atans1

Public tenders = PAPpy greed?

In Financial competency, Public Administration on 23/01/2018 at 7:26 am

At regular intervals, cybernuts (Think TKL and TRE nuts) and usually rational S’poreans complain that public sector public tenders must not always go to the lowest bid or to the highest offer. Discretion must always be exercised for the good of the public. In their opinion, the PAP administration’s failure to exercise discretion for the good of the public is evidence of the greed of the PAP.

But are they willing in turn to give the govt and other public organisations the benefit of the doubt when bids are won by those bidding more or offering more (say for leases) but then things go wrong?

The reality of winning public tenders is that the lowest bids or highest offers are the way to win them. The UK has seen the collapse of Carillion, a construction and outsourcing contractor, who won public sector bids by consistently being the lowest bidder.

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The trap of awarding tenders to lowest bidder for society

Rob Whiteman oversaw the procurement process at the government’s UK Border Agency, where he used to be chief executive. He now heads up the Chartered Institute of Public Finance and Accountancy.

He worries public contracts are too often awarded to low bidders.

“Low bidding can appear attractive to procurement officers because they know they will be judged on value for money. But I think there is a bear trap,” he explains.

“If we overscore cost in the evaluation then we risk squeezing contractors’ profits and if they’ve got their sums wrong they may take their best staff off the contract and the taxpayer gets a sub-standard delivery.”

Another concern raised by Mr Whiteman is a lack of focus on the companies’ financial robustness during the tendering process.

He thinks that while civil servants look at a firm’s track record for delivery, more questions need to be asked about how financially sound the company is before awarding a contract.

http://www.bbc.com/news/business-42720245

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To avoid accusations of wasting public money, there’s pressure to accept the lowest bid. Conversely when tendering revenue generating contracts (say leases), there’s pressure to accept the highest bid to avoid accusations of failing to maximise public revenue.

Remember that in the background is the elephant: there’s the taint or accusation of corruption, favouritism or cronyism when the lowest bid (or highest offer) is not accepted.

Coming back to the idea that discretion must be exercised for the good of the public, what is the “good of the public”? Ideas on a post card, as those wanting public tenders to be awarded using this criteria don’t seem to be able to define it. In the case of renting leases, for the “good of the public” usually amounts to renting out to a small mom-and-pop comfort food operation rather than Tony Tan Colonel Saunders or Big Mac who can afford to pay and pay unlike the small family eatery. So everyone KPKBs of “moneytheism” of the PAP administration.

 

This issue is more complicated than the cybernuts think.

 

 

  1. Absolutely. Altho would say the Carillion collapse has less to do with accepting the lowest public tender than how the PFI s structured and how the company handles and report its future receivables.

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