After this tragic accident, it is perhaps the best time to call out what I feel is an ill-advised practice by the government e-bidding system, GeBIZ.

The Government Electronic Business (GeBIZ) portal is an online platform where contractors log on to source and bid for potential government contracts of any kind.

Given the hundreds of daily requests for quotations by government agencies, it is a great business development platform. Except for one key feature not many know about: After the quotation is awarded, GeBIZ posts the prices of all the bids entered, for all and sundry to peruse. It also reveals the winning bid made by the selected contractor.

This is probably done with good intentions: market transparency and promoting competitiveness. But the side effect is a race to the bottom. If you are a hungry contractor and have lost the bid, you now know what a winning price looks like. For a similar future job, you know what price you need to enter to potentially win it. And it would likely be lower than the previous winning price.

Of course, government agencies usually don’t write RFQs based on a 100% price consideration. Most adopt a price-quality matrix, balancing the bidders’ track record with the price tendered. Yet, lowest bids overwhelmingly win the job.

How do I know this? I am a contractor and have done this countless times over the past seven years. My winning bids have consistently fallen over the years. The irony is that as my experience and quality climb (together with my cost), my rates and profit fall.

The picture below illustrates this terrible trend. The winning bid is the lowest one, and HALF the highest price.

What do you do to secure profit margin in this case? You cut corners. You do things the expedient way. Then to move on from your paltry profit, you take on more and more jobs — each one lower-paying than the one before.

I’m not asserting that the government should or should not choose the lowest bid. It should just not publicly announce to vendors what these are.

The road to hell is paved with good intentions. GeBIZ needs to re-think theirs.

Source: FB post by Clarence Chua


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