External Providers/Suppliers’ Evaluation: Quality vs Price

Questions have been raised on the PIE (Pan Island Expressway) work site collapse of a 40m segment of a viaduct being constructed at Upper Changi Road East, killing one worker and injuring 10 others on Friday morning, 14July. 

While the authorities are investigating the accident, many questions have been raised about the tender process and the award of the project to contractors.

One critical question asked was: Why did the Land Transport Authority (LTA) award the contract to build the PIE-TPE viaduct to Or Kim Peow (OKP) Contractors? Was it based on OKP's lowest bid?

According to reported news, OKP submitted the lowest bid of S$94.6 million for the tender for the Design and Build contract in November 2015, which was 27 per cent lower than the next lowest bid of S$129.7 million by Yongnam Engineering.

Although an LTA spokesman said it considered more than just pricing alone in assessing tender proposals, citing other "quality aspects", such as the relevant experience of the participating contractors, their safety management systems and practices, track record, project-specific technical, risk management and resource management proposals.

For all construction tenders, LTA said the price-quality method is used by agencies as a framework. The price-quality weighting used for Design and Build projects before January last year is between 60:40 and 70:30.

Obviously, LTA’s price-quality methodology is questionable as it places higher weightage on pricing than quality. Sad to say, this is nothing new as such practices are still commonly practiced in many industries and projects in many countries.

After years of working in factories and manufacturing facilities, I observed that such practice rose from different objectives of various functional departments. The buyer buys at the lowest cost, the quality department wants to receive the best product quality that meets the specifications and the safety department demands zero accident from their contractors working inside their workplaces. More often than not, the department with the loudest voice and willpower wins.

 

Unless and until all functional departments are given common key performance indicators (KPI) on quality and safety aspects on service providers, suppliers and contractors, many would continue such practice with severe consequences like the accident illustrated here.

 

As top management are more concerned with bottom lines than other aspects of operations, the purchasing function is viewed more as a “cost-saving” function compared to “expense” functions of quality and safety roles. Until top management understand and learn the lessons of using the cheapest supply source, and faces the consequences of using incompetent providers, nothing would change.         

 

Read full article from The Straits Times, dated 16-07-2017

PIE work site collapse: Questions loom over collapse of viaduct segment

http://www.straitstimes.com/singapore/questions-loom-over-collapse-of-viaduct-segment?xtor=EREC-16-1[ST_Newsletter_AM]-20170716-[PIE+work+site+collapse%3A+Questions+loom+over+collapse+of+viaduct+segment]&xts=538291