Principles and Integrity Matter
Charles L. Ettner, corporate consultant to Miglin Properties, works with major construction projects on a regular basis, and is the first to admit he is a fussy customer. “I like to have a strong business relationship with contractors,” he said. “They have to be reliable and responsible. Principles and integrity are important to me.”
Mr. Ettner prefers to keep the lines of communication open throughout the entire construction process, so he can interact with architects, engineers, contractors, and other project participants. “I have to know the people I am doing business with, if I expect to get a good night’s sleep without having to worry about my work,” he said. “That’s why I would never use an online reverse auction – that process leaves too much up to chance.”Low Bid and Best Value Just Don’t Mix
LTC A.J. Castaldo, program manager and deputy principal assistant responsible for contracting, U.S. Army Corps of Engineers (USACE), is the author of a July 2004 report to Congress on online reverse auctions, entitled “Final Report Regarding the U.S. Army Corps of Engineers Pilot Program on Reverse Auctioning.” He has studied this procurement process extensively and in his report, states “reverse auctions are a game strategy.” He goes on to conclude that these auctions are a generally inappropriate means for procuring construction services, and only in exceptional cases can be used as a strategic tool. This method does have value in the procurement of commodities.“The low-bid concept doesn’t work with best-value standards,” Castaldo said. “You can’t have it both ways.” He added that online reverse auctions encourage ‘bid gaming,’ a practice in which contractors do not offer their best bids initially so they can see the bids of other contractors first. Bid gaming continues through the process as contractors try to figure how low they have to go – a figure which may never arrive at the actual lowest price. “Bid gaming and related collusion are very possible in online reverse auctions,” he said.
He noted that no actual research exists to prove the superiority of this method in procuring construction services. “Construction encompasses one-of-a-kind projects built under one-of-a-kind conditions,” he said. “Online reverse auctions have no valid benchmark. They can only address theoretical savings, which have no bearing in the real world.” Online reverse auctions are also time-consuming, he said. “The online process isn’t as simple as the traditional sealed bid method. And, our study did not reveal any proven savings in the auctions. If a procurement process is labor-intensive and the savings can’t be proven, why should anyone use it?”A Better Solution
In addition to the MCAA, organizations such as the Associated General Contractors, Associated Builders and Contractors, Construction Users Roundtable and American Subcontractors Association have expressed concerns about the negative effects of online reverse auctions. John Gentille, executive vice president of the MCAA, commented on the effectiveness of the construction industry’s time-proven procurement methods. “Value-based selection criteria, careful past performance evaluations, prequalification screening of competitors, project partnering, integrated project contracting and delivery systems, design-build services delivery, and other positive contract administration procedures were all developed to avoid the pitfalls of the low-bid, price-only standard,” he stated.These methods exemplify the straightforward, collaborative business practices required to facilitate complex construction projects. To ask contractors to compete for such projects through a time-consuming, impersonal online process only creates hard feelings while perpetuating the pitfalls of low-bid, price-only selection.Addressing issues that impact on client satisfaction is only one of many promises that MCA affiliates make regarding their commitment to providing quality service. For more information on MCA contractors and their workforce, visit (www.mcaproof.com).