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I once asked one of the contractors I use whether they preferred to negotiate a price for a project or put in a tender. 鈥淣egotiating is better for continuity,鈥� he said, 鈥渂ut it鈥檚 good to tender from time to time as it gives you a chance to win a job at a price you鈥檇 really like to do it for.鈥� In other words, if the estimator knows more about the matter in hand than the person who wrote the documentation, it provides an opportunity to build-in a decent return. For example, an estimating chum of mine told me he鈥檇 once won a tender where he鈥檇 been asked to give a price for digging a vast hole and taking away the spoil at one end of the bill 鈥� and importing 500 tonnes of fill and a layer of topsoil at the other.

I don鈥檛 like tendering if I can help it. Not so much because I disapprove of it in principle, but because of how it tends to work in practice. The problem is that once you鈥檝e invited people to bid, you鈥檙e almost dutybound to give the work to the firm that submits the lowest price. So one offer may have been submitted by a builder whose work I know and whose pricing I understand, and another may undercut it by 20%. My first reaction upon opening that envelope is not elation at having saved the client a shedload of money. Rather, I know that I鈥檓 in for a dispiriting few months fighting off claims and breaking the news to my client that the builder has stopped work on the spurious grounds that I haven鈥檛 prepared full-sized drawings that locate the step-irons in the manholes.

A similar thing seems to occur on an altogether grander scale at the PFI level. When I read that a consortium鈥檚 bid costs can add up to half a million, I wonder just how many jobs they can afford to lose, and just how keen they are to pay their architects when they do. As for the ones that make it to the preferred bidder stage 鈥� surprise, surprise, you read that its final price turns out to be twice as high as first suggested; but by the time this has been established the other tenderers are no longer interested.

All of which brings me to the topic that filled most of last week鈥檚 magazine: the Office of Fair Trading鈥檚 investigation into cover pricing. The truth is that tendering for work you鈥檙e not going to get is wasteful and expensive, and to compensate for this, I鈥檓 sure some tender manipulation goes on. If you go to six tenderers for a brick building, and each goes to three subcontractors then you can get 18 bricklayers pricing the same piece of work. In this case, putting in false bids is not really villainy, it鈥檚 expediency.

There is a good story in Bryan Appleyard鈥檚 biography of Richard Rogers where he describes the way the French government prevented itself getting stitched up by a French construction industry somewhat disenchanted with the fact that it had to build a British design.

The general left unopened the revised tenders submitted by the French steel fabricators which were now all miraculously around 拢5.1m.

Tenders were sought for the structural steelwork. Six French bidders put in prices of 拢10m (or whatever). However, instead of appointing a QS to project manage the operation, president Giscard d鈥橢staing recruited a former general. He was from one of those scary French outfits like the OAS or the DGSE or Foreign Legion, and immediately smelt a French rat.

So, he asked the British team what it would expect the tender to be. 鈥淲ell we鈥檝e measured it and we thought the tenders for the steel should be more like about 拢5m. 鈥淶ut alors!鈥� said the general. 鈥淟et us re-tender but this time let鈥檚 ask some foreign steel suppliers to bid as well.

This they did. In due course the general was presented with a new lot of envelopes, including one from Krupp, the German steel giant. 鈥淶is is more like it,鈥� he announced as he opened their tender, which was for 拢5.1m. He left unopened the revised tenders submitted by the French firms, which he (rightly) suspected would now all miraculously be in the 拢5.1m range. 鈥淟et鈥檚 get on with it 鈥� we have a building to build,鈥� he barked. And after that there was no more price fixing.

I always tell my employers that there are no bargains to be had in the construction industry. There may be for insiders, but for relatively novice clients, getting the work done properly, on time and for a sensible price is a good deal in itself. If clients insist on contractors wasting time by endlessly tendering then firms are bound to put in unenthusiastic bids to protect themselves, and sooner or later some sort of price fixing is almost inevitable. Having said that, the OFT鈥檚 report is timely, otherwise the money will have run out by the time of the Olympics.