What options are available to an Owner for negotiating unit prices?

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QUESTION:

I have a question about how the COVID-19 pandemic may affect material and labour costs of MMCD items – we’ve noticed that some of these items in the tenders we have received during the pandemic have increased in costs by almost double, particularly on materials and related components. On one of our tenders, we are inquiring with the lowest tenderer to provide some background to their pricing for us to determine if increase costs are an effect of the pandemic, or other factors.

The question I have is: what options do we have for negotiating unit prices? I know that we can negotiate quantities, since those are based on estimates, but can you advise on the practice of negotiating actual unit rates and what best practices are, from the MMCDA’s perspective?

COMMENT:

Unless the Owner wishes to modify the standard Instructions to Tenderers, there is no ability to negotiate prices or quantities prior to award. Tender law typically does not permit this - that is the realm of Requests for Proposals. However, Owners have the ability to structure their call by modifying the Instructions to Tenderers in any way they wish.

After Award: Perhaps one idea would be to provide a Supplementary GC which gave the CA the right to require proof of costs "on demand” and/or some kind of price adjustment mechanism if it is somehow proven that there is some price gouging built in. It is not clear whether this is significantly different from bid unbalancing and MMCD currently provides protection against this only when quantities overrun. Possibly normal "competitive pricing" through tendering does not adequately protect the owner from a rogue bidder.

In addition, we have a new “Contract consideration” video available on Covid 19 at https://www.mmcd.net/resources/video-resources/

What options are available to an Owner for negotiating unit prices?

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