GOVT GEBIZ PORTAL ENCOURAGING “RACE TO THE BOTTOM” PRICES AMONG CONTRACTORS
Following the tragic accident where a public highway collapsed, leaving 1 dead and 10 injured at the site, a brave contractor has stepped forward to explain just why the current practice of choosing and then publicizing low cost bids in government projects is a bad idea.
According to the netizen Clarence Chua, the Government Electronic Business (GeBIZ) online web portal is an online business platform where contractors can log onto source for and bid for potential government projects. After bidding is completed, the government displays the quotations of all the bidding contractors, including the winning bid.
However, based on Mr Chua's years of experience with the system, he realized even though the government does not only consider the low cost of bids in its decision making process, low cost quotations tend to be awarded the project most of the time.
He writes of the system: "This is probably done with good intentions: market transparency and promoting competitiveness. But the side effect is a race to the bottom. If you are a hungry contractor and have lost the bid, you now know what a winning price looks like. 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.
"Of course, government agencies usually don't write RFQs based on a 100% price consideration. Most adopt a price-quality matrix, balancing the bidders' track record with the price tendered. Yet, 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."
He adds that when forced to cut costs, many contractors end up cutting corners and doing things expediently.
Read his account here.