Reverse Auctions: “Gitcher plumbing service rat cheer!”

Imagine an auction where the price gets lower with every bid. That’s called a reverse auction and they’re doing it online these days. Who’s doing the bidding? El Cheapo contractors, that’s who. They’re bidding on jobs. All the bidders keep dropping their prices until the last man standing gets the contract.

Reverse auctions have been around for quite a while, and companies like GE have claimed that it saves them a lot of money when they buy commodities. I tend to think that such real-time bidding, where price is the only factor, is fraught with peril. But what do I know? GE hasn’t offered me a six-figure salary to run their purchasing departments.

I know a little bit about plumbing prices, though. Check my web site’s “About Pricing” page. I would never get into a bidding war with another plumber over a job. Why not? Because I’m honest. I don’t quote a price to a customer because I want to see if he’ll agree to it; I quote him the price because that’s what the price is. If I’m prepared to cut the price when necessary, that means I wasn’t telling the truth the first time.

The only time I renegotiate a bid is when the customer points out to me some factors I had originally missed. I don’t mind admitting a mistake. But if I were to offer to clean a drain for $70, and a housewife should respond that plumber X had told her on the phone that he would charge $60, I would still stand by my original offer. If I lose my time and gasoline on this “free estimate,” then so be it.

Sales managers have told me that I’m nuts. Fellow-plumbers have told me the same. Our point of disagreement is over priorities. Economically they’ve got me dead to rights. Ethically, I have the upper hand. I didn’t tell her $70 because I was trying to trick her into paying ten dollars more than she needed to. I told her that because that’s the price.

Believe me, if a plumber drops the price under pressure, he’s highly capable of recovering his “lost” money by cutting corners. A reverse auction sounds like a fool’s game to me. Here are some professionals who agree.