The Price-Quality Method is not perfect

With a tendency for projects to be awarded to the lowest bidders, has the Price-Quality Method failed to ensure that quality aspects (in execution or the final product) are maintained?

Image from The Straits Times.

In Singapore, the collapse of a highway structure under construction at Upper Changi Road East on Friday (July 14) left one construction worker dead and ten others injured. Today calls the mishap is one of the “worst worksite accidents since [the] 2004 Nicoll Highway tragedy”.

The project is managed by Or Kim Peow Contractors Limited (OKP). The construction firm was recently convicted and fined for another worksite incident in 2015 which left one dead and three injured.

According to tender document on the Land Transport Authority (LTA) website, OKP had submitted the lowest bid in order to secure the viaduct project, with a tender of $94.6 million.

According to The Straits Times, OKP’s tender was substantially lower than that of the other bidders involved:

  • Yongnam Engineering: $129.7 million
  • Singapore Piling: $185.0 million
  • Samwoh Corp: $193 million
Most noticeably, Singapore Piling and Samwoh Corp’s bids were double and more than double of OKP’s bid. By Alan Lin.

Was low bidding at the expense of safety standards?

The process of crafting a bid for a project requires the contractor company to consider many factors. To simplify the entire formula, it involves two main considerations:

1. Quality of the final structure

2. Construction efficiency — how quickly the structure can be built

Construction efficiency can be costly. Building structures quickly often requires more manpower, better machinery, or both. Safety precautions could also be glossed over in order to speed up the construction progress.

However, this article is not interested in investigating OKP’s responsibility in this entire matter. Rather, we want to know if the Price-Quality Method (PQM) in the Building & Construction Authority’s (BCA) tender evaluation has failed.

How does the entire tender process work?

The tender process for the viaduct project utilised a two-envelope system. According to BCA,

In this system, the bidders submit the quality proposal separately from the bidding price. Agencies would open and compute the quality score first, before opening the price envelopes and computing the combined scores. The firm with the best combined score will be awarded the contract.
The weightage between price and quality will range from 60:40 to 80:20, depending on the complexity of the project. For design-bid-build projects, since majority of the design by consultants has been done and the technical specifications have been specified, agencies shall adopt price-quality weightage of 80:20 except for special circumstances. For design and build projects, agencies can consider price-quality weightage of between 60:40 to 70:30.

Read more about BCA’s PQM here.

According to The Straits Times, “Despite the two-envelope system — which is supposed to prioritise quality over value — public projects still tend to be awarded to the lowest bidder.”

Does this indicate that the price-quality weightage has failed to provide BCA with a clear metric to identify the ideal tender?

Does the arbitrary price-quality weightage ranging from 60:40 to 80:20 led to a drop in quality in infrastructure projects?

Further complications arising from OKP’s past performance

Part of PQM’s measurement of quality includes the following:

Performance in past or ongoing projects in areas such as timeliness, safety and quality. To give due emphasis to site safety, it is mandatory that safety performance accounts for at least 15% of the overall quality points.

LTA’s tender information database shows that the tender submissions for the viaduct project closed by 9 July, 2015. The tender was awarded on 23 November, 2015.

On 22 September, 2015, OKP was implicated in a worksite incident under the Yio Chu Kang Flyover which left one dead and three injured.

The viaduct project was ultimately awarded to OKP even though the Ministry of Manpower (MOM) was still investigating the incident. Whether the accident was taken into consideration is unknown.

Could a timely review of OKP’s tender submission after the 2015 accident have prevented a second crisis? By Alan Lin.

Given that the accident occurred between the closing date and awarded date for the viaduct project, was the accident taken into consideration as part of OKP’s past performance?

Or is past performance factored in only after the company is actually convicted?

There is still much that the government has not explained to the public. Full transparency is required. The people need assurance that construction standards have not been compromised out of a desire to ‘cut costs’, and that official checks and balances are still healthy.

Ultimately, beyond OKP’s seemingly poor history of work site safety, there is a lot of uncertainty surrounding the official instruments’ ability to measure quality in project management. It would be very easy for BCA to strike all of this off as OKP simply being a black sheep, and to say that PQM has worked well for many other projects.

It is almost tempting to dismiss all of this as OKP’s bad luck, that the company has messed up twice in a row. It would dismiss all concerns over PQM’s efficacy as a tool. However, that would be too convenient for all the parties involved. And we need to bear in mind that in the construction sector, there should be no room for ‘luck’ to be at play.

Has quality taken a backseat over price in construction? What do you think?