THE Federal Government's economic stimulus package is a much-needed shot in the arm for the Victorian economy and, in particular, the building and construction industry.
A huge, $42 billion nation-building plan was unveiled in February, and builders are now tendering for civil infrastructure projects including schools, hospitals, sportsgrounds, community facilities and defence housing. These projects can begin as soon as contracts are awarded.
Despite this, the Master Builders Association's recent Building Trends survey finds that bidding builders often face tremendous pressures, including too many builders vying for the same project, poor documentation provided by clients and inadequate tendering periods causing cost estimates to be rushed.
The current open tender system allows more than five tenderers to bid for a project, resulting in severe price cutting among competitors. While clients, including government, might think that this offers them the best deal, it actually increases time and financial pressures on builders and estimators without any benefit to the client.
They often have too little time to prepare a well-considered quote, are too afraid to speak up when overwhelmed and fear being "blacklisted" or left out of future jobs. Five tenderers is acknowledged as being sufficient to get competitive prices.
If tender documents are poorly prepared, builders can spend five days in a four-week tender period doing basic tasks such as printing, checking scale and sorting out the document sequence.
A large number of addenda issued during a tender process also results in increased tendering costs when bidders have to prepare fresh quotations to meet amended requirements.
Five years ago, it was rare to see projects having three addenda. One member told us that the minimum number of addenda issued for a project today is between eight and 10.
Prequalification requirements can also make the process cumbersome. Builders can be asked to supply detailed information about health and safety protocols, and company structure, even though that information has often already been provided in response to a call for expressions of interest.
These are real concerns. Proper tendering procedures provide the best environment for a project to succeed. Otherwise, contract disputes, potential litigation and, in a worst-case scenario, the possible failure of the principal contractor can add considerably to cost and delays to a project.
Clients, government and private, must do better in tendering to get the best return on investment. With every $1 million invested in construction, $2.9 million is spent elsewhere in the economy. Fine-tuning the process will allow builders and associated professionals to maximise opportunities and facilitate an economic recovery.
Brian Welch is executive director of the Master Builders Association of Victoria.
