Highway Projects: Prices in Public Bids

Highways and roads are an important part of public assets in all countries, allowing movement between communities. As well as other types of infrastructure, the roads infrastructure requires a proper procurement process. The research shows that prices presented in public bids are lower than those expected by contracting authorities. Public owners are restricted to the public bidding procedures, especially the provision to use low bid price in the Public Procurement Act. Often a public owner has concerns about the contractor bidding with the lowest sum. Contractors are repeatedly requested to explain the reasons for their low price. This leads to time extension of the bid process. The lack of contracts for construction work and an additional competitive concern to win out in the bid process may be the reason for low prices. An incorrect calculation of the estimated contract price by the contracting authority itself could be another reason.The cost analysis of two sections of highway clearly showed incorrect cost estimates by the relevant contracting authority. The difference was primarily due to significantly lower rates of indirect costs and profit, rebates granted when buying building materials, and lower cost of plant. The author summarizes the possible causes of the incorrect estimates of expected value and at the same time proposes methods to achieve better estimates for the contract price. The public sector may use the results of this study to identify the ineffectiveness of procurement in the area of infrastructure projects in the Czech Republic. The proposed procedures should improve the efficiency of procurement and provide better cost estimates by the public agencies.