Risks Associated with Lowest Evaluated Bid Selection on Contracts Performance

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World Bank procurement guideline for procurement of works is largely based on the lowest evaluated bid selection procedure and it has also been indicated in Public Procurement Act.2003 Act 663 Part V section 59 (3) which states that “the successful bidder shall be the bidder with lowest evaluated bid price .With the recent downturn in the construction industry, most of the contractors are competing more and more aggressively to secure the relatively few new contracts that come to the market. Some informed clients appear to consider this to be good news and are reverting to the practice of awarding contracts on the basis of the lowest evaluated tender price and are ignoring the associated risks and adverse consequences. It seems the Public Procurement Act 663 Act 2003 in using the lowest evaluated tender as means of selecting a Contractor does not make provision for comparing the bids to the Consultant‟s estimate and this may be one of the causes of project failure in terms of cost, time and quality standards. The study involved sampling the views of A1B1 to A3B3 road contractors and client on the risks associated with lowest evaluated bid selection procedure. Questionnaire survey approach was adopted for the study. Seventy questionnaires were distributed and Sixty three was retrieved representing a response rate of 90%. The study revealed the risks are associated with the lowest evaluated bid selection procedure. The major conclusions from both client and contractors were that termination of contract is the topmost risk associated with lowest evaluated bid selection procedure. From the client, unrealistic low price, time over run, increase overall cost of contract unsatisfactory quality was major risks that would affect contract performance. From the contractors, it was shown that some of the key risks that would affect contracts performance include unsatisfactory quality, unrealistic low price, and contractual claims among others.
A Thesis Submitted to the Department of Building Technology, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirements for the award of a degree of Master of Science in Procurement Management.