In a recent article on Daily Commercial News.com Stephen Bauld (a procurement expert from Canada) writes,
“provisions in municipal contracts will scare off sensible contractors”.
In the article Mr. Bauld addresses specific provisions that transfer risk from the Owner to the Contractor. In discussing these transfers of risk he maintains that these are unfair expectations of an owner and that any such efforts to transfer risk will be met with commensurate price adjustments from the bidders.
In principle, I agree with Mr. Bauld but I have my own perspective on one specific point he makes. Today I want a share with you my take on Mr. Bauld’s comments.
First let me address some differences in perspective.
Mr. Bauld the is an expert in municipal procurement whereas my expertise comes from private sector procurement, so there may be some differences in what he has experienced versus what I have experienced. In addition Mr. Bauld is located in Ontario Canada. Although the U.S. and Canada have very similar construction markets there are some significant differences between the two countries.
The article cites five provisions that could be perceived as unreasonable transfers of risk from the owner to the contractor. Largely, I agree with four out of the five provisions listed. I won’t go through the first four since I have no issue with those comments. I invite you to read the article and understand those for yourself.
The final point Mr. Bauld makes is,
“Asking for unnecessary detail as part of the bidding process generally serves little purpose.”
that when a contract is not based “on unit price, even the possibility of an unbalanced bid offered little justification for the amount of information required. Working out a detailed proposal in this manner is time consuming, particularly since individual contractors may not have priced their bids in the same manner as imagined by the person who drew up the form of tender.”
Mr. Bauld appears to have a very specific solicitation in mind.
He references and 11 page break down itemizing the bid price calculation.
I’ve not seen the specific solicitation, but I do want to argue that a detailed bid price is essential for an owner to understand what is included in a bidder’s quote.
Too many times I have seen solicitation bid forms that fail to require sufficient detail for understanding the scope covered in the quote.
This leads to award decisions being made on a bottom line price alone and precludes the owner and his procurement professional from understanding the quotation.
Mr. Bauld’s assertion that unnecessary detail serves little purpose contradicts the mission of procurement.
Without sufficient detail it is impossible to make an informed award decision.
Mr. Bauld also cites;
“contractors may not have priced their bids in the same manner as imagined by the person who drew up the form of tender.”
I would cite that exact reason for why a detailed a breakdown is required. Without a consistent and similar form of quotation an owner has little basis for a side by side evaluation.
Without such detail, scope discussions and negotiations are relegated to high level conversations which offer no value or insights to either the contractor or the owner.
As such I strongly disagree that a detail price breakdown is unnecessary and while I sympathize and understand that excessive detail is detrimental and counterproductive for all parties, careful consideration must be given to ensure the Owner receives sufficient detail for evaluation.
Having read several articles from Mr. Bauld I have great respect for the man and his writings. I do however want to make sure that the Owner’s perspective is kept clearly in mind when discussing the value of a bid break down or any other such provisions.
As always I’d like to hear your thoughts. Have you been on the receiving end of a solicitation where the bid breakdown was excessive? If so, how did you respond? Did you even submit a bid?
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