Agency considers contracts auction

Construction contracts could be up for auction under a new system of bidding being considered by the Highways Agency and local authorities.

Under Reverse Auction Tendering (RATs), contractors will have to bid against each other in a live telephone auction to offer the lowest possible price or the best value for money bid. Bidders would remain anonymous, with their bids relayed through an auction assistant to the auctioneer, who would act for the client.

Auctioneers Warner Sheppard and Wade, of Watford, say clients can save 17% to 45% by using this method. 'The aim is to do away with the often unfair practice of one-off, sealed bids and to offer all the suppliers a chance to lower their bids against those of their competitors,' said managing director Paul Fletcher, who invented the system.

The Agency confirmed that it is considering RaTs as part of its contracts review. Fletcher claims London Underground, British Rail, the privatised utilities and a number of local authorities are 'very interested.'

Fletcher denied the system was a form of Dutch auction. 'This is open and fair competition. Bidders remain anonymous but know what the opposition is bidding and can adjust their price accordingly. They will know that they were participating in a fair competition without favouritism.'

But Amey chairman Neil Ashley said: 'This system raises questions of client-contractor confidentiality, of cartels, of inequitable pricing, and of intellectual property rights. It's wide open to all sorts of skulduggery.'