PURCHASING EQUIPMENT FOR PUBLIC WORKS ON TOTAL COST BID AND DISCUSSION

HIGHWAY MAINTENANCE EQUIPMENT IS PURCHASED BY STATE AND LOCAL GOVERNMENT AGENCIES IN THE UNITED STATES BY COMPETITIVE BIDDING. AWARDING AN EQUIPMENT CONTRACT ON LOW BID PRICE, ENCOURAGES THE MANUFACTURER TO BUILD UNITS AS ECONOMICALLY AS POSSIBLE TO MEET MINIMUM SPECIFICATIONS SET. A TABLE IS PRESENTED SHOWING THE WIDE VARIANCE IN REPAIR COSTS OF OPERATING MACHINES THAT WERE PURCHASED ON THE SAME SPECIFICATIONS. A RELATIVELY NEW PURCHASING CONCEPT TO SOLVE THIS DILEMMA IS CALLED TOTAL COST BIDDING. USING THIS METHOD, EQUIPMENT SUPPLIERS ENTER NOT ONLY THE BID PRICE FOR THE INITIAL PURCHASE, BUT GUARANTEE FOR A PERIOD OF TIME A MAXIMUM REPAIR COST AND A MINIMUM REPURCHASE PRICE AT THE END OF THE STIPULATED PERIOD. THESE GUARANTEES ARE BACKED BY PERFORMANCE BONDS TO INSURE THAT ALL PROVISIONS OF THE CONTRACT WILL BE FULFILLED. THE BID AWARD IS MADE ON THE BASIS OF INITIAL PRICE PLUS REPAIR COST MINUS REPURCHASE PRICE. THE LOWEST NET COST IS THEN THE BEST BID REGARDLESS OF INITIAL PRICE. THE TOTAL COST CONCEPT IS BEING SUCCESSFULLY UTILIZED BY GOVERNMENTS AT EVERY LEVEL. WITH DEPRECIATION AND REPAIR COSTS KNOWN IN ADVANCE, BUDGETING AND PLANNING FOR FUTURE EQUIPMENT PURCHASES ARE MADE EASIER. THROUGH THE USE OF TOTAL COST BIDDING, THE TIME WASTED WHILE MACHINES ARE WAITING FOR REPAIRS CAN BE REDUCED BECAUSE EQUIPMENT IS MORE AVAILABLE FOR WORK. TOTAL COST BIDDING IS RECOMMENDED TO ACCOMPLISH A BETTER JOB OF PURCHASING EQUIPMENT.

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  • Supplemental Notes:
    • Paper sponsored by Committee on Highway Equipment and presented at the 48th Annual Meeting. Distribution, posting, or copying of this PDF is strictly prohibited without written permission of the Transportation Research Board of the National Academy of Sciences. Unless otherwise indicated, all materials in this PDF are copyrighted by the National Academy of Sciences. Copyright © National Academy of Sciences. All rights reserved.
  • Authors:
    • Hughart, W M
  • Publication Date: 1969

Media Info

  • Media Type: Digital/other
  • Features: Figures; Tables;
  • Pagination: pp 15-21
  • Monograph Title: Highway equipment studies, construction management, noise and air pollution bibliography
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 00219356
  • Record Type: Publication
  • Files: TRIS, TRB
  • Created Date: Sep 29 1994 12:00AM