New state tendering rules to shift focus from price

NEW measures to avoid a repeat of the Children’s Hospital cost overrun debacle — which will remove the focus on lowest-price tendering — are close to completion, according to well-placed industry sources.

The new tendering rules, currently under development by the Office of Government Procurement, will introduce the concept of “most economically advantageous tendering” into the public sector, it is understood.

The Government is in the midst of a political storm over a huge cost overrun on the new hospital, with main contractor BAM.

The new measures, in the works since last year, are also expected to introduce early contractor involvement into the state tendering system. Agencies and departments will be expected to engage with and interrogate contractors from the outset of a tendering process to identify potential problems.

Industry sources also expect a move away from fixed term lump sum tendering, which has forced contractors to build at original quote costs even if major delays mean that costs have since risen.

This has caused big difficulties for smaller contractors over the last year or two as they tried to build projects they won for low prices just after the recession despite big subsequent hikes in labour and construction costs.