Dear Editor,
At a symposium held at the Inter-national Conference Centre on October 2, Junior Finance Minister Juan Edghill delivered the feature address and highlighted the government’s concern on the matter of contract variations which he stated could lead to double the actual contract sum. He further claimed that contractors have been deliberately submitting low bids to secure contracts and then expect to generate variations to supplement their under-priced bids. It is evident that Minister Edghill is not conversant with the bidding/contracting process and the underlying causes for which variations/ change orders are issued, since he is of the opinion that a low bid invariably leads to a contract variation and hence an increase in the project cost.
A contractor usually submits a bid based on the tender documents – drawings, specifications and pricing on a bill of quantities (BoQ). In Guyana the policy has been to award contracts to the lowest bidders, but in many other jurisdictions only the lowest ‘evaluated’ bidder gets the job. Once the contract is awarded and work starts the contractor is paid for work done based on the itemized list in the BoQ after due certification by the supervising engineer and approval by the client.
Often there are discrepancies up or down between the BoQ and work being done or materials to be supplied, which in order for the contractor to proceed further with construction of the project requires the issuance of a change order or variation which has to be approved and paid for by the client (government). Hence the Government of Guyana is aware of all variations generated by the contracts it awards, and therefore for Minister Edghill to claim that contractors deliberately submit low bids to secure contracts and then generate variations to get the real price for the project is somewhat disingenuous. All major civil engineering projects have variations because of poor design and unforeseen circumstances and site conditions.
These variations could be anywhere from about 5% to over 100% because of the many unknown factors during construction, including the complexity of the project and competency of the contractor.
It is unfortunate that in Guyana today all major government contracts have large time and costs overruns because of poor design, bad construction management and ill-equipped and inexperienced contractors. To remedy the situation the government will have to pre-qualify those they employ to execute their projects to ensure that they have the qualification, experience and financial resources to undertake the work at hand.
Contractors should be selected based on an evaluation of their past performance, competency of their work force and financial viability. They should also be bonded (not the Fip Motilall type) for failure to perform as this will give government the leverage to recoup its losses in case the contractor defaults. It is indeed reassuring to Guyanese that Minister Edghill has at long last pronounced that the government will not be condoning any skullduggery from contractors and the bidding process for all government work will be fair, free and transparent. He also stated that reports on projects under construction with details on completion dates, variations, cost overruns and time extensions will now be made available to all stakeholders. Could he state when this information with respect to the Hope Canal, East Bank and East Coast highways and the Vreed-en-hoop Power Station projects will be available for pick-up?
Yours faithfully,
Charles Sohan
