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Sat 6 Nov 2010 12:00 AM

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Name of the game

If you know you’re beaten, is it still worth staying in the game?

Name of the game

Every time I’ve suffered through a game of Monopoly I’ve impatiently
awaited the predictable ending. You can usually see who’s going to win long before
the final, inevitable result occurs. As soon as one player has hoarded enough cash
and properties, they become impossible to stop; hence the name of the game. But,
because we’re not sore losers, we usually keep on playing, to allow the victor the
chance to enjoy their spoils.

In the real world of development there is more at stake than
the appearance of fair play. But, too often in the tendering process, companies
with little chance of getting a positive outcome are kept in the running right to
the end. It often appears that big players take over and others are just in the
game for the show of competition.

Developing companies have to carry some of the blame here. Logic
says they want the best value deal for their job, which we know will not always
be the best price. But when tenders go public, there is usually a run of excitement
among expectant contractors, while in reality very few are ever in real contention:
the bigger the job, the fewer the contenders. In part that’s why there are JVs –
a multi-corporate collection of skills and financial fire power.

Since business got a bit tougher to find, more and more contractors
are pitching for a scarcer selection of jobs. Some are trying to punch well above
their weight, spending time, energy and resources on preparing  long-shot tenders.

The cost of tendering can be enormous, with teams of people dedicated
to working on them, sometimes for years. Take the recent Muscat International
Airport award, a contract
worth $1.8 billion, which went to a JV between US engineering firm Bechtel, Turkish
construction firm Enka and locally based Bahwan Contracting. When the announcement
came, losing parties had been working on the process for 15 months or so. Now you’ve
got to be in it to win it and all that, but it’s difficult to believe that in tenders
of that size, all the bidders were in serious contention from the outset.

At the recent Construction Week Conference a senior executive
of a leading contractor made the very same point. He bemoaned developers of all
kinds who carried more than two or three bidders into the final tender selection
round.

When this happens, it feels a bit like some companies are hedging
their bets. They seek the benefits that come from price competition, but only so
they can force down the numbers presented by their preferred bidder. Essentially
they’re getting other companies to do their cost benchmarking for free.

You might say this is letting the market decide the price, but
tough business practice aside, the time and effort expended by contractors on the
tender process really means they deserve better. A real shot at a win, or an early
exit; either are preferable to the slow-death situation many outfits find themselves
in at the moment.

Stuart Matthews is the senior group editor of ITP Business' construction & design tiles.

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