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Experts call for waiver of bid bonds

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Experts in the field of engineering and construction have called for waiver of bid bonds, which are mainly put forward for big contracts.

A bid bond is issued as part of a supply bidding process by the contractor to the project owner, to offer a guarantee that the winning bidder will undertake the contract under the terms made in the bid.

However, small scale construction companies have complained that the bond does not work in their favour as it only promotes big companies.

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Tione Mdina, Managing Director of South African-based firm, Mdina Engineering, said most countries waived the bid bond and this allows small companies to compete with big ones.

“Here in Malawi, the bid bond is a big issue. A lot of contractors are failing to grow as they are limited in their works.

“At most, the bid bond favours big companies to bid for major contracts. This puts local contractors out of the way. That is why you find that major contracts are awarded to foreign companies unlike Malawian companies,” he said.

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Mdina said, by removing the bid bond, it will allow local contractors to compete favourably with foreign companies. “By promoting the local industry, you will see that economic growth can be attained at a faster rate. In South Africa and some major economies, the bid bond is not used. The most important bonds that apply are performance bond, advance bond, retention and payment bond,” Mdina said.

Malawian Building Contractors and Allied Trade Association (Mabcata) President, Wickly Mhango, said it is a good idea to have the bond waived.

He said, even though the bond is crucial in providing checks in terms of capacity of the bidder, the removal of the bond will allow all contractors to bid.

Mhango also said projects under the World Bank and the government have considered waiving the bond.

“The government, through the ODPP, is only requesting for a bid declaration while World Bank funded projects have removed the bid bond to promote competition,” he said.

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