transport - reverse auctions
WORKERS, MAY 2005 ISSUE
Transport for London has decided to procure consulting engineering and other professional services in construction by 'Reverse Auctions'. In this system firms put in bids by internet and later are asked to bid again to beat the lowest price until a bottom bid is reached which no one is prepared to beat.
The Standing Committee for Structural Safety recommended in its last report that this form of procurement should be avoided as it increased risks on safety. Research on relative costs within the construction industry show that design costs 0.1, construction 5, construction plus maintenance over the life of a building 20 — set against 200 as the value from its use. To save on design and so compromise other stages represents very poor value.