Construction Industry – Fair Bidding System (Documents)
Owner / Architect
The Owner employs an Architect to come up with plans to construct a building. Once satisfied with the final revisions, the project will “go out to tender”.
Basically, that means the Architect will contact a number of construction companies and inquire whether they would like to bid on the contract. For government contracts, you may see these advertised in the newspaper.
Everything will be clear, everything will be “on paper”, everything will be “above board.
The Tender Documents will be provided to each interested party, which will include:
· The scope of the Project
· The Plans, specifications and drawings
· A Copy of the standard form construction document
· A copy of the Owner’s Amendments to the standard form
· An explanation of the tender process, times and dates
· Contact information for inquiries
· Statement that ALL inquiries are to be made in writing
· A copy of the contract tender to be submitted
The Communication Process
Once a party has “registered” their interest to participate with the Architect, this party will receive copies of all communications.
If party A sends in a request for clarification, the response will be emailed to all registered parties.
Alternatively, some might utilize a website with an access restriction to registered parties. The website will be updated with changes and each party can check in regularly.
In some cases, a party will not have sufficient experience with the project tendered. They can opt to team up with a qualified party if they wish.
In some cases, a performance bond may be required. That’s issued by an Insurance company which agrees to complete the project if the contractor fails to do so. This is sometimes referred to as a “bid bond”.
In other situations, a sum of money may be required to be posted. On smaller projects that could be 125% of the bid amount. It is held in trust until completion and then released.
Valuation of the Bidders
Each bidder is “valued”. Their contribution to the system is appreciated. They are treated with “kid gloves”. Both the Owner and the Architect want to do business with everyone invited over the next decade. So, no one is mistreated.
There’s no room for cheating. The system itself is designed to be fair to all the participants. It yields a good price for the Owner and a good profit for the successful bidder.
It is important to note that no system is perfect. Collusion can take place among both Owners and Bidders, however, “bid-rigging” is a “quasi-criminal offence” under the Competition Act.
Brian Madigan LL.B., Broker