Reference is made to the article with heading “Bidders Protest $7.5M Generator Contract Award” published in another section of the media on June 25, 2016. The article refers to a procurement process conducted by the Hinterland Electrification Company Inc. (HECI). As the head of the HECI, I would like to comment on our procurement processes in general, and not address the specific issue in the article.
I previously attempted to address the issue of bid-price when I wrote a letter on October 24, 2009 under the heading “Invariably, price is not the only criterion for winning a bid”. So, I would repeat some of what I wrote in that article.
Some contractors and suppliers believe that a contract should be awarded to the bidder with the lowest price, while others believe the contract should be awarded to the bidder with the price closest to the engineer’s estimate.
What those persons do not realise is that the procuring entity looks for the best value, not necessarily the lowest or the price closest to the engineer’s estimate.
Generally, in a procurement process, bidders are expected to meet certain stated requirements, which are used as the criteria for evaluating the bids. Bidders are, therefore, expected to submit sufficient, relevant information from which a determination will be made as to whether or not they meet those requirements.
However, very often, bidders ignore some or all of the requirements and just concentrate on offering the lowest possible price for their goods or services.
A bidding process usually have:
i. a financial requirement to ensure that a bidder has access to sufficient funds to successfully complete the contract;
ii. equipment and skill requirements to ensure that a bidder has the capacity to perform the contract;
iii. an experience requirement to ensure that a bidder has successfully performed similar contracts in the past; and
iv. strict technical specifications that items must meet, in the case of the procurement for equipment.
In a bidding process, bidders are expected to meet the stated requirements even before their prices are considered and compared. In other words, a bidder’s price is irrelevant if he does not meet the requirements, even if his price is the lowest or closest the engineer’s estimate.
In the case of the procurement of equipment, it is particularly important that the goods meet the technical specifications. This is to provide some level of assurance to the procuring entity that the equipment can serve the purpose (for which it is being procured) in an effective, reliable and efficient manner.
As such, bidders should pay special attention to the bidding requirements when participating in a bidding process. If a bidder cannot meet all the requirements, that bidder should consider partnering with another contractor/supplier in order to do so.
I would like to reiterate that price is not the only criterion for winning a bid. Using price as the primary basis for awarding a contract could result in the wrong contractor, supplier or equipment being selected, and this could have serious repercussions for a project.