TL;DR – Good intentions, bad implementation.
An uncompleted viaduct that was being built along Upper Changi Road East collapsed in the early hours of Friday, July 14.
That accident killed a PRC worker and injured 10 other workers. Naturally, people are baying for the blood of Or Kim Peow (OKP), the construction company in charge of the project. After the accident, shares of OKP Holdings, the holding company of OKP, fell by 8.1%.
If negligent, then is the construction company the only party to bear the brunt of the responsibility? We think there could be more to this. What about the ones who had assessed and awarded the tender to OKP? And why so?
Let’s back up a little bit.
Not possible to be cheap, good and fast
According to tender documents, OKP won the tender for the project with a bid of $94.6 million. That was 27% lower than the next lowest bid of $129.7 million by Yongnam Engineering. It was also less than half of the other two bids. Did the people assessing the bids think they were saving the government heaps of money by awarding the tender to OKP?
But did it not occur to them that there might be something suspicious or missing or substandard about such a drastically low bid? Is it realistic for one company to do this at a cost that is 27% lower than their nearest competitor, and still make money? Does OKP use some advance technology? Does OKP employ some really skilled workers? Does OKP have some secret ultra-productive processes that other companies don’t have? Or does OKP do business on such a large scale that they enjoy economies of scale?
Honestly, we have no idea. We hope that it’s not a case of OKP being able to do the job at low costs by cutting corners and rushing work. Because when that happens, things are bound to go wrong.
Was that what had happened this time around?
What is worth mentioning is that OKP was just slapped with a $250,000 fine three days before the fatal incident last Friday over a safety lapse that resulted in the death of another worker in 2015.
GeBiz leads to race to bottom
One of the deeper underlying systemic issue that can potentially lead to such tragedies is the GeBiz. FaceBook user Clarence Chua explained it most eloquently in this post:
Government Electronic Business (GeBIZ) portal is an online platform where contractors log on to source and bid for potential government contracts of any kind. After the quotation is awarded, GeBIZ posts the prices of all the bids entered, for all and sundry to peruse. It also reveals the winning bid made by the selected contractor.
Clarence acknowledged that this practice was probably done with good intentions: market transparency and promoting competitiveness. Unfortunately, it has a negative side effect. Clarence explained:
“If you are a hungry contractor and have lost the bid, you now know what a winning price looks like. For a similar future job, you know what price you need to enter to potentially win it. And it would likely be lower than the previous winning price.”
And since lowest bids overwhelmingly wins the bid, this causes a race to the bottom. Clarence described his personal experience:
“I am a contractor and have done this countless times over the past seven years. My winning bids have consistently fallen over the years. The irony is that as my experience and quality climb (together with my cost), my rates and profit fall.”
How can that be? As a contractor’s experience increases and his quality rises, his rates and profit should go up. That’s how we encourage people to deepen their skills and improve the quality of his work. Unfortunately, the GeBiz system, in its current form, seems to reward mediocrity.
How to make the system work
The system is great for transparency. It works if the people in the government evaluating the bids know what they are doing. Unfortunately, the competency may be lacking. Other than price, how many government officers actually know how to properly assess and evaluate whether a company is competent and their proposal is of good quality based on the tender documents? So then, is transparency alone the solution?
How to make sure that officers are properly trained? One way is to increase accountability. The people who awarded the tender should be investigated and taken to task where applicable.
Perhaps it is time to completely rethink and redesign the GeBiz system.