The Factors that affect bid reduction in Turkish public investment bids and approaches towards project management system improvement

The government is the primary employer in the Turkish construction sector which is thedriving force behind the economy. Public investment projects are carried out according tothe law in force (State Bidding Law 2886, regulations, contract terms, governmentcirculars etc.) by the contractor and the personnel who take part in the planning,organization, administration and inspection phases of project management.In recent years, price reduction percentages in public investment bids have typically beenvery high (%40 and above). In other words, these public investment projects have beenundertaken with high price reductions can be completed within the pre-specified timeframe and costs while satisfying the quality specs, that investment bid is the mosteconomical one and the project management goals are realized. If the project cannot becompleted within these constraints, that bid is not the most economical.In our examination of 291 public investment projects, we saw numerous cases of high bidreductions. Typically, the periods between the planning and completion phases of theprojects were extremely long and significant deviations from initial cost estimatesoccurred. From the data, we established a strong correlation between bid reduction andcost increase. In our survey of 99 contractors who have completed public investmentprojects, we saw that 25% of these companies became contractors by working assubcontractors and 40% acquired their licenses from other license holders. The bidreductions were not based on cost analysis, but were determined by guessing the requiredreduction to get the job. We discovered that the contractors, who acquired their licensesfrom others, aim to complete at least one project before the license?s expiration date, inorder to use the project completion certificate to obtain a license of their own and tobecome contractors. When incompetent contractors take on projects with high pricereductions significantly under the cost, the resulting public investments are of low quality.Since such projects with high bid reductions cannot be completed within the pre-specifiedtime, quality and cost constraints, we argue that the bid is not economical.In order to make efficient use of our country?s scarce resources and to promptly reap thesocial benefits of public investments, the projects must be completed within the specifiedtime, while satisfying the cost and quality demands. To achieve this goal, we present a newproject management model based on our research, which involves the selection of projectsinto the investment program (Cook & Seiford), planning, contract and bidding method,contractor qualifications, contractor selection (AHP) and proper inspection services.Keywords : Planning, bidding method, bid reduction, contract method, contractor license.