'Unrealistically' low public construction bids to be interrogated

19 February 2021

Contractors will face “intense scrutiny” over unrealistically low bids for public sector construction contracts, according to a UK government official.

Fergus Harradence, deputy director for infrastructure and construction at the Department for Business, Energy, and Industrial Strategy, said very low bids would be rejected unless a plausible explanation is provided.

In a webinar with the Business Engineering Services Association, Harradence said: “We want to do things differently. This persistent under-bidding for projects leads to ministers having to stand up in parliament and apologise for projects running over time and budget.” 

He added that unrealistic bidding means the government does not achieve the desired quality for projects, and leads to the industry suffering low margins and a lack of investment, as well as poor payment and contract conditions that pass on too much risk to suppliers. 

“We need to get away from a situation where people are only able to make a profit by putting pressure on their supply chains,” he said. “We need the industry to behave responsibly and embed the rigorous comprehensive approach to quality that has been so successful in manufacturing.”

Any contractors suspected of underbidding will face a detailed interrogation as “it is better for projects to appear to cost more, than us having to go cap-in-hand to the Treasury for more money further down the line”, he said.

“We need to spend more time and money at the start of the process to get the design right. That will give clients greater reassurance that they will get the quality asset they need.”

In December 2020, the government released its construction playbook which contained new procurement rules aimed at resetting its relationship with the industry.

It highlighted that departments should refer abnormally low bids, those more than 10% lower than the average for that project, to the Cabinet Office.

Harradence said: “There has to be a greater level of trust between the industry and its clients – this is absolutely pivotal. Without that trust, the process will run into the mud.”

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