Lowest Bidder Outdated Concept

Please be indulgent with the French to English translation. I did it myself.

In 2018, the Coalition Avenir Quebec (CAQ) centre-right autonomist, led by Fran?ois Legault, won an absolute majority in Quebec.

A real reform of the Quebec government’s criteria for awarding public contracts was eagerly awaited by Quebec businesses. This was the lowest bidder principle. I was pleased to see the possible abolition of this “lazy” principle. Why “lazy”? Simply put, it is very easy for a municipal, provincial or federal official to sit on the lowest price. Simple question of numbers, without any judgment. And above all, as usual, we protect our butts. It is great that in public organizations, non-accountability is the main concern of workers while unions diligently protect its members and especially its incompetents. Competent people do not need protection.

Hence the bad reputation of government officials. We must admit that the saying: “A chain is not stronger than its weakest link.” is always true. Unions protect weak links at the expense of multiple strong links. If they were based on a social conscience (acting as a good family man), everything could be better.

This simplistic method “the lowest bidder” is also at the expense of the taxpayer. Although there is an illusion that the government is saving money, this approach shows a short-term vision of project administration. What about the taxpayer of the future who will have to pay more quickly for the repair or replacement of a public project?

There was Bill 12, An Act to promote responsible Quebec purchasing by public bodies, to strengthen the integrity regime for businesses and to increase the powers of the Autorité des marchés publics. Wow! That’s quite a law.

Let’s dig fairly:

·????????“to promote the Quebec purchase” Phew! What a goal to reach! To promote Quebec purchasing, you don’t need the lowest bidder principle. Just need to finance Quebec companies to lower their prices. This would not be tolerated by free international competition.

·????????“to promote responsible purchasing by public bodies” Phew! What a goal to reach! To promote responsible purchasing by public bodies it is enough to make them accountable in time, which is totally utopian. There are a lot of great minds in government that find every way not to be accountable.

·????????“to strengthen the corporate integrity regime” Phew! What a goal to reach! The corporate integrity regime. What is that goal? Business integrity is ONLY money, profits, that I will explain below.

·????????“to increase the powers of the Autorité des marchés publics” Phew! What goal to reach! Increase the powers; what power? The Acceptance of a Proposal of a Call for Tenders THIS IS THE POWER. No need to look any further.

So why draft a Bill that targets a vast universe impossible to reach. We just want to kill the lowest bidder concept. There’s no point in taking the opportunity to spread out. The “while at it” is always what messes up the projects. Why not make a law that simply repeals the concept or the principle of the “lowest bidder”? To succeed only this would be a feat. Imagine a public servant (strong or weak link) having to award a contract on something other than price. He will have to work to protect his buttocks. Not a small deal!

Let’s see the reality of the market with a simple example.

A business, say, makes $100,000 in sales.

It costs the owner, say, $90,000 to make the product. (Direct and indirect costs).

This owner makes a gross profit before tax of $10,000.

For the bank of this company, the profit is therefore 10%.

Almost all businesses have to have a line of credit to compensate for the occasional and temporary lack of funds (money). A Canadian chartered bank will require a minimum percentage of profit to provide a line of credit. Otherwise, the bank will refuse the line of credit and the company will go bankrupt.??

Let’s go back to the simple example. If the owner has to lower his prices to protect the public servants’ buttocks, he will therefore sell at, say, $80,000. His profit will drop to 8% and the bank will perhaps indicate its discomfort and refuse the line of credit. So the owner will have to lower his direct and indirect cost to $8,000. That would stabilize his profit at 10%. That’s good for the bank, but not for the employees and their families, or even for the company, because those same employees will have to leave to have the right to live fairly better.

THE CONCEPT OF THE LOWEST BIDDER is to look for the most mediocre supplier, in order to protect the buttocks of a public servant who is already immensely protected. In my knowledge, to get rid of a mediocre public servant, all you have to do is promote him. The others will think it is excellent and will want to appropriate it.

In order to overcome these stupid rules, companies, over time, have created specialties. Such as medical supplies, computer supplies, construction, renovation, computer development (otherwise known as “Consulting”) and many others. The fun is that these specialties have quietly agreed to raise prices, without, of course, improving working conditions. The banks oblige. The lowest bidder principle no longer holds the road. Speaking of the road, the title image shows very well the consequences of mediocrity. At the time, everything is beautiful and the buttocks are well protected. In the longer term, our children will have to make up for it.

So. Instead of encouraging the scattering of these well-meaning public servants in order to make a 12 law too large for it to be feasible, we should ask them to stick to the basics, which would not be easy. Creating new selection criteria without relying solely on price will require a lot of thought (always to protect the buttocks of our officials).?

If you have any comments, please let me know and even share them with all LinkedIn contacts.

Richard Gaudreault