Govt drops 'lowest price wins'

Government is poised to drop its insistence that the lowest bid wins on public contracts, in favour of a new value for money approach. The far-reaching change was signalled in a new white paper - released on Monday - and was accompanied by a commitment to cut tender lists.

The document, Setting New Standards: a Strategy for Government Procurement, heralds a significant switch in the core of Government procurement policy away from compulsory competitive tendering (CCT) and towards best value for money (VFM).

It says this will be achieved by a variety of means including private financing, market testing and contracting out. But there will be a particular emphasis in construction contracts on whole life costing rather than short-term lowest price bids.

The move is being welcomed by contractors who have long been lobbying for a more dynamic approach to procuring work in the public sector.

The paper also pledges that all departments will invite only a sufficient number of bids to provide 'genuine competition' and says 'in general, between three and six bids will be appropriate.'

The industry was still digesting the implications of the paper but one contractor said: 'If these moves are actually implemented life will be a whole lot easier for us. But we will have to wait and see.'

But Richard Houghton, construction spokesman at the Royal Institution of Chartered Surveyors, said the paper 'sends out many of the right messages. But translating the strategy into practice will be far from easy.'

The Government is also promising a more flexible approach to suppliers combining competition with co-operation. It says it will adopt a more flexible approach in preference to seeking firm price contracts. Emphasis is placed on the appointment by Government departments of a contract manager and, for each capital project, a project sponsor. Cross functional teams will be appointed to deliver value for money solutions.

Project sponsors 'will be supported by project managers, skilled and experienced construction professionals who will manage the design and construction of the project on a day to day basis.

'Project managers will be brought in early in the life of the projects. They may come from within the department or outside, depending on whether the department has staff with the requisite skills and experience.'

Risks will be allocated to those best placed to manage them. It adds: 'Attempts to pass all risks to the contractor will lead to higher prices and an antagonistic atmosphere.'

Where disputes arise which cannot be settled by dialogue and negotiation, alternative disputes resolution procedures will be considered.
GOVERNMENT CONSTRUCTION PROJECT:

AVERAGE COST & TIME CHANGES 1993-94
TIMECOST

(% overrun)(% overrun)

CategoryNo. ofApprovalPost-tenderApprovalPost-tender

projectsstagestagestagestage



Hospitals229 *6.713.15.9

Buildings4489.55.512.811.6

Civil Engineering8523.212.929.633.9

Roads410.72.1-1.33.9

Totals/Averages80311.06.513.813.1

*Data not available