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August 14, 2006

Bid to thwart reverse auction successful

TORONTO

In a letter from Toronto Construction Association (TCA) president John Mollenhauer to GlaxoSmithKline representative Peter Longo, there was an “air of comfort” in the pharmaceutical company’s decision not to use reverse auction bidding for its expansion.

A procurement or reverse auction is commonly an online auction where the buyer puts an item up for sale and a series of sellers enter bids. The buyer specifies exactly what they want and bidders must pre-qualify.

The initial response to GlaxoSmithKline’s decision to use the reverse auction was a stern one by Mollenhauer. By outlining four major points including: the recommendations of CCDC 23 and CCDC 29 are integral to the bid process; sealed bid tendering processes are competitive; existing procedures were the culmination of a lengthy review process and that reverse auctions represent a form of bid shopping, Mollenhauer expressed disappointment at the lack of attention paid to Canadian bidding methods.

Reverse auctions are aggressively opposed within the Canadian construction industry.

A meeting was scheduled between GlaxoSmithKline representatives and Mollenhauer and the results were cooperative.

Facing pressure from several national and provincial construction groups including the Canadian Construction Association (CCA), Mechanical Contractors Association of Toronto, TCA and Ontario General Contractors Association (OGCA), GlaxoSmithKline abandoned the idea of a reverse auction concept encouraged by the company’s American parent.

“You are in Canada and we do things a little differently here. Certainly, we are not against new ways or methods of improving construction buying, but not everything that comes from the states should be done everywhere,” said OGCA’s Clive Thurston.

“You are in Canada and we do things a little differently here.“

Clive Thurston

OGCA

Thurston was brought in to support the subcontractors after receiving a call from the mechanical contractors concerning the disputed bidding system.

“Because this was a little different, that it directly involved the subs, we weren’t brought in at the beginning to the degree that we are normally brought in. We certainly supported the subs in their efforts to stop this as they have supported [OGCA] in the past as well,” said Thurston.

“It is an industry issue.”

The contested auction was used to select subcontractors for a construction management project for an addition and renovations. After selecting one subcontractor, GlaxoSmithKline moved back to the normal bidding process.

“The OGCA has basically led the fight against reverse auctions in this province for the last five or six years, and we have had an enormous amount of success with a number of major firms who have U.S. parent companies.”

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