Construction Law/Tender Process


QUESTION: We are engineering consultants, and have recently bid in a design project for a government entity in the Middle-East.
The tenders were opened in the presence of all the bidders, and the bids announced. After a few months, selected bidders were invited for negotiations.
The ‘selection’ was 12 out of 13 original bidders. The ‘negotiation’ was – an instruction to submit a ‘reduced offer’. The options were ‘yes’ with a revised value or ‘no’, but all bidders were required to submit a response.
The revised bids were opened on the same day. The earlier bid nr. 5 become nr. 1 now after reducing 27% from his original offer. The earlier ‘lowest’ bid scored third and lost out.
My question is whether this is a fair and acceptable practice for government entities?
And what can the aggrieved parties do about this?

ANSWER: Dear Jaison,

Fair or acceptable has nothing to do with anything.  The important questions is whether or not the procedure is legal under Saudi law or the regulations of the funder?  If it was illegal or contrary to the funder's regulations, then you could complain to whatever complaints committee exists in Saudi Arabia, but I do not hold out a lot of hope for you.  If not, then learn the lesson and take care when submitting bids in Saudi and be thankful that you have escaped from being held to an unprofitable bid.  

---------- FOLLOW-UP ----------

QUESTION: Dear Peter,
Thank you for your response.
I cannot currently say whether this is legal under the law till we consult a lawyer. As for the client, again we have no clue about their internal regulations.
However, the RFI mentions that the Client can call one or more bidders for negotiations, discussions, clarifications, or for improving the tender.
This practice didn't seem right to me; so I would just like to know whether this is a normal practice in other parts of the world. Could you comment from your experiences in the field.

Dear Jaison,

Most International Funding Institutions restrict the opportunity for 'negotiations' due to problems of transparency.  The Practical Guide of the European Union says that negotiations are allowable only to reduce the scope of works if the budget has been exceeded.  For services contracts, it is more usual to use a QCBS method, with a split of 90/10 between technical and financial scoring.  I would say that the system of negotiations is unusual for government organisations, but could be common for private tenders.

On re-reading your first question, I note that you say Middle East where I interpreted that to mean Saudi Arabia.  Obviously, my answer has to be read in the light of your original question.  My apologies for my error.  

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Peter M. Elliott


First response to queries regarding extensions of time, variations orders, site instructions and payment using FIDIC and other forms of Conditions of Contract, based on English Law, and derivatives only. Anyone who needs advice about EoT should download and study the SCL Delay & Disruption Protocol before submitting a question.


Value . . .
It's unwise to pay too much, but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do.
The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run.
And if you do that, you will have enough to pay for something better.
. . . John Ruskin (1819 - 1900)
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I said it in German and Greek:
But I wholly forgot (and it vexes me much)
That English is what you speak!" Hunting of the Snark - Lewis Caroll
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Comments and observations leading to improvements in the translation of FIDIC Red & Yellow books into Romanian prior to approval by FIDIC (reference 'Preface to the Romanian edition')

Institution of Civil Engineers, Association of Chartered and Certified Accountants, Society of Construction Law, Dispute Resolution Board Foundation

B Sc(Hons) in Civil Engineering

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