ABSTRACT
Traditional contractor selection in the construction industry in Australia has long been managed through the process of calling for competitive cost-based tenders. Such bidding processes may also include estimated construction time as a selection component but, in general, they do not include an assessment of the contractor’s ability to deliver quality project outcomes (Cartlidge 2004; Masterman 2002). Consequently, the lowest priced tenderer may not ultimately be able to deliver the best value for the project’s end users. The traditional system attempts to manage quality either by the exclusion of all but known or ‘invited’ tenderers or by independent supervision of the contractor’s work by an architect or other expert. There are potential difficulties with both these options. In the former case of invited tenders or pre-qualification, there is a risk of a ‘closed shop’ situation developingwhere new contractors are locked out of the process (Fong andChoi 2000; Mahdi et al. 2002; Ng et al. 1999; Palaneeswaran & Kumaraswamy 2001). In the latter case of architect supervision there may be either a lack of expertise in ‘buildability’ issues or insufficient resources to make timely decisions on problems that arise on. As a result of these problems over several decades, the industry has seen a gradual increase in the use of other procurement methods such as Design and Construct, In-House Development, Partnering and Relationship Contracting (Chan et al. 2003). Nevertheless, the traditional competitive tender system has not disappeared. Despite evidence of the system’s short-comings owners sometimes see competitive prices as their only significant way of ensuring some market input into
the procurement of an expensive asset. It is not possible to comparison shop for new buildings in quite the same way as it is for real estate. Competitive tendering gives the impression of fulfilling this role although it may not necessarily always deliver a successful outcome. Builders can favour competitive tendering because it allows them to specialise in the delivery of projects and avoid involvement in design iterations and project approval processes. Whatever the procurement method the relationship between cost and value remains a problematic one. In general, the competitive bidding process emphasises cost at the expense of value and the result is a problem with delivering project quality (Uher 1999; Walker and Hampson 2003; Hampson 2005).
