The efficiency of the procurement process can significantly impact the level of transaction costs to Government and bid costs incurred by market participants. Excessive and unnecessary bid costs impact the value for money achieved by Governments, with the market loading these costs into the pricing of future successful tenders and/or the level of return required within a project. Key issues raised as having a significant impact on bid costs include:
• overall time taken from release of Expressions of Interest (EOI) to the appointment of preferred bidder. This is considered the key factor impacting overall bid costs, in particular the time taken to:
ο announce short listed bidders and release RFP documentation (resourcing of staff, bid office costs, commencement of early work, etc.);
ο evaluate bids and complete Government decision-making and approvals processes, in particular in relation to overly restrictive and/or inconsistent probity processes;
ο protracted re-bid phases (where these occur as a result of an insufficiently developed project brief or significant changes in scope);
• excessive information and documentation requests, resulting in significant direct bid costs, particularly where specialist consultant input is required. Examples include:
ο design costs associated with a detailed level of design potentially not needed in order to determine a preferred bidder, particularly in relation to the level of drawings required as part of the bid submission;
ο non-project specific information requested (perhaps a legacy from previous projects used as precedents) but not required for evaluation of the current project; and
ο requests for information regarding general processes that contractors (both builders and facilities maintenance contractors) must have in place to maintain industry accredited certification;
• inconsistency in tender documentation from project to project, which significantly impacts the efficiency of the bidding process and the ability of bidders to realise efficiencies in non-project specific elements of bidding. Although the market acknowledges the benefits associated with the improvements in standardisation of commercial principles nationally, a lack of consistency in detailed contractual drafting results in debate and reconsideration of positions amongst consortia members;
• inefficient resourcing, due to the lack of a national co-ordinated pipeline, resulting in peaks and troughs for specialist staffing requirements, impacting on bidders' ability to bid on multiple projects at the same time as having to select projects based on their perceived chances of winning;
• lack of clarity in Governments' requirements resulting in bidders undertaking unnecessary additional work and/or re-working potential solutions throughout the bid phase;
• requirements for bid bonds and other forms of security leading to additional costs unnecessarily incurred during the bid phase, due to the level of commitment already made to the process as a result of the existing resource commitment and sunk costs associated with submitting a bid; and
• inefficient costs incurred by each bidding party individually undertaking due diligence that could be undertaken by Government and provided to bidders (for example geological, contamination, environmental and condition assessment studies, particularly in respect of linear type infrastructure projects).
This paper focuses on the bid costs incurred by the market from release of EOI to announcement of preferred bidder. Costs incurred post-appointment of preferred bidder are generally not at risk (assuming successful negotiation and resolution of outstanding issues as well as Government's commitment to the project). However, inefficiency in the procurement process post-appointment of preferred bidder still negatively impacts value for money outcomes, as these costs are included within the overall tender price.