Selection of Contractors for Middle-Sized Projects in Turkey

Gazi University Journal of Science GU J Sci 24(3):477-485 (2011) www.gujs.org Selection of Contractors for Middle-Sized Projects in Turkey Ayşegül YILMAZ1, Sema ERGÖNÜL2♠ , 1 MSB Đnşaat Emlak ve NATO Güvenlik Yatırımları Daire Başkanlığ, Bakanlıklar-Cankaya/Ankara1 2 Mimar Sinan Fine Arts University, Faculty of Architecture, 34427 Fındıklı, Istanbul2 Received: 19/10/2010 Accepted:08/02/2011 ABSTRACT In the last decade, there has been a trend rising towards the improvement of the methods for effective contractor evaluation. Governments may have been utilizing these kind of studies during legislation and legal regulations on procurement. To achieve the best value for money, the tender evaluation should consider not only price competitiveness, but also compliance with users’ requirements, reliability of performance, capabilities and experience, qualitative superiority, and whole-life costs. Turkish public authorities arise the need for proper contractor selection approach including factors other than price. A contractor selection model is structured to cover non-price attributes together with the bid price. The concern of the model is the public authorities, who want and need to consider the factors other than price during contractor evaluation process of middle-size and semi-complex projects. The model is tested by a hypothetical scenario which evaluates four contractor candidates. The results show that the model provides a guide for the public client to reward experienced, capable and qualified candidate contractors, and to eliminate incompetent, inexperienced, or underfinanced contractors for the success and quality of works. Key words: Procurement, Public Sector, Clients, Contractor Evaluation, Contractor Selection 1. INTRODUCTION The concept of project success does not have a common and certain definition because of varying perceptions of different parties including the client, the architect, the contractor, various surveyors and engineers in construction sector. Each project participant will have his or her own opinion of success and the definition of success changes from project to project. Traditionally, a project is considered successful if the building is delivered at the right time (schedule), price (budget), and quality. Construction contractor selection is very important task as the contractor plays a vital role for the progress and sucsess of the project. In every country, public procurement environment has different characteristics in respect to dissimilarities in political, social and economical features. Evaluating contractors and selecting the best bidder requires a sophisticated knowledge and experience to ensure that the selected contractor is capable of executing the project according to the owner’s requirements. Owners in various sectors have different procedures for evaluating construction bids. The private sector clients Corresponding author, e-mail: mostly develop their own procedures and have unrestrictive system for bid evaluation. The method implemented in the public sector is that of awarding the contract to “the lowest bidder”, because clients are publicly responsible and must demonstrate that the best value for their money has been obtained [1, 2, 3, 4]. However, the selection of the lowest bidder is one of the major reasons for project delivery problems as contractors, when faced with a shortage of work, desperately quoted a low bid price simply to, remain in business with the expectation to be offset through claims [5]. Turkish Public Procurement Law (PPL), which is revised in 2003 provides a public procurement system with more transparent regulations, no arbitrary and unequal treatment of public client to candidate contractors, elimination of discriminatory and unwelcome procurement practices, and development of effective competition. Based upon all these attributes, PPL 4734 [6] constrains public clients to contract with the lowest bidder, excepting some cases like invalidity of documents 478 GU J Sci, 24(3):477-485 (2011)/ Ayşegül YILMAZ, Sema ERGÖNÜL of the lowest bidder. Bid evaluation based on the lowest bid price without contractor qualification may be suitable in simple and small-scale public projects. But, it may result in a failure for middle-size and semi-complex projects. As far as non-price criteria are concerned, there are no clear regulations, standard forms and instructions for contractor evaluation method in PPL 4734 [6]. Therefore, public authorities do not prefer to use nonprice attributes for fear of impropriety, and damaging transparency and competition during the evaluation process of contractor’s tenders. Currently, public clients in Turkey need some kind of qualification criteria together with bid price during bid evaluation and contractor selection process for the success of their projects. This study aims to present a contractor selection model which is practicable for public authorities who are willing to take into account the factors other than price, to be able to select the best bidder. Middle-size and semi-complex public projects are the primary concern of this study. The model is hypothetically tested by a scenario evaluating four candidate contractors. 2.CONSTRUCTION CONTRACTOR SELECTION Contractor selection aims to minimize the possibility of contractor default and the time involved in bidding by restricting the number of eligible contractors involved. It is one of the most challenging tasks performed by an owner or contract administrator, due to the complexity involved in this process [7]. Construction clients are becoming more aware of the fact that the selection of a contractor based on bid price alone is quite risky and may lead to the failure of the project in terms of time delay and poor quality standards [8-10]. In order to evaluate the overall efficiency of a project it is necessary to identify selection attributes, to assess information relating to these attributes, and to develop methods for evaluating the attributes to meet the participant’s needs [11]. In practice, contractors’ suitability to participate in a project bid is usually assessed by the project owners according to their previous experience, judgement and a set of criteria which might vary between projects and clients. The multi-criteria evaluation model is broadly used by researchers as a means of alternative selection [12-15] addresses 25 attributes for contractor selection while Alsugair [1] proposes a framework of 36 evaluating factors grouped into nine classes. However, literature review shows that the most acceptable contractor’s prequalification criteria are financial stability, management and technical ability, contractor’s experience, contractor’s performance, resources, quality management, plant and human resources, health and safety and environmental concerns [5, 16-18]. Numerous researchers [19-21] emphasizing the importance of contractor selection, suggest methods/models for the evaluation of candidate contr (...truncated)