Contractors’ Bid Offers and Engineers’ Estimates

Contractors’ Bid Offers and Engineers’ Estimates – Some Remarks

Apr 23, 2019 Letters

DEAR EDITOR,

Please refer to your article on page 12 of your Good Friday edition of your newspaper entitled “Questionable Engineers’ Estimates costing Guyana Billion$”. Your piece seems to comprise both the record of bids opened for two building contracts and simultaneously a vilification by your journalist in support of (local) contractors. Engineers were the target. The content did not support the Header.
Unwittingly, the article did not expose the engineer but instead highlighted the seemingly unexplained wide variation in price offers by (local) contractors.
It may be noted that engineer’s estimates seek only to offer a figure for the owner’s budget while a contracting firm’s bid seeks to offer the owner a competitive price, thereby a win of the contract, the firm’s technical capability being demonstrated . These costings are therefore approached from different perspectives. One would note that, in the case of the two contracts in the article, the engineer’s employer would have sufficient sums to support the projects, regardless of which firm was awarded the contracts.
Let’s look at the offers made by contractors. In the first record, there are 13 offers (bids) by contractors which ranged from $8.1 million to $12.8 million; there is a significant disparity in bids, the largest being $4.7 million. The contractors may wish to explain how offers for the same building can have as much as 58+% difference.
Taking the second record of bids, the conclusions are similar. There are 12 bids with offers ranging from $7.3 million to $11.6 million and a disparity of $4.3 million, also roughly 60%.
While both Govt. and private engineering organisations use engineers to prepare cost estimates, such engineers do not have training in quantity surveying and therefore are not adequately prepared to make cost assessments. This is the function of Quantity Surveyors. This norm ought to be remedied.
Usually, rates for building activities when prepared by qualified staff would consider reasonable inputs for overhead and profit, and provide for depreciation of plant and equipment – the latter being essential for contracting firms gearing for the long haul businesswise.
While contracting firms are the best source to explain why bids have such significant variances, it is possible that some contractors seek to win contracts by applying the very minimum cost margins for overhead and profit, forget to fully consider VAT, do not adequately provide for replacement of plant and equipment, and ignore allocations for risk. This usually results in poor contracting outcomes and failed projects.
Your article has revived previous claims of corruption. However, both Kaieteur News and the Contractors should provide evidence to the appropriate Tender Authorities so that their concerns may be investigated.
Best regards
Paul Bonar, Sr.

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