Written by Denise de Blok
In 1989, the managing board of the Stedelijk Museum Amsterdam stated the wish to renovate and extend their building. The following years became a rollercoaster wherein the first chosen architect quit and the second did have to quit due to a conflict (Wamelink, 2017, September 17). Fifteen years later, the board selected the third architect and could finally start selecting the appropriate contractor (Authors of Architectenweb, 20041; Authors of Architectenweb, 20042). But this was not the end of all problems: they received only one bid, 35% over budget (Soetenhorst & Logtenberg, 2011). That is not ideal… So, what pre-contract approaches are there to prevent this from happening?
The renovation and extension of the Stedelijk Museum has been approached in a traditional way. The architect was selected first and afterwards a contractor was selected using the restricted tender procedure. Using this procedure, the client could have large control (Gordon & Member, 1994). This control was important for the client, since he/she wanted to have influence in all stages of the process (R. Warmerdam, personal communication, 2017, October 6).
But was this the right procedure for the Stedelijk Museum? According to Gordon & Member, a client should take the characteristics of the market into account (1994). In 2004, the Netherlands was in the state of an economic boom: contractors had lots of work and could select the most attractive projects to apply to. The project of the Stedelijk Museum was not attractive for contractors due to its complexity: defining all specifications to apply to the tender would cost a lot of money (Authors of Het Parool, 2007).
A way to make it more attractive to apply could be using the tender procedure of the competitive dialogue. This procedure makes it possible to reward selected contractors financially for their input in the dialogue rounds (Chao-Duivis, 2010). A financial reward will decrease the risk for losing the project and makes it therefore more attractive to apply. Next to that, according to the economical law of supply and demand, contractors who do expect more competition, will do a lower bid trying to win the tender.
In this project, the contractor is selected on the bid he/she did based on the design of the architect. According to procurement law, it is not allowed to make changes in the design during the tender phase (Chao-Duivis, 2010). So, this separated tender rounds make it impossible to improve or change the design during the tender phase, even when the design is very expensive. This could lead to an expensive bid.
A way to make it possible to make improvements and changes to the design in a later phase, is making use of a Design&Build Contract wherein the architect and contractor work together (Gordon & Member, 1994). This contracting method will decrease the influence of the client, but knowledge of the architect and contractor can be combined and the design could be revised easier when it seems to be too expensive.
So, two ways to prevent the situation wherein only one high bid is done are explained. The first approach is using the competitive dialogue, wherein a financial reward makes it more attractive to participate. This will lead to more applications, which leads to lower bids. The second approach proposes to integrate the design and build contracts into one. By doing this, the knowledge of both actors will be combined and the design could be revised easier when it is too expensive.
For the Stedelijk Museum, I prefer the first approach. This approach could lead to more applications and lower bids, where the second approach only solves the problem of a too high bid. Another option would be the combination of those two: the use of the competitive dialogue to select a consortium for an integrated design&build contract. This would combine the advantages of both approaches, but could lead to high transaction costs. To conclude, choosing the right tender procedure is not an exact science. There is not one good way, but it is important to be aware of the different possibilities and their pros and cons!
Reviewers: Nienke Hakenberg and Sofie Oosdijk
References
Authors of Architectenweb (20041). Stedelijk selecteert architecten. Retrieved 2017, October 5 from https://architectenweb.nl/nieuws/artikel.aspx?ID=2501
Authors of Architectenweb (20042). Benthem Crouwel bouwen nieuw Stedelijk. Retrieved 2017, October 5 from https://architectenweb.nl/nieuws/artikel.aspx?ID=3055
Authors of Het Parool (2007). Stedelijk museum jaar langer dicht. Het Parool. Retrieved 2017, October 5 from https://www.parool.nl/binnenland/stedelijk-museum-jaar-langer-dicht~a4405/
Chao-Duivis (2010) Procurement Law. In: A practical guide to Dutch building contracts. Den Haag: Instituut voor Bouwrecht.
Gordon, C.M. & Member, A.S.C.E. (1994). Choosing appropriate construction contracting method. Journal Construction Engineering Magazine, 120(1), pp. 196-210.
Soetenhorst, B. & Logtenberg, H. (2011). Hoe Cor van Zadelhoff Midreth introduceerde. Het Parool. Retrieved 2017, October 5 from https://www.parool.nl/kunst-en-media/hoe-cor-van-zadelhoff-midreth-introduceerde~a3541419/
Wamelink, H. (2017, September 17). Project success & risk management [lecture]. Retrieved 2017, October 5 from https://brightspace.tudelft.nl/d2l/le/content/35591/viewContent/569726/View
Winch, G. M. (2010). Motivating the project coalition. In: Managing Construction Projects; An information Processing Approach. West Sussex, UK: John Wiley & Sons.
