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Let there be no return to lowest cost tendering

The industry has made tremendous progress since Egan, as an imminent report from Constructing Excellence will tell us. By Chris Gilmour

Frameworks, negotiation and two-stage tenders have provided an environment in which collaboration between the players has flourished, resulting in better projects and increased client satisfaction.

But in a climate of hardening economic conditions we await the letting of further public sector frameworks with the fear there could be a return to single stage, lowest cost tendering.

The argument might be put that there will be more contactors chasing work, which could drive prices down and help to stretch public budgets further.

This would be a mistake.

But what would be the disadvantages for procurers in lowest cost tendering? The obvious point, in a sector where margins are low, is that the chances of achieving all of the client’s objectives in terms of time, cost, quality and value for money are significantly reduced. History supports this view.

It could also be argued that it might attract the desperate, willing to chase work at any price to maintain turnover.

The advantages of two-stage tendering and frameworks are not felt only in times of plenty. They become even more important when times are tough, because they offer consistency, particularly in terms of predictability and value for money.

Frameworks working well

With increasing pressure on public finances and public borrowing now at its outer limits, obtaining the best value on public investment should become the driving force.

Public procurement frameworks are working well. The benefits are clear: contractors have time to put the right supply chain in place and, in an environment of collaboration, deliver outstanding solutions within tight budgets.

Transparency about costs and profit in the two-stage bidding process means that procurers will continue to benefit from the right kind of competitiveness. The major contractors will tackle the hardening conditions by competing harder on differentiators and adding value. What they are unlikely to do is put their reputations and viability at risk by chasing work at any price.

Chris Gilmour is marketing director at contractor HBG