Is a Three-Bid Procurement Strategy for Employee Relocations a Waste of Time and Money?

Finding the best pricing for products and services can be accomplished in a logical and sensible way by collecting three competitive bids for purchases. In today’s business world, many organizations routinely use a three-bid procurement technique for a wide range of purchases in order to ensure that they are getting the most value for their money. 

The practice of soliciting three bids from interested parties is successful in certain contexts, such as when purchasing computers, machines, and other types of capital equipment; however, it is less successful when used for the purchase of services like moving and relocating. The use of a three-bid procurement strategy for the purpose of purchasing employee moving and relocation services can have unanticipated adverse effects on both the financial and human resource departments, in addition to producing less than favorable experiences for the employees who are being relocated.

It’s likely that businesses who use the three-bid procurement model for employee relocations aren’t thinking about the toll it could have on their finances and human resources, or how it could lead to less-than-ideal circumstances for the relocating workers themselves. When an organization uses the three-bid procurement technique for relocating employees, it’s likely dealing with a variety of different moving companies for each relocation. By doing so, businesses miss out on the benefits of partnering with a reliable, high-performing provider that has detailed knowledge of the company’s unique needs, processes, and specific relocation policies.

Not only does this mean that different different employees may receive varying levels of service quality, but it also paves the way for a loss in efficiency for the company, which must spell out its specifications and policies anew each time, with no way of knowing how well they will be adhered to until after the fact. 

According to the findings of our previous studies and polls, implementing a three-bid procurement strategy for relocation services results in an average of eight to fifteen additional hours of work for the team that is relocating employees, as well as the teams that are responsible for human resources, procurement, and accounts payable. In contrast, organizations who were contracted with a professional relocation provider spent, on average, less than an hour working on the relocation of a specific employee.

It’s no surprise that a three-bid procurement strategy for employee relocation doesn’t just waste time, it can also waste money. Companies using the three-bid method typically provide either a lump sum payment or a reimbursement program to employees who are relocating. This places the worker in the awkward position of being treated like a consumer when it comes to the purchase of moving services. 

Companies that operate under a corporate relocation contract, on the other hand, can provide their employees with a variety of benefits that result in cost and time savings. These savings are the result of guarantees, advantages, and preferential treatment provided to employees moving under a corporate relocation contract that is not available to consumer customers.

Without a corporate relocation contract, businesses may need to spend an extra $800-1,200 every move as a result of these disparities. A three-bid strategy overlooks several hidden soft costs that contribute to the true total cost of a move, such as:

  • The amount of time spent on paperwork for the corporate buyer and shipper to compile and review estimates
  • The cost of Replacement Value Protection is not included into the total price of a consumer’s move; rather, it is an optional add-on.
  • The extra setup costs that come with adding new vendors to accounts payable who may only be used for one move
  • The difference between the budgeted amount and the final bill
  • Surcharges for peak season transfers, as well as capacity constraints for which business relocation clients get priority over consumer movements

It’s also worth noting that the three-bid procurement process for employee relocation exacerbates the primary difficulties encountered by most relocation experts. According to one mobility survey, the top challenges mobility and HR professionals encounter with their relocation programs are cost management, process efficiency, and speed to deploy. 

Three-bid procurement exacerbates these challenges by raising administrative time and cost, foregoing the benefits and cost reductions associated with contracting with a provider, and foregoing the efficiencies that can be gained over time through a long-term working relationship with a sole provider. Furthermore, up to 80% of companies do not always accept the lowest bid.

Taking a truly comprehensive approach, we must also consider the employee’s experience. We would be remiss if we did not mention that three-bid procurement tactics in relocation go hand in hand with either a lump sum or reimbursement relocation program.

Not only are these workers seen as consumers, but they also feel like consumers. That is, while this is a business-related move, employees are required to perform the necessary planning, commissioning, and other ancillary tasks. For employees who own a home, the burden is increased further by the necessity to sell one’s home and struggle with the time and financial reality of that additional, in-depth process running concurrently with the planning of a life-changing move.

Employees are frequently expected to continue with their current job obligations while simultaneously preparing for their new role in their new city, while perhaps having family members for whom the transfer signifies substantial life changes such as finding new schools and places of employment.

In the case of a reimbursement program, the employee must additionally finance his or her move, recouping their costs only when the relocation is completed. In short, the true cost of these programs goes well beyond what is listed on invoices, and it must be scrutinized to ensure alignment with company culture and remain competitive in the current talent market.

Conclusion

When determining the best purchasing and relocation plan for your company, it is critical to do a multifactor analysis. While three-bid procurement strategies work effectively for some things, they are ineffective and costly when used for employee relocation. What you might want to consider is partnering with a relocation provider as your company may benefit from it in multiple ways.

Cost control, process efficiency, and speed of deployment are only some of the major obstacles faced by relocation and HR professionals, but these issues are mitigated by full-service relocation programs. These programs secure savings by decreasing administrative costs, including perks like Replacement-Value Protection, and providing a fixed price that is protected from excessive seasonal increases, all of which are advantages over the traditional three-bid lump sum or reimbursement method.

Working with corporate relocation providers results in time savings for firms utilizing these full-service programs, as much as 14 hours per move across all internal stakeholders. Other benefits, such as preferential access to trucking capacity, long-term relationship building (which correlates positively with increased efficiency), and less burdened employees who receive the highest level of service, make full-service, provider-based programs the best option for cost- and culture-conscious businesses striving to boost efficiencies.