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Do clients really lose out when contractors collude?

In my 25 years experience in UK construction cover pricing was routine for two main reasons.

If the company was overloaded with work but had to maintain its position on clients select tender lists it had to submit a competitive price to be considered for inclusion on the list of tenderers for the next tender or future work.

Also companies spend a lot of overhead wooing new clients but are not always in a position to carry out a particular project at a particular time. A cover price was sometimes obtained from competitors to be either 2nd or 3rd. Cover prices were also given to other bidders who found themselves in a similar position.

My view is that in competitive tendering the client will always get the best price for him but not for the winning contractor who may be hungry for work. I believe that in the majority of bids the client will always get the cheapest price.

Other countries have a different system of "first past the post" whereby an average of, say, the lowest three or four prices is calculated and the bidder closest to the average is awarded the contract. The client pays a fair price and the contractor gets a better deal and claims and disputes are rare.

Competitive tendering is a dying form of bidding. JV's, negotiated work, partnering, target cost contacts and cost plus are a much more efficient way of ensuring client value for money and contractor profit with the added benefit of claims and dispute reduction. This is generally the case in the Caribbean where I have worked for over eight years.

Steve Brinkhurst, senior project manager, CO Williams Construction, St Lucia West Indies, sbrinkhurst@cowstlucia.com

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