Whitehall’s measures to avoid low-ball bidding will not increase the risk of price fixing, two authors of the Construction Playbook have said.
As previously reported, the new guidance for government procurement includes a provision designed to prevent jobs being awarded to low-ball bidders with clients being obliged to refer any bid that is more than 10 per cent below the average of its competitors’ to the Cabinet Office for extra scrutiny before it can be signed off.
In an interview with Construction News, Infrastructure and Projects Authority chief executive Nick Smallwood (pictured) and Cabinet Office crown representative Phil Brookes said the playbook would help modernise the construction industry through measures such as stressing the importance of value over cost.
CN asked whether a secondary look by another government department would really have any impact on low-ball bidders.
Brookes said: “I think it will. One of the key themes in the playbook is cost modelling. It’s an area that we need to improve on moving forward; we should have a pretty good idea of what projects cost […] but the abnormally low bid process is designed to just sense-check that suppliers have actually interpreted the requirements correctly, and that it is sustainable. The last thing we want is to be letting contracts to people on unsustainable rates.”
He added that suppliers “could help more” as they usually stand by low bids following queries from government rather than re-examining them. The new measure, he said, is “not intended to delay things, but is a process that should help eliminate things that are going to cause us a problem farther down the track”.
Smallwood added: “There’s going to be a very strong focus on value for money, rather than lowest price, [which] ultimately results in poor value for money because the bidders have omitted to do various things.”
Among the aims of the playbook is a drive to mandate the increased the use of modern methods of construction (MMC) on public sector construction projects.
Smallwood said that much of what is contained in the guidance is “common sense” and reiterates the government’s determination to “drive innovation and modern methods of construction through standardisation and aggregation of demand, increased planning capability and setting clear requirements for suppliers”.
Whitehall has called for increased use of MMC for years and announced a presumption of offsite across five departments in 2017, but figures obtained by CN in 2019 suggested that it required very few projects to be delivered through the methods. Addressing this, Smallwood said that subsequent moves to create a visible pipeline of work, including the publication of the national infrastructure strategy and the hospital building programme, would help this.
“I think what you’re seeing with the playbook now is a reset and a refresh; an expectation that we’re now really serious as clients and we want to push the initiative forward,” he added.
CN asked whether firms using different methods and companies with varying access to the factory-production facilities associated with MMC would make it harder to assess the quality of their bids in future.
“I don’t believe so,” Smallwood said, stating that “pockets of the supply chain” have already been delivering through MMC on hospitals, schools and prisons. “We actually want to see a 40 per cent drop in cost, so we’re going to be proactively looking for modern methods of construction applied. The challenge is that we don’t want them to underbid and not allow for being productive, and we want them to make a healthy profit at the same time, so there are checks and balances to make.”
The Competition and Markets Authority has recently warned the construction industry over collusion and illegal price fixing. A survey it published last February found that almost a third of senior construction professionals believe it is acceptable to agree prices with competitors. Nevertheless, the civil servants dismissed a suggestion that there could be a risk attached to measures in the Construction Playbook putting extra scrutiny on firms who bid at lower rates than their competitors.
Brookes said: “I don’t see that as a big issue. I think that, following some of the problems of 15-20 years ago, suppliers are generally incredibly transparent with us in the way that they price these things.”
Smallwood added: “I think good bidding practices will still be followed. So, the chances of that [price fixing] happening on our projects, I would hope, is slim to none. And it’s all about due process and being transparent in the bidding process.”
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