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If It Walks Like A Duck...

June 24, 2005
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Internet reverse auctions are getting a bit of attention from various associations that are supporting legislative efforts in Congress to ban this practice on federal construction. If this ban were to be set in place, it could eventually work its way down into the private construction sector, which makes up a large portion of all publicly bid jobs.

The intent of reverse electronic auctions on the Internet is to hold live, online bidding, which will lead to the successful bidder submitting the lowest price to the owner at the conclusion of the cyberspace auction. A similar thing happens in the terrestrial world when a plan-and-spec bid process takes place. Bid documents must be submitted by a specified deadline, and then the successful bidder is revealed to all. Again, the lowest bidder wins.

However, I must wonder why an Internet reverse auction process is so much different than the common variety of plan-and-spec work that it warrants special legislative governance?

Played out in the construction field every day of the week for decades, the plan-and-spec process has often been detrimental for contractors and owners. Many of you have spent part of an afternoon sitting at a plan-and-spec bid opening, anxiously waiting to find out who would be named the winner. All the while, you were probably hoping that somehow, some way, you would turn out to be one of that very rare breed of HVAC contractors that could actually have the lowest bid among 20 of your competitors, without having made a huge mistake. Nearly every plan-and-spec bid winner I've ever known walks out of such a meeting with a sinking feeling mixed in with the thrill of victory. Quick, get back to the office to see if I left anything out!

However, this same reverse auction mentality is supposed to be somehow different, and worse, because it happens on the Internet?

Exception For Construction

Rep. Tom Davis (R-Va.) has offered comprehensive procurement legislation indicating that reverse auctions can be used in all commercial practices, but specifically defines that construction is not a commercial item. Therefore, upon passage of this legislation, reverse auctions may not be used for federal construction. What? Let's go over that again. Reverse auctions are OK for federal procurement. Reverse auctions are not OK for federal building construction. My head hurts.

A great percentage of federal buildings are currently being bid within the framework of the plan-and-spec commercial delivery process in order to ensure the lowest cost. Internet re-verse auctions, conducted in the interest of ensuring the lowest cost, would no longer be allowed under the proposed legislation.

Gee whiz. Please, somebody hit me in the head with that duck that keeps quacking like a duck. Reverse auctions on the Internet are no different than a plan-and-spec job on bid day.

Why should we need any more protection from ourselves for one low bid process as compared to any other low bid process?

Perhaps the purpose of this legislation is to prevent construction bid mistakes that would cause the owner to later be faced with change-order requests that usually increase the cost of a job considerably, compared to the initial low bid.

In some way, it's admirable that a legislator is watching out for the way our tax dollars are being spent on federal buildings.

But, shouldn't any form of construction bidding adhere to a model that would protect contractors and owners from the mistake of offering or expecting more for less?

Certainly, there are many HVAC contractors that have become very successful playing the market - the plan-and-spec market. But for many, it is a gamble that doesn't always pay dividends.

It does seem curious that the Internet is able to bring such attention to issues that heretofore, have been so commonplace in our daily routines. Thank goodness for Al Gore and the Internet. Politicians now have more ways to keep themselves busy protecting us.

Mike Murphy is editor-in-chief. He can be reached at 248-244-6446, 248-244-2905 (fax), or mikemurphy@achrnews.com.

Publication date: 06/27/2005

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