Back to the lowest bid in public works

A law to replace the present system of awarding public projects will be submitted to Parliament by the end of next month, Environment and Public Works Minister Giorgos Souflias announced yesterday. The new law will replace the current system (under which a public project is awarded through the use of a complicated formula) with an older one in which the award automatically went to the lowest bidder. The so-called «mathematical formula» method had been devised by the previous government in order to put an end to the abuse of the lowest-bidder method, in which bidders offered unrealistic discounts for public projects – often 90 percent or more – in order to win the bid only to «discover» some time later that the actual budget would be much higher than their estimations. Contractors soon found, however, that they could manipulate the «mathematical» method by forming cartels or submitting several almost identical bids. This would ensure that the most lucrative projects went almost exclusively to the same group of contractors. In some cases, it was even discovered that supposedly different bids had been submitted by the same person. Souflias said that a number of safeguards would ensure that abuses of the lowest-bidder system would not be repeated. These safeguards include a higher amount demanded as letter of guarantee from bidders offering discounts (at present, the letter of guarantee is equal to 5 percent of the initially estimated budget) and higher penalties to contractors that fail to adhere to a strict time frame. Souflias acknowledged that ensuring fair competition in tenders will be difficult. «In most (European) countries they use lowest-bidder systems. The difference is that public administration there is more effective,» he said. He said there is a need for a complete reorganization of his ministry but added that measures, such as using a team of ministry experts rather than a single person to assess progress in a project, bringing in private project assessment firms, making it simpler to throw out a delinquent bidder from a project and punishing ministry officials who collude with contractors should be sufficient.