Tesco’s contractors use reverse auctions

Barr, Bowmer & Kirkland (B&K), Costain, Midas and Taylor Woodrow are all using reverse auctions to procure subcontract work on new-build and refurbishment contracts for Tesco.

CJ has learnt that all the contractors on Tesco’s construction frameworks, many of which would regard themselves as best practice companies working with enlightened clients such as BAA and the Highways Agency, are apparently using lowest-cost methods to determine suppliers.

The admission came in an interview with Tesco director of property services Neil Sachdev at the National Federation of Builders’ (NFB) AGM in London last week.

Sachdev told CJ that all the retailer’s main contractors are using what he called e-tendering (e-auctions) on a regular basis to procure services such as demolition, painting and decorating, security installation and M&E services.

The use of reverse auctions for construction services has been strongly condemned by the likes of the Construction Industry Council, Constructing Excellence and the Construction Products Association for promoting lowest-cost bids rather than quality.

"All our contractors are using, or have used, e-tendering," Sachdev said. "However, it should be made clear that e-tendering is not mandatory. We will facilitate any contractors that want to use e-auctioning to determine construction services on our projects.

"Once a store and a framework contractor have been determined we will meet with the project team, such as the main contractor and architect, and determine whether it will be better and cheaper to go through e-tendering or to go through the negotiated procedure.

"We have found great benefits from e-tendering. By having a whole list of services that suppliers can bid against in a transparent approach they will be able to see how they can improve their bid and how they could undercut what has been offered."

Sachdev was unable to tell CJ what percentage of subcontracts were e-tendered. Midas and Taywood confirmed they were using e-auctions, but were unable to add further comments as CJ went to press.

A B&K spokeswoman said: "We package works up over a minimum amount and e-auction them. We have produced great savings taking this approach."

Another contractor, which wished to remain anonymous, said: "The pressure comes from Tesco for us to use e-auctions to continually drive down construction costs."

An NFB spokesman said: "Reverse auctions might work for the purchase of commodity materials. But when it comes to construction services, they fly in the face of everything the industry is trying to achieve through partnering and best value."