Whether you call it a quote, an estimate, or a proposal, a document approximating the price of product or service is an essential part of the sourcing or contracting process. Few of us — either individuals or companies — can afford to hand over a blank cheque. No matter how vast our resources or how flexible our management of those resources may be, we need to understand the effect a particular procurement will have on the bottom line. Besides which, we want to be sure we’re getting the most value for our money.
Transparent quoting practices should be a prerequisite for any company procuring products or services from external sources. A detailed breakdown of the product or service elements and their corresponding costs offers several benefits, all of which combine to ensure maximum value.
Transparent Quoting Shows True Value
The chief benefit of transparent estimates is that they reveal the actual value of a product or service. Itemizing project costs leaves no room for artificial inflation or “padding,” and no room for ambiguity or misunderstanding. You see each piece of the project and its associated costs, so you can tell if something isn’t right or isn’t a good deal.
Specifically, transparent quoting offers four advantages:
- It reveals potential savings. When a project is broken down into its elements,
and the labour and materials for each element are itemized, project managers are better able to determine where savings might be found. For example, an element might be eliminated from the initial project and left for a later iteration. Or a company might choose to reuse materials it already has, or lend in-house talent as labour for a particular part of the project. - It makes budgeting and resource allocation easier. In cases of projects that span multiple divisions, an itemized quote allows managers to assign project elements to their appropriate budget categories.
- It provides a basis for accurate comparison. With an itemized estimate, consumers are better able to compare quotes from multiple companies and ensure they’re getting the best deal. For example, perhaps the supplier with the lower total price is using inferior materials, in which case, it’s hardly a better value.
- It creates accountability. A transparent estimate demonstrates a vendor’s trustworthiness — they’re willing to detail their pricing practices so that you can evaluate and compare. Companies providing transparent quotes must be prepared to defend the details — material costs, the number and cost of labour hours, the necessity of each piece of the project. Unscrupulous practices will come to light pretty quickly if a consumer asks questions.
No matter what the product or service, a vendor should be able to break it down and cost out each part so that you, as the consumer, can be confident of the cost and the value of what you’re getting.