Procurement Professional is the official publication of CIPS Australasia

#109 - National Broadband: The high cost of tendering

04 Feb 2010

Communications Minister Senator Stephen Conroy was under criticism yesterday after the publication of the Auditor General’s report on the cost of the ill fated tender exercise for the national broadband project last year http://www.theage.com.au/technology/technology-news/aborted-broadband-plan-cost-us-17m-20100203-ndj8.html  

You will recall that the federal government decided to abandon the tender exercise at the shortlist stage, forgo the ‘buy’ option altogether and select the ‘make’ option – even though it wasn’t an option at the start of the exercise. They now plan to spend $43billion over the next eight years building their own national broadband network [NBN].

Anyway, the costs of this truncated exercise were published yesterday, over $30m all up says the auditor general. The tenderers together apparently spent $13m preparing their bids. Though maybe the Telstra bid didn’t contribute quite so much of that amount [apparently two sides of A4 wasn’t it?]. Still, any professional buyer will tell you that tenderers in any major project incur significant costs to prepare their competitive bids. Management time alone adds up to a lot, feasibility studies, consultancy reports, spec-building, samples production, design costs, environmental reports, quotes and costings all take time, money and effort.   And all on a speculative basis.

But it was odd that the government’s costs came in at even more - $17m.  The Buyer is at a loss to understand how the client spent more than the bidders?? The minister blames the GFC of course. http://news.theage.com.au/breaking-news-national/nbn-tender-process-not-a-waste-conroy-20100204-ndxh.html  Though no one seems sure quite why? But it will be a drop in the ocean compared to the $43billion they will spend over the next eight years now. Busy days ahead for someone.

The Buyer – posted 4 February 2010

The views of THE BUYER are personal and are not necessarily those of Procurement Professional magazine, BTTB Marketing nor CIPS.