Alternative tender system for SMRT

Tan Kin Lian

For the past two decades, I have taken a view that the competitive tender system is a bad system. The principal may get a lower price but the contractor may cut corners and provide inferior material and workmanship to keep a profit.

It is difficult for the principal to monitor the work closely. It also leads to conflicts, and request by the contractor for additional payment due to variation orders. It is a game. One party tries to “cheat” the other party.

What is an alternative system?

This is my suggestion. The principal will ask two quantity surveyors to estimate the cost of the project. If the price differs, in the case of two estimates, the principal will ask the quantity surveyors to explain the difference, and will select the more realistic estimate.

In asking for tender, the principal will disclose the estimate made by the quantity surveyor. This will help the bidders to prepare their bids.

When the bids are received, the principal should select a bid that is close to the estimate and award the contract to the bidder that has the best resources including the quality of the manpower and their availability.

The principal should give preference to the contractor that has fewer projects on hand, as they can focus on the new project.

The aim of this system is to give a fair price to the contractor for the project, so that they can focus on doing a good job, rather than worry about cutting cost. If they have a good profit margin, they will not have to cut corners on the quality of materials or workmanship.

If a contractor cuts corners to make a bigger profit, they should be barred from future projects.

This system of awarding a fair price will encourage contractors to build up a pool of permanent workers who can develop their skills. They are assured of a continuing flow of work.

I suggest that the public sector adopt this new system of awarding projects based on “a fair price”. The private sector will be encouraged to follow this practice.

Suppose the fair price for a contract is $200 million. Under the current competitive system, a contractor may bid $180 million to get the job. They may look for ways to reduce their cost, such as using cheaper materials (i.e. lower quality) or cheaper workers (i.e lower skill). This will have serious impact in the years ahead.

Alternatively, the contractor will find ways to ask for additional payments through variation orders to get the additional $20 million. This can lead to disputes. The principal may end up paying the same cost.

The system of getting the principal to disclose its estimate also helps the contractors to prepare their bids at a lower cost. They do not need to carry out the entire work as they can use the principal’s estimate as the basis to make adjustments to their final bid. It will remove most of the uncertainty and allow the contractor to focus on where they can add their value.

The most important benefit of a “fair price” system is that it allows contractors to build up a pool of permanent workers who can develop their skills over time. They will be confident that they have a job that for many years. The contractor will also be confident of providing this assurance to their workers.

We have seen the harm that comes from our competitive tender system, as reflected by the continuing problems in our MRT system and also the poor quality of many new property projects.

It is time to consider a better system to award projects to contractors, based on a “fair price” system.

 

* Facebook post by Tan Kin Lian.

 

 

 

 

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13 Responses to “Alternative tender system for SMRT”

  • NotMyProblem:

    @Mr. Tan, it doesn’t matter if it is two envelopes tender system or your fair- price method, it just cannot beat the kaki-nang method.

    Most work in government tenders are awarded to people with connection. These contractors already knew exactly how much to bid for and how much it needs to go undertable.

    Isn’t it obvious those contracts in Town Councils. Remember AIM, the Tampines flyway collapse, $800K bin centre, HDB lifts and etc.

    It was not the lowest bid, it was because a lot of money for the project went to the wrong way.

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  • Amos exposed PAP hypocrisy:

    Some stat boards already have a quantity surveyor which provide estimated cost of projects. The problem is that his estimate is not used in evaluating bids. What should happen is that any bid below say 5% of his estimate should be rejected. But it isn’t. Why? PAP still believes in the oxymoron “cheap and good”. Also risk-averse civil servant will always recommend the lowest bid for fear of being accused favouring a particular bidder. Blame SOB LKY for this practice.

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  • LIONS:

    ownselves award own GRASSLOOTERS ?..cheapest?

    like you say,’ad this,add that’ after award of initial CONtract????!!!!
    then anyhow TAX THE POOR PEASANTS WHO ARE JOBLESS OR RETIRED?

    SO MANY ‘BILLIONAIRES’ created from grasslooters type???

    fiack the shitty $ystem!

    integrity? honesty?….really?

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  • Cursed ?:

    Today a EW mrt train got hit by lightning. Driver sent to hospital after the incident after he complained of feeling unwell. Reported on 9pm news ch 5 .Poor guy.
    Hope alls well now.
    Is our mrt system cursed. If so, by whom?

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  • asd:

    is he trying to make us understand that the lowest successful bidder do not have to fulfill its contractual obligation ? and that there is no one to ensure that they do ?

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  • rukidding:

    Mr Tan have been “sleeping” all this while and didn’t know how the G and G related system works !

    There are times where a Tender is “abrogated” on purpose .so that Participants are “forced to be enlighten” and indirectly had to know how to “adjust” their prices downwards….because all the “Tendered prices in the initial first tender have already been shown and “leaked” to every participants”.

    In the end,…Tenderers are “forced to offer at a lower price ,…using the 1st Tender results which had been “exposed and abrogated”…maybe on “purpose”

    This is how the “G” system works…..in a “leegal” way !

    In the end….its …”I WIN”….”You. Lose” .

    Sounds familar rite ?…….”With you”,…”For you” ????

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  • Harder Truths:

    The tender system in $G for all government authorities and stat board by default requires the lowest tender be approved. This is regardless of what system is used. Any system can be made to favour any tenderer.
    This is nothing new and SOP.

    The problem is not the process but the people behind it demanding certain outcomes. This is not to exonerate the people directly involved,. However they have no power to change the rotten system.

    The end result is that some people are going to die one day. Mostly the 70%. It will happen only a matter of time.

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  • KHAWK & Bull story:

    Is the term singapore standard becoming a shame?

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  • Oc transport:

    The Cheng hu should also have a competent site manager to check on hardware and manager construction stage by stage!

    Leaving it entirely to the ah nehs to do the work, complete then open ceremony is a sure way to disaster!

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  • huh:

    Dear Mr Tan,

    You should not talk with authority on something that you dont know and damage the credibility of netizens.

    There is nothing wrong with the tender system, its the pre qualification requirements that are too loose and post tender monitoring and poor quality of personnel user acceptance tests supervision.

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  • MarBowling:

    Unlike in olden days, nowadays In SinKapore No tender System is foolproof. After the signing of documents btw the top guns representing the Coverment and the top guns of the company awarded the fiacking contract, the top guns esp from the Coverment will climb back on top their ivory tower leaving the main and important task to their subordinates. For these MFs, It will be limp Kopi, shake legs and boobs all day LOONG! End result, few or no one will check on the daily work carried out by the workers on the ground. DO You think the manager or the supervisor will check diligently on work that are done during the wee hours, esp the materials used!? You may HAVE the mother of all best designs on planet earth, the damn thing will still collapse like no body business if the materials used are of poor quality or at being replaced by inferior ones and the supervision is lax! How come like that? It’s because of the BEAUTY of outsourcing or best sourcing, the blady brainchild of Mai Hum! Important establishment like PWD(Public Work Department)and HDB were downsized and privatized leaving skeleton staff to SUPERVISE the outsourced companies. Analyze carefully whether the skeleton staff with NO PROSPECT OF PROMOTION AND CARRER ADVANCEMENT, would they still want to carry out their duties diligently when What is in front is dark cloud and only steps away from sunset! These are the people who are doing all the shits work$ for the downsized organization with RETRENCHMENT AFFECTING only the Middle and Lower rank and file staff, while in the new setup, they have fancy new position of director of this and that unit, deputy and assistant directors under an overall GROUP DIRECTOR. All doing WHAT all day LOONG! For answer, ask the CEOs of those downsized Coverment organizations!

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  • Tender Award:

    Best to award the tender to the middle bid.Best chance to have a good and quality project outcome.

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  • Tender Done the F1 Way?:

    Maybe…

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