Cost shouldn’t be sole factor in tenders

Source : Straits Times – 20 Jul 2009

I REFER to last Wednesday’s report, ‘Civil servants rapped for sloppiness’, and the remarks by Mr Khong Kiong Seng in his letter last Thursday, ‘Quality first’.

The Construction Industry Joint Committee shares the view of Mr Khong on the need to also consider quality when deciding on awarding tenders. While we do not have complete details of the reported case of rejecting the lowest bid, we would like to highlight to readers, in particular procurers, the ill effects of abnormally low tenders (ALTs) which can occur if procurers award projects with an overt emphasis on the lowest bid.

In Europe, the construction industry set up a working group under the auspices of the European Commission to study the harmful effects of ALTs more than 10 years ago. It found that ALTs had serious adverse effects, not only on the company that submits the ALT but also on owners and users of the works.

Companies which submit ALTs will suffer financial losses, leading to excessive pressures to save costs and reduce expenditure on quality, health and safety. These effects are passed on via the supply chain to sub-contractors, suppliers and employees. Owners and users are also affected as the works will most likely be substandard, leading to poor value for money.

We trust that government agencies’ procurers are aware that awarding a project to the lowest bid does not necessarily result in the best outcome.

Since end 2004, the Building and Construction Authority has advocated quality and price as the basis for selecting consultants and builders in public sector projects. A quality-and-price method of evaluating bids emphasises quality and capabilities of firms in addition to cost. This is a good practice which should be emulated by both private and public sectors.

Cost should not be the sole determinant of the winning tender in both public and private sector projects. The track record and the capabilities of the bidding firms should also be assessed to ensure optimal quality while keeping to the allocated budget of the project. This will ensure that owners and users get the best value for money in their projects.

Lee Bee Wah (Ms)
Chairman
Construction Industry Joint Committee