the contractor who most accurately captures uncertainty, poor geotechnical data, incomplete design, utility conflicts, traffic staging complexity—is often the one who loses. The winning bid is frequently the one that didn’t price all of that risk.
And that should concern anyone who cares about how we deliver infrastructure.
Because it means we’ve created a system where being a disciplined, responsible estimator can make you uncompetitive, while being overly aggressive, or selectively optimistic, gets rewarded.
The incentive problem no one wants to own
Public procurement still leans heavily on the “lowest compliant bid.” On paper, it’s defensible—objective, transparent, and easy to administer.
In practice, it creates a perverse incentive:
Contractors must choose between pricing the job properly… or pricing it to win.
Increasingly, those are not the same thing.
That doesn’t mean contractors are careless or acting in bad faith. It means they are responding rationally to the rules of the game. In a competitive market, if one bidder carries full risk and another doesn’t, the latter wins, every time.
Over time, this drives behaviour across the industry. Risk allowances get shaved. Assumptions get stretched. Known unknowns are pushed down the road.
In some cases, projects are effectively in the red the day they’re awarded.
Owners are often frustrated when projects become contentious, when change orders increase, disputes escalate, and claims emerge.
But we shouldn’t be surprised.
If a contractor wins a job that was underpriced at the outset, the only way to recover is through the contract:
- Scope boundaries are scrutinized
- Change opportunities are aggressively pursued
- Notice provisions are strictly enforced
- Claims become central, not exceptional
What should be a collaborative delivery environment becomes a commercial balancing exercise.
And it doesn’t stop there.
Field teams are under pressure to find efficiencies. Contract administrators tighten oversight. Quality and compliance become flashpoints—not because either side wants conflict, but because the financial structure of the job demands it.
We’ve created a system where margin is often realized not through building—but through dispute resolution.
The myth of market correction
There’s a common refrain: contractors who underprice will eventually fail and exit the market.
Sometimes they do.
But often, they don’t.
Large firms absorb losses across portfolios. Others rely on claims to rebalance projects. Some accept thin or negative margins simply to keep crews working and equipment moving.
The result isn’t a cleansing of the market—it’s a steady-state environment where underpricing persists.
And everyone adapts to it.
The irony is that lowest-bid procurement often fails to deliver the outcome it promises.
The lowest number at bid rarely reflects the final cost of the project.
Instead, we see:
- Escalating claims and disputes
- Administrative burden on owners and consultants
- Strained relationships across project teams
- Delays driven by conflict rather than complexity
In other words, the system may appear efficient at award—but becomes inefficient in delivery.
So what needs to change?
This isn’t about abandoning competitive procurement. It’s about recognizing that how we compete matters.
First, we need to move beyond pure low-bid selection. Even modest weighting for qualifications, past performance, and risk approach can change bidder behaviour.
Second, owners must take greater responsibility for the quality of tender documents. Incomplete design and poor information don’t eliminate risk, they simply transfer it into the bid, where it’s either overpriced or ignored.
Third, we should expand the use of collaborative delivery models such as: progressive design-build, early contractor involvement, alliance contracting where risk is surfaced and priced transparently, not competitively hidden.
Finally, we need to have an honest conversation about risk allocation. If contractors are routinely expected to absorb uncertainty they cannot quantify, we shouldn’t be surprised when they either price themselves out or fight to recover later.
The construction industry is full of capable, sophisticated players on both the owner and contractor side who want to deliver high-quality infrastructure.
But the system they operate in matters.
Right now, we are asking contractors to win work by not fully pricing it and then criticizing them when they try to recover that value after award.
That’s not a contractor problem. It’s a procurement problem. And until we fix it, we’ll keep getting exactly what the system is designed to produce: Not the lowest cost but the lowest number… followed by the highest frustration.
Steven Crombie is the Senior Director of Public Affairs at the Ontario Road Builders’ Association (ORBA), where he leads advocacy on construction policy, infrastructure investment, and regulatory reform. Widely regarded as one of the industry’s proven thought leaders, he works closely with government, owners, and contractors to advance practical, buildable solutions that improve safety, project delivery, and long-term economic resilience across Ontario’s transportation network.
