We must all work to improve tendering

Apr 25 2008 by Don Ward, The Journal

THE media had a field day following the Office of Fair Trading’s announcement that it had issued Statement of Objections against 112 construction firms.

Any anti-competitive practice must be condemned and a number of the companies involved have already held up their hands. But, as ever, the devil is in the detail and before condemning all builders – and 112 is a fraction of the 280,000 in the UK – as cowboys, it is worth analysing the substance of the allegations.

There are two. Firstly, that the companies were involved in cover pricing. This involves bidding for contracts they do not really want, to keep favour with the client (normally a local authority). To ensure their bid was not successful, they colluded with rivals to bid an overly-high price, knowing it would not be successful. A second, more serious allegation – levelled at a minority of the companies investigated – was that they colluded with rivals to agree who was going to win the contract.

Then the successful bidder paid a pre-agreed amount of money as “compensation” to the loser by creating a false invoice. As I said, anti-competitive practices are wrong. But for reputable companies to apparently fall foul of the rules might suggest there is something systematically wrong. The tendering process aims to ensure that local authorities, for instance, get the best value possible on behalf of their council tax payers with bidding contractors therefore encouraged to do the work for minimum cost.

In addition, companies have to satisfy strict criteria before they are accepted on to the list of potential bidders.

Again, in theory, there is logic behind this.

However, it can mean – for example – that a company with an outstanding track record in its sector might not be able to tender for work on a new school if it has never worked on a school before. As we strive for innovation and imagination in our built environment, this condition seems short-sighted.

On the other hand companies who are on the approved list often feel compelled to bid for contracts, even though they might not want to, for fear of being excluded from future tendering processes.

Low costs and familiarity are important, but so are a company’s capability and capacity.

These must be a factor in the bidding process. Major construction projects require a range of skills and usually a range of companies with those skills.

From the start of the process, therefore, there needs to be collaborative working and openness between the bidders and the organisation awarding the tender. There must be more scrutiny and rigour in selection. This approach also requires open book accounting.

If the publicity surrounding the allegations has dented public confidence, then it is worth remembering that they relate to events several years ago. In addition, the OFT agrees that the sector has come a long way since then.

It is up to our industry to help identify the flaws in a system, which a few have fallen foul of, and continue to work with the relevant bodies to ensure improvements.

For more information on Constructing Excellence in the North East, contact regional director Catriona Lingwood on (0191) 383-7435 or catriona@constructingexcellence-ne.org.uk

Don Ward is chief executive, Constructing Excellence in the Built Environment