Dear Editor,
‘Bid Security’ has to be the costliest policy mistake ever made in Guyana’s short history, for in every public tender, the insurance companies make risk-free profit from the contractors who make bids. Allow me to use the Meten-Meer-Zorg pump station contract award to demonstrate. 27 bids ranging from 771M to 1.5B, bid security lodged totaled $277,464,860, the insurance companies charge between 2-4% to provide this security, hence the contractors paid between $5.5M and $11M to insurance companies on this single bid; a simple extrapolation of the figures show that hundreds of billions of dollars are being added to the cost of construction (and the insurance companies profit line) annually. This brings us to the question of what exactly is ‘bid security’ and why is it a necessity.
Bid security is required to cover government costs if the bidder is offered a contract and refuses or is unable to take up the same. Who has ever refused a government contract when offered? This may be the reason the government has never claimed a bid security; the insurance companies have never had to pay the government a single dollar on a bid security claim. It may be important to note that bid security is separate from performance bonds which are required by contractors who win bids to execute projects.
Editor, Bid Security is a no-risk, all-profit business, $11M for twenty-seven sheets of paper and a thousand of dollars’ worth of ink is a great day, for the insurance companies, however, it adds billions to the cost of doing business with the Government of Guyana, which is ultimately paid by citizens. It is seemingly designed to fill the coffers of insurance companies and is of no actual benefit to the contractor or government; it is a colossal cost to the people of Guyana and has no redeeming feature (unless one is a shareholder in an insurance company).
I would ask that the government review this imposition with a view to the removal of this onerous burden from the citizens as soon; the biggest cheers will come from the contractors but the rest of us will be applauding in the background.
Sincerely
Robin Singh
