At a downtown Toronto property we were called in last year to take over the management. Before we started the board informed us that we would be taking on a large fan coil replacement – something that we were happy to take on as we were in the middle of the same project at a site down the road. Shortly after we started, the bids came, and all were surprised to see how high the prices were.
Not only were bids almost 40% more than what were were paying (per unit) at the other site for a very similar scope, the engineer’s tender process raised a lot of red flags. First, of the four bidders chosen by the engineer, two of them were general contractors with no specialty in doing fan coil projects. Second, the bid document specified an exact and obscure make and model of fan coil that only some vendors may have had access to. And finally, even though one of the general contractors had the lowest bid, the engineer recommended not using them because they weren’t a specialist. This was the same vendor that the engineer chose to bid in the first place!
Digging further, we reached out to another engineer in the industry. We told the story without using any names, and only described what we were seeing. Surprisingly, the engineer had no problem guessing not only who the engineer behind the bid was, but also the four bidders. This was not the first time he had seen this.
After several discussions, we recommended cancelling the job and starting fresh with a new engineer and new bidders, with a quality product being specified. Our expectation was that the new bid would come in lower than the old, but we would have been happy with the added transparency alone. When the bids came in, we were surprised to find that two of the low bids came in at $170,000 and $230,000 lower than the previous low bid.
While it is impossible to say whether or not the first bid was rigged, doing our due diligence and carefully managing the second bid resulted in a significant savings for the building.