Tendering is a crucial stage of any construction project. When done right, it can hugely boost a build’s cost efficiency, but poor tendering leaves any project at risk of going over budget. Put simply, the tendering process in construction is the act of requesting and receiving a price for a specific scope of work. If you want to maximise the value of your construction projects, you’ll need to fine-tune your understanding of tendering. So, in this article, we’ll use our extensive experience as the leading quantity surveyors in London to guide you through the process and explain how you can give your projects the best chance at success through high-quality tendering.
Understanding The Tendering Process In Construction
The tendering process exists in many different industries, from healthcare to education. In construction, it is most often used by public entities, like governments or councils, as they assess which contractors are most suitable for their projects. However, tendering is still hugely relevant in the private sector, and it’s one of the key ways developers and stakeholders can ensure they’re getting the most value for their investment. Construction has many different types of tendering, so keep reading to better understand each.
What Is A Tender In Construction?
Tendering occurs when an organisation needs goods and/or services. To assess its options, it develops a tender document that invites other parties to submit proposals or bids to provide these services. These other parties will use the tender document to outline their prices and suitability for the project. The organisation will review these documents and select the party that best fits their needs.
There are many different tender processes that may be used to select a contractor:
Open Tendering
Open tendering is the most common tender process and is frequently used by governments and public entities. During an open tendering process, anyone is welcome to submit a tender in response to the organisation’s invitation. The opportunity is advertised where relevant parties can see it. For example, the UK government has its own Contracts Finder page on its website. Sometimes, for larger and more complex projects, contractors must be pre-qualified before submitting an open tender. The type of tendering is the most competitive, and it gives new/emerging contractors the chance to win work.
Selective Tendering
Unlike open tendering, selective tendering is restrictive. At the start of this process, the organisation seeking goods and/or services will create a short list of contractors they’d like to invite to tender. Only those invited can submit a tender offer. This type of tender is best suited to speciality or complex projects because the organisation can limit the responses to those they deem suitable for the work.
This process is more streamlined and reduces wasted effort for both parties. The organisation won’t have to sift through too many tender documents, and contractors who wouldn’t be considered won’t waste their time creating an offer. On the other hand, selective tendering can exclude smaller companies that may be well-suited for the work.
Negotiated Tendering
Negotiated tendering is the least competitive tender type, as only one contractor is selected to submit an offer. The organisation and contractor will negotiate between themselves to reach an agreement on the price and the scope of the work. This type is most commonly used for highly specialised contracts or the extension of an existing contract.
While this tendering process significantly reduces the cost involved in finding a suitable contractor, it discourages competition and gives the organisation less power in negotiating prices.
Serial Tendering
This type of tendering acts as a middle ground between competitive and negotiated tender processes. It involves preparing tenders based on a typical or notional bill of quantities or schedule of works. Serial tendering works best when an organisation has a regular programme of works they would like to be undertaken repeatedly by a single contractor. Contractor prices are often lower with the expectation of ongoing work as they’re less reliant on future tenders and can build a long-term business relationship.
Framework Tendering
Framework tendering selects a contractor for on-call work over a fixed period of time. Contractors will provide a schedule of rates, a breakdown of resources, and overhead charges. This tender type is cost-effective and allows the organisation to get a quick response from the contractor whenever needed.
Single-Stage And Two-Stage Tendering
In a single-stage tender, the designs are complete before the invitation is sent out, so the selected contractor is awarded the entirety of the construction. In a two-stage tender, the project designs aren’t completed. That means an initial contractor is chosen to develop the designs, and another may be selected for the construction phase.
Why Should You Have A Tender Analysis?
It’s evident how important tendering is in maximising the cost-efficiency of a construction project, but choosing the right contractor can be challenging. Tender documents are long, and depending on your tendering method, you’re likely to receive a large number of offers. As part of our quantity surveying services in London, we provide detailed tender analysis to help you confidently choose your contractors. Here’s how it can help:
Cost Efficiency
Professional tender analysis will help compare offers and ensure the best value for money is achieved. That doesn’t mean just selecting the cheapest option but balancing the services offered with the quoted price. Tender analysis is one of the most effective ways to stop your organisation from overpaying for goods or services.
Risk Mitigation
An experienced set of eyes can identify the potential risks associated with a tender offer. Whether it’s financial instability, lack of experience, or insufficient resources, a tender analysis professional will be well-versed in the issues contractors might bring. Additionally, they can ensure that each offer is contractually sound and meets all regulatory requirements.
Improved Negotiation Leverage
By understanding each bid’s strengths and weaknesses, your organisation is better placed to negotiate more favourable terms, including extended warranties, a better price, or additional services. You’ll also be able to fall back on the next best offer if negotiation breaks down.
Strategic Alignment
Effective tender analysis can help identify contractors that align with your organisation’s strategic goals, leading to long-term partnerships rather than just a one-off transaction. Additionally, a better understanding of the offers can help you choose contractors that offer innovative or sustainable practices if that’s a priority.
Construction Tender Process
The tender process in construction can be broken into five categories:
Invitation To Tender
The organisation looking for goods and/or services provides a tender document to potential suppliers outlining the work to be performed. These documents usually include:
- Letter of invitation to tender.
- Details of the goods, services, or work required.
- List of all items or outcomes expected from the supplier or contractor.
- Schedule of the work or delivery, including key milestones and deadlines.
- Instructions on how to submit the tender.
- Information on how pricing should be presented and how/when payment will be made.
- A draft of the proposed contract that the successful bidder will sign.
- A submission checklist of all documents that must be submitted with the bid.
- Details on any legal or regulatory requirements that must be met or non-disclosure agreements.
Clarification
Prospective contractors submit questions and clarifications to the tender notice so they can better understand the work. Any responses are sent to all prospective bidders so each party is in an equal position. If necessary, the offer deadline may be extended so bidders can review all the information and establish their pricing.
Submission
Contractors submit their bids. Documents submitted with the tender may include:
- A brief introduction to the contractor and a concise summary of the bid.
- A more detailed explanation of how the contractor plans to execute the project, including a timeline.
- A detailed breakdown of costs, including labour, materials, equipment, overheads, and profit margin.
- Details about the contractor’s background and similar previous projects.
- Confirmation that the bid complies with all legal and regulatory frameworks.
Settlement
Having reviewed all submitted tenders, the organisation will negotiate with its preferred tenderer. The negotiation may involve revisions to the proposal, but once everything is agreed upon, a formal offer will be made.
Contract Execution
The final contract is prepared and reviewed by both parties before it is signed.
Value-Driven Construction
For those wanting to maximise the cost-efficiency of their construction projects, honing your tendering processes is a great place to start. Not only can top-quality tendering help you reduce the amount you spend on contractors, but it can also connect you with teams whose values align with yours and start long-lasting working relationships. To further streamline your construction expenditure, check out our article on value engineering and how it can help ensure your projects meet their budget.
If you’re looking for quantity surveyors in London to support your construction projects, contact our team at Bhangals. With the support of our industry experts, our clients save an average of 27.8% on construction costs. So, discuss your project with our consultants and start cutting costs today.