Fri, Apr 14, 2017 - Page 8 News List

Looking at government projects’ real costs

By Hsieh Ting-ya 謝定亞

The Cabinet has approved a budget of NT$880 billion (US$29 billion) for its Forward-Looking Infrastructure Development Program and plans to boost it by amending the Government Procurement Act (政府採購法), which stipulates the price-based open tender as the standard method of procurement. The amendment is likely to run into opposition.

However, if the lowest-tender procurement method is used in the implementation of the stimulus, it might lead to construction delays and substandard quality.

In the early days of government procurement, major construction projects could be handled through price negotiations. Because the agencies in charge of the projects were administrative bodies whose mission was national construction, they were able to complete Taiwan’s key projects on time and with high quality.

In 1992, construction firms were invited to bid for a road widening project on the Sun Yat-sen Freeway (National Highway No. 1). The prospective contractors pulled out of the bidding process after failing to reach an agreement with the National Freeway Bureau on the negotiated price.

Later, lowest-tender selection was applied, which led to savings of NT$1.7 billion. The rules governing price negotiations became a sunset clause during the period before the act came into force.

Taiwan then entered a new age of government procurement, lowest-tender selection became the rule and best-value selection became the exception.

The public’s misgivings about best-value procurement prompted the government to make lowest-tender procurement the rule and restrict the use of best-value procurement. However, a few years later, the Cabinet told the ministries to discourage lowest-tender procurement.

Authorities have been vacillating between lowest-tender and best-value procurement methods ever since the act’s inception.

Taiwanese might value preventing fraud in construction projects over generating revenue, but if civil servants are constantly under suspicion of malfeasance and graft, how can they be expected to implement best-value procurement?

It is time for the Cabinet to adopt a new mindset, let us call it “government procurement 3.0.”

First, civil servants have a duty to uphold contractors’ legitimate interests. The rule that civil servants must not seek profit concerns improper interests — it does not mean that officials cannot seek to ensure contractors’ legitimate interests.

As for the populist attitude of suspecting civil servants of involvement in graft and contractors of doing shoddy work and using inferior materials, the Cabinet should refute such claims and clarify the situation. Civil servants have a duty to ensure that contractors who make successful bids can also make a profit.

Second, the government should focus on value rather than price in procurement and establish a value-based procurement system engaging departments concerned with procurement, financial control, civil service ethics, auditing, oversight, investigation and prosecution.

Value-based procurement implies innovative approaches to engineering methods, technology, materials and management, with the aim of improving quality and competitiveness.

The third point is the optimization of construction project life-cycle costs. The Cabinet’s investment plan only covers the initial construction costs. The operational period would last for decades, and life-cycle maintenance costs and end of life costs should be factored in.

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