Why do VFX companies underbid? — Scott Squires answers the question

greenscreenOver at Effects Corner, Scott Squires examines the questionable business practices of the Visual Effects industry. He writes:

“One of the most problematic issues in the VFX industry, besides subsidies, is underbidding.

This is where a company knowingly underbids what the company  estimates it will actually cost to do the proposed work.  It’s also known as ‘buying a project’.

This isn’t done by just up and coming companies. Large, well established companies even in subsidized areas underbid frequently.

It doesn’t take a financial wizard to see intentionally losing money on a project is not a good long term plan. In fact it’s not even a good short term plan.”

The reasons, he continues, are Subsidies, Competition and Poor Management.

The impacts are the death of companies, the loss of wages and benefits by workers, the erosion of competing companies, and trouble in completion of films in production when vendors shut down.

His conclusions:

“Place a value on what you do. Do not underbid. Consider the long term consequences. If both companies and individuals are only focused on being the cheapest above everything else, then the quality and the creativity will fail along with the business.”