Cheap parts can cost you in the long run

Cost matters. How much operational cost we have directly impacts our bottom line. We are all looking for goods and services that provide good value in our business.

But when one supplier’s price comes in substantially cheaper than everyone else’s, there is a question we need to ask:

What has been taken out to deliver that price?

Is it simply better efficiency? Lower overheads? Or are cheaper materials being used, less-qualified people delivering, and weaker quality checks being done?

A recent Victorian prosecution shows just how badly things can go when the things you can’t see aren’t properly checked.

A Victorian business engaged a China-based third party to prepare the drawings, fabricate and treat approximately 440 tonnes of structural steel, then ship it to Australia for the redevelopment of the Kew Recreation Centre.

The steel arrived, with quality-assurance paperwork. The first few containers were inspected.

It was erected, everyone went home, and then part of it collapsed.

The good news? Nobody was hurt. It happened at around 10 pm, when the site was empty. The bad news? That was good luck, not good planning. The failed truss spanned 40 metres above the pool hall. Had it collapsed during the working day, or after the recreation centre opened, the outcome could have been catastrophic.

What caused the collapse? Shoddy welding in the underlying materials. In the structural steel which had arrived from China.

WorkSafe don’t take shoddy construction lightly. The business was found guilty, convicted and fined $400,000 plus costs.

Its failure wasn’t engaging an overseas supplier. It was failing to check that the work had been done properly. It hadn’t ensured the quality documents were reviewed by someone competent. It hadn’t ensured the welding was completed by qualified welders. And it hadn’t ensured the truss underwent the necessary testing and inspection.

Now, I don’t have the full picture here.

I don’t know whether this steel was chosen because of price. I can only guess this may have influenced the decision, given 440 tonnes of it was fabricated offshore and shipped to Australia. If price was the driver, it turned out to be one hell of an expensive saving.

But speculation aside, what we do know is that critical work was outsourced, the workmanship was shoddy, and checks failed to pick it up before it was used.

That is the risk when outsourcing, and it is why supplier and contractor selection and management are so important

You see the finished product. You don’t necessarily see the materials used, the capability of the people doing the work or the quality checks happening behind the scenes. The product can look the same. The paperwork can look legitimate, and you might not discover the difference until the part fails.

Cheap and good value are not the same thing.

Chase value, always. Value considers more than the number at the bottom of the quote. It factors in quality, reliability, longevity, sustainability and whether the product is safe and fit for purpose.

But selecting contractors or materials based on price alone is a dangerous game. A low price is no bargain if it comes from shitty workmanship, unqualified workers or quality checks that were never properly done.

Compare prices. Negotiate hard. Look for savings. Outsource when it makes commercial sense.

But do your due diligence. This is especially important when outsourcing internationally, where standards and quality requirements may differ from those in Australia.

If a quote is significantly lower, don’t just celebrate the saving. Interrogate it. Ask what makes that price possible. Ask how you will verify that safety and quality haven’t been sacrificed to deliver it.

Because if the saving ultimately impacts the health and safety of your people, or the wider community, that bargain good or service may end up being the most expensive thing you ever buy.

Case source: WorkSafe Victoria’s Prosecution Result Summaries and Enforceable Undertakings.

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