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Get three prices for work done

31st July 2015

By: Terry Mackenzie-hoy

  

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For many years, it has been the requirement of the South African government that all government work be awarded on the basis of the lowest price offer from a number of firms through a tender process.

However, in the old days, it was not as simple as it sounds. The consulting engineer appointed by the Department of Public Works would evaluate the offer of each firm on the basis of whether the firm could do the work (resources) and could afford to do the work (financial stability) and if it did good-quality work safely. This all boiled down, in the end, to quality, schedule and safety.

In 1992, I had the good fortune to work for a firm of project managers, the senior project manager of which was from Holland. He had been the lead electrical engineer and was promoted.

I was brought in on a contract to run the electrical engineering design. The project we worked on had a total budget of R700-million, and the electrical budget was about R90-million. I had, as a senior designer, a very capable team. Our drawings were good – so good, in fact, that, when we finished the construction drawings, we handed them over to a contractor to do the work.

In addition, as is normal in these types of contracts, we had bought, on behalf of the client, all the cables, lights, switchboards, et cetera, which we could issue to the contractor to install. I had no idea how we were going to generate a schedule of quantities. But the Dutch project engineer had a different idea. He called in three contractors and issued them with the drawings. He said he wanted from them two prices: one for the work and the other a sum of money which would be paid to the contractor if the work was done to good quality, safely and on time. If the contractor failed on any of these counts, then that sum of money would be deducted from the contractor’s payment. It worked like a dream.

These days, it is the lowest price which counts. If the price is low, the contractor will definitely get the job. Thus, we have a situation whereby the contractor puts in a low price and then claims a delay (to be paid for) or additional money for variations to the specification to compensate for the low price.

Since the contractors know it does not matter how nice or horrible they are, they will still be asked to supply a price on the next contract. They are quite ruthless. And the delays they claim and the additional money for variations are quite ridiculous. One contractor who was required to supply, install and hand over a switchboard in working condition claimed a variation because there was no item in the bill to connect the switchboard to the mains supply.

Another contractor claimed a delay because the details of the Telkom cupboard on the tenth floor of a building which had not had its foundations cast was not available. In the past, contractors made an effort to be nice or at least polite. They knew that if they were unpleasant enough, they would not be asked to bid on the next job. These days, they know that, since price rules, they can be as unpleasant as they want – they will still be asked to bid. This has escalated to the point where the builder or contractor tries to embarrass the consultants in site meetings. When they try to embarrass me, I just put on my most sarcastic responses. But it is not nice.

The essential problem is that building contracts which used to be run by architects are now run by a combination of cost engineers and schedule managers. Architects used to be able to control costs and schedule to the benefit of all. But now price is everything and the results, even from well-known contractors, is poor- quality construction that is late. What we need is a ‘built environment’ convention to straighten things out. What we do not want is low prices resulting in poor-quality buildings that are way behind schedule.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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