Opinion column written by OBA MP Jeff Sousa on Development of Bermuda’s Airport
The Opposition has attacked Government plans to rebuild the airport in part by saying that because it has not involved a competitive tender, it is “a slap in the face to good governance,” as Shadow Finance Minister David Burt put it.
As is often the case, the Opposition is making that claim without doing its homework. Had they looked around a little, they would have learned that many western governments are being advised consider alternatives to competitive tendering, especially for projects as large as this one.
Flaws that perhaps don’t make a great deal of difference in small contracts have the potential to produce waste on a grand scale in larger projects.
It was exactly that kind of waste that Finance Minister Bob Richards had in mind when he told the House of Assembly that the traditional RFP process had gone awry in Bermuda in large projects such as Heritage Wharf, the Port Royal Golf Course and the new Police and Courts building, costing the Government millions more than it had anticipated when the building process began.
There are a number of disadvantages to the traditional tendering method of awarding contracts, including these:
Competitive bidding seldom allows the customer to get the product he knows is best for the job, because it is underbid by suppliers of products of lesser quality.
The best company for the job may not bid because it finds the advertised conditions onerous, or because the cost-cutting process of tendering threatens its reputation for high quality work.
To play the game of “cost plus” a supplier offers a bid so low that he is almost sure to get the business. But after the bid is accepted, the customer discovers that a change in plan is vital. The supplier obliges, but the change adds tremendously to the cost of the work, restoring the supplier to profitability.
One way a supplier can reduce his costs in the fierce competition to get a contract is by using cheap labour or materials, or by cutting corners and creating safety risks, meaning the customer may end up with an inferior product that costs more in the long run.
It can take years to choose a successful bidder. The customer may wait for unacceptably long periods for a product or service that was needed quickly.
The process of overseeing the work involved often requires the hiring of expensive consultative expertise not available in-house.
Alternatives to competitive tendering will vary depending on the type of work needed, its complexity and its cost. The following key principles however, can be applied to the majority of procurement decisions:
Thorough research of the purchasing requirement and/or alternatives.
Open communication with current or potential suppliers.
Purchasing decisions based on a strong relationship of trust.
Developing a long-term and healthy relationship with a reputable supplier or suppliers.
Paying the supplier a fair profit margin.
It is because of these key principles that the Government has turned to the Canadian Commercial Corporation. This is an agency that does no work and supplies no product itself. It is an agency that simply matches customers with suppliers.
CCC provides governments with the benefits of government-to-government contracting, including the time and cost savings of a simplified procurement.
Working as Prime Contractor, the Corporation stands behind every sub contract with the full assurance of the Government of Canada. Its robust risk-mitigation process means that CCC supports only those suppliers that it considers are financially and technically capable and are committed to ethical business practices and corporate social responsibility, thus ensuring a high success rate for projects.
The agency oversees all contracts from start to finish. CCC also provides Procurement Agent services, sourcing and delivering goods and services from trusted companies.
It is an agency that can be depended upon to remove all the disadvantages of competitive tendering, and is capable of saving the Bermuda Government millions of dollars in the cost overruns which have come to be expected on this kind of project.
Far from a slap in the face to good governance, it is a creative method of making sure Bermuda gets the best value for money.