Revamping the open tender process

As Lau implied earlier, the process of successfully obtaining a tender in our sector has a rather unsavoury reputation as being based on ‘ know who’ rather than ‘ know how’.

For most countries, this issue is usually solved by employing open tenders where everyone who is of ability can tender for a project without discrimination and only the best offer will be selected.

Malaysia on the other hand, for whatever reasons has yet to follow suit perhaps due to a stubbornness to change, hidden agendas or the fear of increased procurement costs.

Industry experts have commented that this reluctance for more transparency in the tendering process has in turn driven up costs and lowered effectiveness of our construction and infrastructure projects as companies who might be better poised to deliver projects are often overlooked for those who have more political clout.

There have even been rumours of some entities who tender for a project with no intention of proceeding with it but instead attempting to ‘ sell’ or subcontract it out to other companies while pocketing a neat percentage sum of the contract costs for themselves.

Such actions inevitably drive up the actual costs of the projects and in some instances even result in poor workmanship as the company who is actually proceeding with the project is forced to cut corners in order to maintain a sustainable profit margin for themselves after the original tenderer has taken a substantial cut of the costs.

However, the days of such practices are about to end as the Minister of Works Baru Bian, has guided that the PH government will be proceeding with open tenders moving forward and will even be legislating the necessity of it in government projects.

In a statement to BizHive Weekly, Baru stated that the government would be moving to utilising open tenders extensively and with transparency for all government projects.

“The use of open tenders is to ensure that public funds are well spent in compliance with the existing circular on procurement.

“It is crucial for us to optimise the usage of materials and resources and it is the obligation of the government to always ensure that this money is spent optimally,” he stressed.

“The government will improve its procurement and tendering system to ensure it is more competitive and thereby generate the best value for public funds by reviewing the existing government’s procurement procedures, and will come out with the new Government Procurement Act under 1 Pekeliling Perbendaharaan (1PP) from The Ministry of Finance,” he said.

Detailing the new open tender process, Baru said that the process will begin with the public work departments ( PWD) providing the public or interested parties with all the detailed bills of quantity ( BQ) for a particular project and bidders would be required to place their bids based on these BQ.

The bid documents and its bidders would then undergo evaluation stages to determine whether they would be suitable for the project in question and the project estimated value will be made known to help assist those involved in the evaluation process.

“Based on government circulars 1PP, several assessment criteria have been outlined to guide the evaluation of tenders. Each criterion has a minimum requirement for example the financial capability of the company needs to hold at least 3 per cent minimum capital over the estimated price of total cost of project as estimated in Anggaran Jabatan Kerja Pembina.”

After determining successful candidates, Baru guided that the final stage will be to tender the BQ amongst the companies that were successfully chosen during previous stage.

“This will ensure that we managed to secure a good company at a competitive price,” he commented. Potential higher procurement costs

On the surface, it seems that the open tender process would be the most equitable and cost effective way of awarding a project.

However, the downside to an open tender is potentially higher procurement costs as a higher number of tenders would also mean increased efforts needed in the evaluation process.

To minimise this effect, Baru guided that the open tender process employed will not be completely ‘ open’ per se as it will also have requirements that only contractors of a certain skill or in a certain expertise may tender projects.

“Under the existing government circular, the requirement of procurement is to invite certain experienced and skilled contractors in specific fields in bidding for relevant tenders for more realistic and competitive prices.

“With this practice, for any project, there will be a minimum set of criteria for companies wishing to participate. For instance, the ministry intends to limit the tender for building hospitals to experienced contractors and medical planners.”

This however raises the issue of potential small- cap contractors having a higher barrier in the participation of larger scale projects, to this, Baru guided that that there is currently a distribution of employment policy to Class G1 and G2 Bumiputera contractors under the MoW.

“This policy aims to increase the capability of Bumiputera

Class G1 and G2 contractors to be more competitive, and highly skilled.

It is also exposes them to mega projects and systematic work execution and serves to build up their networks.” Overall effect on the industry

In the short term, the open tender process is expected to drive up transaction and procurement costs due to its formality and strict adherence and compliance to procedures and requirements. However, Baru opined that the cost will eventually be lowered once industry players begin to understand the flow of the system.

“In the long term, there will be more benefits that can be derived from the open tender system, including setting a benchmark for good governance, nurturing sound companies with competitive pricing, quality workmanship and timeliness in delivering public projects,” he declared.

Sharing the sentiment, Lau added that the more straight forward tender process would also help reduce the layers of sub-contracting within projects which in turn would help drive down costs and even help increase labour efficiency.

More specifically, Baru Bian on August 5 said he will personally follow up closely the ongoing Pan Borneo Highway construction.

“This is my commitment to ensure this mega project spanning Sarawak and Sabah is successfully and timely constructed,” he said while officiating the Selangau District Teachers’ Day celebration.

“For a start, I am planning to visit the various construction sites from Telok Melano (Lundu), Kuchingching to Miri on the Sarawak sidee with ministry officers duringing the first phase ofconuction.

construction.

“Then we will visit the Sabah sidee beginning from Limbang ( Sarawak).rawak). The schedules are noww being worked out,” he said.d.

Thehe 2,325- kilometre highway highy costing about RM29 billionion is scheduled for completionmpletion by 2021. The cost is however stilll being reviewed.

Meanwhile, Baru saidd his position as Works Minister had increased his knowledgeowledgespelly

specially on road networkwork system and government buildingsldingsnatione.

nationwide.

“But as far as Sarawakawak is concerned, conned, it is still laggingging far behind.

“Itt is the agenda of the new PHgovernnt

government under Prime MinisterMinr Tun Dr. Mahathir Mohamadhamad ‘s leadership to improve on this despitepite the financial constraint,”straint,” he said.