Hidden costs of low-cost bids. The difference between the budget and actual cost of supervision and training for the project indicates that the project required substantially more supervision than planned. The HPDT attributes this greater cost, at least in part, to the selection of the low-cost bidders for portions of the civil works. The PCR states “four contracts [of the 26] (procured under international competitive bidding) were awarded on an exceptional basis [due to the very low prices] without determining the combination of bids offering the lowest evaluated cost.” Although these contracts were subjected to higher performance securities, such bids rarely include adequate management and contingency budgets. Therefore, to ensure appropriate quality, greater executing agency supervision and monitoring during construction is required. Comparisons of bids on the basis of established provincial reference prices and the expected quality of higher cost bids should be undertaken before contract awarding to ensure low-cost bidders can deliver civil works of the appropriate quality. The award process should be strictly followed, with no exceptions being made for the low-cost bids. This is likely to result in a better project implementation process within the expected supervisory budget.
Heilongjiang Road Network Development Project