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Lowest cost tendering – the industry should know better

Lowest cost tendering – the industry should know better

It’s a well-known saying that you pay what you get for intimating that cheapest is not always the best. Yet despite several leading industry opinions to the contrary and several reports to back them up, lowest cost tendering still seems to dominate the landscape for main contractors.

While there are calls for better processes, in the foreseeable future nothing appears to be changing, how many more wake up calls does the industry need before things actually start to change?

Lowest cost carries a heavy price

Grenfell brought to light the very tragic consequences lowest cost tendering can have. When contracts are awarded on skin and bones budgets and costs increase during construction – as they invariably do – then costs are managed in other ways, compromising either the safety of the construction process or the actual site, costing lives.

Lowest cost tendering is cited as one of main factors that lead to Carrilion’s collapse, and that their strategy of undercutting to win the tenders, in the end was their undoing. As one of the UK’s largest main contractors it’s left a gaping hole in the industry. Despite other companies tendering to take over contracts, projects stand half completed for now with an almost guaranteed budget increase if they are to be completed. On top of that, for some projects funding has been lost, leaving them in an uncertain limbo.

Smarter spending, better management

It seems that there is an overriding fear that if tenders are not awarded on lowest cost basis then it opens the door for bribery and corruption in the public sector. To back this up the John Poulson bribery incident of 1974 is cited.  However, lowest cost is not the only mechanism that can drive smarter spending efficiency and it’s time for authorities to realise that party policy shouldn’t dictate how contracts are awarded.

BIM for example, provides tools to improve cost efficiencies from the planning right through to the implementation phases. Surveying technology too contributes to more efficient site works and can help ensure work is carried out efficiently. Drone technology can be used to inspect sites and pick up deviations from plans before the project gets too far along, helping to reduce the costs of correcting back to plan.

Rather than narrowing down the focus to the bottom line, perhaps those awarding tenders should look at the ways cost efficiencies can be achieved without compromises.