International Construction Law Review
TENDERING FOR THE FUTURE—YOU GET WHAT YOU PAY FOR
JEFF DELMON
Allen & Overy, London *
Man should put as much effort into simplifying life as he does in complicating it.
HENRI BERGSON, French philosopher, 1859–1941
The world is in need of infrastructure, water, power and housing. We have the ability and resources to provide these things, but only in so far as public policy promotes efficient mechanisms to deliver them. Tendering procedures are meant to achieve efficiency, to manage costs, to maintain quality, to uphold expediency and to maximise value for money. Yet the tendering procedures that we currently use lack elements of dynamism and flexibility. This is due at least partially to the application of legal and organisational restrictions in an effort to maintain the fundamental purposes for tendering. Inefficient tendering procedures, no matter how well-intentioned, are not meeting the needs of either the public/private sector owner of the project, the prospective bidders or the general public.
One particular difficulty encountered in major projects is the cost of tendering.1
Bidders are sometimes expected to undertake a very complex, lengthy and costly exercise of project analysis, due diligence, design development, cost analysis and negotiation of the underlying commercial deal before being selected as the preferred bidder. This results in wasteful duplication and a substantial increase in the costs incurred for each bid attempted. These costs will inevitably be passed on by unsuccessful bidders through their margins for future projects and may also dissuade potential bidders from submitting bids. In turn, infrastructure projects as a whole become more expensive and more difficult to procure, reducing the amount of infrastructure available.
Formulating tendering procedures is a question of balance between control, flexibility and efficiency. The authority will want to protect its own negotiating position vis-à-vis
the bidders and obtain the best price from the bidders. However, other forces influence tendering procedures. The authority will want to maintain sufficient flexibility to adapt the procedure and the project in accordance with changing circumstances. It will also want to manage the entry costs for bidders, or possibly compensate bidders, in an
* The author would like to thank Anil Mehta, Sophie Charveron and Owen Lefkon for their kind advice.
1 For further discussion of tendering procedures see chapter 4 of John Scriven, Nigel Pritchard and Jeff Delmon (Eds), A Contractual Guide to Major Construction Projects
(1999).
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