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This is what I'm also wondering. What is the point of making a contract in the first place if the price quoted is not binding? If the provider needs more materi

by vkk8 5y ago

This is what I'm also wondering. What is the point of making a contract in the first place if the price quoted is not binding? If the provider needs more material or manpower or whatever than expected, then it should be their fucking problem and not the clients. The possibility of unexpected stuff happening should, of course, also be taken into account in the initial price quote since the provider should be much better at estimating the probability of something happening than the client.

g_p 5y ago
The problem when dealing with government or public works is that the provider simply isn't better at estimating that probability, since they aren't empowered to bulldoze ahead. The contractor can accurately price in (and insure against) technical risks like the risk of accidentally striking a cable while digging, and they can mitigate this as well (looking at the quality of cable mapping data, using detectors etc.) What the contractor can't factor in is all the (local) government politics and bureaucracy. Where things fall on the financial year calendar, whether they will have to spend the money before or after April, whether they will have to pause works because a resident legally challenges the works, whether the client has even asked for the right thing, or if it will emerge while planning the work that they have made major errors etc. When dealing with a well-specified, fixed-scope piece of work, you are right - the provider should eat that. When dealing with an uninformed non-expert customer (i.e. most public sector or government contracts), nobody in their right mind would take on that risk, except some of the big government outsourcing contractors, who would all quote insane prices based on past "actual costs" after factoring in all the nonsense from previous work.
- 7952 5y ago
  And there will be bias. The contractor will be optimistic about their own abilities and excited about the project. The client will become emotionally attached to the end goal. And everyone will underestimate the overhead of communication. Human factors apply and cannot be engineered away.

by vkk8 5y ago

g_p 5y ago

The problem when dealing with government or public works is that the provider simply isn't better at estimating that probability, since they aren't empowered to bulldoze ahead. The contractor can accurately price in (and insure against) technical risks like the risk of accidentally striking a cable while digging, and they can mitigate this as well (looking at the quality of cable mapping data, using detectors etc.) What the contractor can't factor in is all the (local) government politics and bureaucracy. Where things fall on the financial year calendar, whether they will have to spend the money before or after April, whether they will have to pause works because a resident legally challenges the works, whether the client has even asked for the right thing, or if it will emerge while planning the work that they have made major errors etc. When dealing with a well-specified, fixed-scope piece of work, you are right - the provider should eat that. When dealing with an uninformed non-expert customer (i.e. most public sector or government contracts), nobody in their right mind would take on that risk, except some of the big government outsourcing contractors, who would all quote insane prices based on past "actual costs" after factoring in all the nonsense from previous work.

7952 5y ago
And there will be bias. The contractor will be optimistic about their own abilities and excited about the project. The client will become emotionally attached to the end goal. And everyone will underestimate the overhead of communication. Human factors apply and cannot be engineered away.