ConstructionPro Week, Volume: 4 - Issue: 45 - 11/20/2015

Does “Best Value” Procurement Allow Favoritism?

By Bruce Jervis


The public procurement system at all levels of government has embraced “best value” contracting. The rationale is that sealed bidding, with award to the low price bidder, is inflexible and does not always provide the best deal for the public. The experience and resources of the contractor, as well as the technical strengths of its proposal, may justify a price premium.


There is a problem with best-value contracting, however. It injects a degree of subjectivity not found in sealed bidding. The challenge is to avoid favoritism or an evaluation process that produces a pre-determined result. The answer, at least in part, is to require a procuring agency to specifically identify the non-price advantages that justify the price premium.


In a recent federal procurement, agency evaluators prepared a contemporaneous report itemizing advantages – based on considerations stated in the solicitation – to justify a higher price. This document enabled the agency to withstand a protest by a disappointed offeror alleging an unfair contract decision.


The contemporaneous report prepared by the federal agency is mandated by the Federal Acquisition Regulation. Unfortunately, not all state or local statutes and regulations require such documentation. This allows at least the appearance, if not the actual practice, of favoritism. Should all procurement laws at all levels of government require documentation of non-price factors which justify the award of a higher-price contract? Your comments are welcomed.



The cost of a construction contract is not the bid price. The true cost may only be known after completion and a period of operation. Public procurement should always strive to produce the "best value" for the taxpayer, even if that involves some subjectivity (aka "good judgment"). Better systems of evaluating and qualifying contractors and their bids are much needed at every level of government.
Posted by: Eden Milroy - Friday, November 20, 2015 12:55 PM

The reasons for non-multi-prime lump sum bidding, in other words, single source negotiated procurement's really comes down to one word, "risk." If you apply Lindstone's Multiple Perspectives for Decision Makers, it becomes obvious why prime contractors and public owners favor negotiated procurement's. One study in Washington state declared that few if any negotiated projects went over budget or finished late. This, even though one project that had a Maximum Allowable Construction Cost (MACC) of about $25 million, ultimately cost over $45 million! But, the "budget" for the job was $60 million, so the job was declared "under budget." 15 projects in the Washington study exceeded their MACC's by a combined $750 million, yet most if not all were declared "under budget."

Not having a known transparent fixed target price and schedule allows the public agent to skate on their responsibility to safeguard the public treasury. When I worked in government in the 80's I learned that the worst thing a public agent can suffer is "BAD PRESS" - not surprisingly; but I also learned that the second worst thing the public agent can suffer is "GOOD PRESS!" And, the best thing a public agent can achieve is "NO PRESS."

My doctoral dissertation was a comparison of the technical efficiency of competitive bid and negotiated construction contracts. We found no statistically significant difference in outcomes in the two groups, in terms of: Actual/Negotiated or Bid Cost, and Actual/Original Schedule performance. We did find that, because of "fast-tracking" the negotiated projects had a significantly higher technical efficiency score (using Date Envelopment Analysis). We concluded that the only rational reason to justify use of negotiated single-source procurement's is if and when a job needs to be fast-tracked - such as, when a school has to be built and open for classes in a compressed time frame. Otherwise, there are little to no advantages to the public, but great advantage to the prime contractor and the public agent. Not surprisingly, subcontractors that are chosen on a multi-sub-bid basis, don't enjoy any of the benefits, and perhaps actually suffer worse consequences, from prime contractors that are chosen on a sole source basis.
Posted by: Gerry Williams - Monday, November 23, 2015 2:01 PM


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