ConstructionPro Week, Volume: 3 - Issue: 18 - 05/02/2014

Are Private Contracting Practices Too Informal?

By Bruce Jervis


The public competitive bidding process is formal and structured. The underlying policy is to treat all bidders fairly and equally, as well as to protect taxpayer dollars through open competition. The mere appearance of favoritism or impropriety is offensive to the public procurement system. A formal process with a stipulated bid form and price breakdown avoids problems.


The private procurement of construction contracts is quite different. Without the expenditure of public funds, the policy concerns underlying the public bidding system do not exist. Private entities may contract as they choose. Sometimes, however, private project owners could benefit from the greater structure found in the public system.


An example is found in a recent case from Missouri. A private project owner was planning renovation of a nursing home facility. The owner hired an architect to prepare a detailed design for review by prospective bidders. The owner then became nonchalant, however, apparently allowing each bidder to, in effect, draft its own proposal. The successful bid became a term of the resulting contract. The parties couldn’t even agree whether the contract was fixed price or time and materials based.


Have you seen examples of private project owners failing to exercise discipline during the bidding process? Do you prefer the structured “take it or leave it” public bidding system? Or, do you prefer the more flexible private procurement process where there is an opportunity to negotiate terms and conditions? I welcome your comments.



The concept of open competition for public work is ok assuming you apply that to early selection of contractors wherein one develops a collaborative process,,,,that would protect taxpayer dollars. The "worst" low bid concept is a sham.
Posted by: Bill Gladish - Friday, May 2, 2014 11:07 AM

If managed well and knowledgeably, the private system is far more advantageous to the owner. First of all we can qualify bidders based on our own experience and judgement. Reputation and track record count for a lot. Limiting bidders creates more incentive for each bidder to invest more effort into their bid.

As in public work, we bid the contract as well as the drawings and specs. We also use a defined bid sheet. But we also accept clarifications and qualifications to the bid. We can interview individual contractors to determine how well they understood the documents, discuss their current work load, and what managers are going to be assigned to the project.

When we select who we believe is the best contractor for the project, we are still free to negotiate changes in scope to suit project budget or owner needs.

We understand the public process. We think that it generally avoids corruption, but it is often enormously expensive for the public.
Posted by: Eden Milroy, Pilot Development Partners Inc. - Saturday, May 3, 2014 10:01 AM

There are pros and cons both in the public procurement and in the privae procurement systems. I do not believe that the public procurement system with its rules and rigidity always gives the best value for each dollar spent to the tax payer, whichever country you are talking about. On the other hand, in private procurement, once you know who the ownwer is especially if you have already given your services to him and you know that this owner uses a structured procuement system, then I fully agree on the negatiated type of contract because this, most of the time, delivers best value to both parties.
Posted by: Joseph Micallef - Monday, May 5, 2014 3:04 AM


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