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Contractors wary of new bid system.

Contractors may be wary to support the new system of competitive bidding recently introduced by the city which could change the way construction jobs have been won in this neck of the woods for the past century said Colin Parkes, city vice president and director of technical services for Bovis Lend Lease.

The system which was introduced through the New York City Department of Design and Construction and the Royal Institution of Chartered Surveyors has launched pilot initiatives at two of their new project sites--one on Remsen Street and one on Pike Street--which will require project owners to measure materials and provide exact quantities of those materials to contractors bidding on projects. Traditionally in the United States contractors take educated guesses about quantities of materials needed, and tack on a percentage of risk that those guesses are wrong. The new system is designed to tame the wild range of bids on any given project that and to provide a more even playing field for contractors and project managers, said Simon Taylor, FRICS, RICS Americas spokesperson and vice president of Faithful + Gould.

The new system is estimated to have the potential to save 5 through l0 percent on project costs, he said.

"This was something DDC wanted to try to get more teamwork between the contractors and the city rather than the two being in constant confrontation," said Taylor, who has been researching new methods of bidding for the past two years.

Taylor admits that the new system has not been an easy sell. One of this may be the fact that the system might prevent some contractors from inflating prices.

"When there is a lack of information there is always the chance to make more money. By making things more visible, making people work as a team rather than playing a game of poker, you are making things more even." Taylor said.

Opponents of the system may be more apt to accept the other caveat of the measurement system, whereas the DDC agrees to stomach the quantity risk for the scope of the project, while contractors take the productivity risk with the goals that they set for themselves. If the quantity reported by DDC is wrong, they will pay the difference.

Materials will be measured through a standard taken from the Canadian Institute of Quantity Surveyors which is pretty standard throughout the rest of the world but has never been used in the United States, Taylor said. "It's a consistent method. If you see a quantity in the scope of the work you know exactly what it represents."

Parkes notes there have been both advantages and disadvantages in the standard system throughout the world. Advantages include the fact that bids tend to come in closer together.

Disadvantages are that contractors do not always trust the numbers that project managers put down on the estimate.

Furthermore Parkes notes that while it is adventurous and positive of the DDC to try using new standards; other aspects of DDC policy--such as their includion Wicks Law--will invariably still meet with controversy from contractors.

"It hasn't been an easy sell," Taylor admits.

"The subcontractors have been more receptive than the contractors thus far. The only way we are really going to be able to figure out if it works or not though, is to go through with the pilot project."
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Author:Wolffe, Danielle
Publication:Real Estate Weekly
Date:Nov 14, 2007
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