Is Gov’t portal Gebiz encouraging race-to-bottom bidding war for contracts?

Is Gov’t portal Gebiz encouraging race-to-bottom bidding war for contracts?
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The fatal accident involving the collapse of the Changi viaduct a week ago could have been a consequence of contractors’ bidding war for contracts. The suggestion is being made by some, including blogsite Unscrambled and Facebook user Clarence Chua.

​The bid by the company which is responsible for the viaduct project is questionable, they say.

OKP’s winning bid was $94.6 million, 27 per cent lower than the next three lowest bids – $129.7 million by Yongnam Engineering, $185 million by Singapore Piling, and $193.7 million by Samwoh Corp.

“Did the people assessing the bids think they were saving the government heaps of money by awarding the tender to OKP?”

OKP refers to Or Kim Peow Contractors, the company responsible for the viaduct’s construction.

“But did it not occur to them that there might be something suspicious or missing or substandard about such a drastically low bid?” Unscrambled asked. “Is it realistic for one company to do this at a cost that is 27% lower than their nearest competitor, and still make money? Does OKP use some advance technology? Does OKP employ some really skilled workers? Does OKP have some secret ultra-productive processes that other companies don’t have? Or does OKP do business on such a large scale that they enjoy economies of scale?”

The blogger cites Facebook user Clarence Chua in pointing to the Government’s procurement portal, Gebiz, as a possible contributing factor to the apparent shoddy work by OKP. The company, incidentally, was also involved in another fatal accident in 2015, for which it was fined $250,000 last week.

“After this tragic accident, it is perhaps the best time to call out what I feel is an ill-advised practice by the government e-bidding system, GeBIZ,” Mr Chua said.

He points out one possible flaw in the system: “After the quotation is awarded, GeBIZ posts the prices of all the bids entered, for all and sundry to peruse. It also reveals the winning bid made by the selected contractor.”

This, he says, may lead to contractors submitting ever lower bids for future projects, since they would have known what a winning bid would possibly be.

In 2015, the Land Transport Authority said: “From among those that meet the quality criteria, 17 per cent of the civil engineering projects in the last 10 years were not awarded to the lowest bid.”

In other words, 83 per cent of such projects were in fact awarded to the lowest bids?

“If you are a hungry contractor and have lost the bid, you now know what a winning price looks like,” Mr Chua explains. “For a similar future job, you know what price you need to enter to potentially win it. And it would likely be lower than the previous winning price.”​

Mr Chua says the “lowest bids overwhelmingly win the job.”

“How do I know this? I am a contractor and have done this countless times over the past seven years. My winning bids have consistently fallen over the years. The irony is that as my experience and quality climb (together with my cost), my rates and profit fall.

“The picture below illustrates this terrible trend. The winning bid is the lowest one, and HALF the highest price.”

The result is that contractors cut corners to make a profit.

“You do things the expedient way,” Mr Chua says. “Then to move on from your paltry profit, you take on more and more jobs — each one lower-paying than the one before.”

Mr Chua, however, says he is not saying that the government should or should not choose the lowest bid.

“It should just not publicly announce to vendors what these are,” he says. “The road to hell is paved with good intentions. GeBIZ needs to re-think theirs.”

One of the suggestions he made to improve the system and prevent a price war is for the authorities to set “an Estimated Procurement Value (EPV) based on their research and knowledge of minimum prices that ensure the quality required of the job.”

“And if bids come in below the EPV, the bids are disqualified,” he says. “This would cut away the low-balling companies that would later cut corners to preserve their margin.”

Here is Mr Chua’s Facebook post: