Judging and awarding bids may not be routine for you, or even a part of your job.  Nonetheless, it undoubtedly has an interest for you and a bearing on your work.  It is doubly interesting to think about this because how a bid is or should be awarded may seem self-evident, when it very much isn't.

Procurement is a difficult line of work.  It's difficult enough to know and follow all the rules and regulations that exist, and that difficulty is compounded by the need to make certain all bidders follow them as well.  It's practically a recipe for something to go wrong.   This is why it's imperative to be careful when choosing a bid.  The theory is self-evident.  The practice is less so, or people wouldn't still be searching for the mythical "best bidding" system.

In 2005 Arthur O'Leary wrote an article dwelling on bidding systems and detailed some of the more varied bidding systems supposedly in use somewhere in the world.  Perhaps the most exotic one involved in getting rid of the highest and lowest bids on the assumption that they must be wrong.  The average of the remaining bids is then taken and whoever is closest to the average - which is presumably the correct price - wins the bid.

It is fair to ask why the contract shouldn't be awarded to the lowest bidder.  Assuming everything has worked correctly then the lowest bidder should be the lowest responsible bidder.  That is the linchpin.  If the procedure for weeding out unqualified bids isn't flawless, the difference between the lowest bidder and the lowest responsible bidder can be enormous.  As one general contractor pointed out to illustrate the difference, "I can't tell you how many times I have submitted a bid only to come in second, knowing that the project could not be done for the low bid. Eventually I found out that anticipated delays and change orders paled my bid."

Of course, if there were no unscrupulous contractors then this would all be very easy.  Every bid would be the amount for which that contractor could responsibly complete that contract.  Unfortunately there is bid peddling and people turn a blind eye to last minute, unqualified low bids.  This is why there are so many rules and regulations.

Naturally it isn't possible to award a bid to the lowest responsible bidder unless those awarding the contract have some idea of how much the project will cost.  So long as they don't have this information they may as well choose the lowest bidder every time.  There is more rationale to that than blindly throwing darts at a board.  If they do have this information then they can rightly be leery of a contractor who bids $500,000 for a job that they know should cost around $750,000.  In such a situation the second lowest bidder could very well be the lowest responsible bidder.

Is it fair not to choose the lowest bidder?  Certainly, if the rules and an informed contractor knows what's at stake.  And which responsible contractor wouldn't be informed?  Government procurement carries an added burden.  You must do what's best for your community, be it a city, county, or a state.  There is no reason that you cannot be perfectly fair while doing what's best for your community.

Of course it may all be quite optimistic.  At the end of the day, the contractor needs to make money.  O'Leary points out, "If the contractor does not end up as low bidder, then all the time and effort expended in preparing the proposal is down the tube. Nothing is salvageable. All that is gained is bidding experience - and who needs it?"  That makes their job the difficult one.  Contractors need to determine whether they have a reasonable chance of winning.  Buyers only need to make sure they have a fair chance against the other bidders.

 

Sincerely,