Tenders and the tender process is likely to be a crucial part of the work of a construction contractor. They’re central to the procurement process within the construction and built environment sector and are used by those planning the work to ensure quality, efficiency and value for money. Tenders can be highly competitive, and the skills which win contracts via the tendering process are highly valued by recruiters within the construction industry.
What is a tender in construction?
When a business, organisation, individual or public sector body needs to undertake construction work, they can issue an invitation to tender, which asks contractors and suppliers to put themselves forward to take on the work. They submit bids to the buyer who has initiated the procurement process, who uses the proposals to decide who to hire.
This choice is likely to be based on the value for money, the contractor’s prior record and experience, and the quality of the work the bid offers, although these factors may vary slightly and be prioritised differently according to the nature of the buyer. Sometimes, the construction industry has been criticised for simply rewarding whichever supplier provided their services the most cheaply in a ‘race to the bottom’, disregarding other considerations such as the quality and safety of their work. Tenders are used to ensure that companies cannot simply submit very low price points in order to win contracts, because they have to include detailed information about how they will deliver the work.
Types of tendering in construction
There are a number of different tendering processes used in the construction industry. Some of the most common types include:
This is the most popular type of tendering process for public sector institutions. The contract is advertised to the public to encourage suppliers who undertake the kind of work being proposed to bid for it. An open tender can provide an excellent opportunity for a new competitor to break through and challenge more established contractors. A disadvantage of this kind of tender process is that it tends to take longer, as there will probably be more submissions to go through, some of which will not be suitable. The increased competition can help ensure that the best possible value for money can be achieved. This type of tender also ensures that there isn’t a bias towards particular contracting companies, as anyone can submit a bid and the public advertising of the process make it more transparent.
This process is different from open tendering in that it starts with a predetermined shortlist of potential contractors who are invited to submit a bid for work on a project. This kind of tender is usually used in order to ensure that the bids received are of a high quality, and to speed up the process and save time when the work needs to be done urgently. Since only contractors who were already known to be competent and capable of the work were invited to tender, this simplifies the decision-making process, as those assessing the bids can focus on the financial aspects.
In negotiated tendering, the organisation asks a small, select number of contractors to submit a proposed price, and then resolves the questions surrounding these through negotiation. Often, this occurs in industries in which very specialised skills and capabilities are required, so there are only a small number of contractors who can help, such as in the case of architectural restoration projects. It’s also useful when the buyer needs the work to be done in a short timeframe and therefore must pick someone they know is reliable. It’s unlikely that the public sector would use this method, so it is mainly the domain of the private sector.
How does the construction tender process work?
While the tendering process can be slightly different depending on the type of tender, in most cases the parties involved will, more or less, follow these steps:
Invitation to tender
Before going to tender, the potential clients will draw up a plan for the project they’re looking to undertake and decide what timeframe, budget and specification they need. They may bring in consultants, surveyors and architects to support their planning.
Then, they can publish the invitation to tender. This might be done online or in the press if it’s an open tender, or through direct correspondence with the relevant contractors if the process is a more selective or closed one. The prospective client should include clear details of the work expected, what each bid should include, and the deadlines for submission.
Submission of tenders
Contractors prepare their tenders, paying close attention to the instructions provided and trying to prove that they’re best placed to meet each requirement. The exact contents of a tender, and the process of producing it, will differ significantly depending on the nature of the proposed project. While this isn’t an exhaustive list and some clients will require even more information than that listed below, or else may not need every item, most tenders will contain:
- A tender pricing document which sets out the rates and costs the supplier will charge the client
- A construction phase plan (CPP) which outlines health and safety considerations and can be reviewed and updated at any stage of construction
- Any design proposals requested by the client
- A programme for the works which will be carried out, and details of the procedures which will be used
- CVs of the people who’ll be involved in the project, and information about the supplier’s management structure and how accountability works in their company
- Evidence of the supplier’s capability, including examples from previous projects and the systems which will be used in delivering the work
- Plans for sourcing the necessary plant, tools and labour
- References from previous clients attesting to the capabilities and integrity of the contractor
Selection and negotiation
All contractors have to submit their bids by the deadline, and then the client will assess them. Using a number of different criteria, they’ll determine who has put forward the best proposal. They’re likely to consider factors such as how realistic and well researched the plans and cost estimates are, the thoroughness with which the bid has assessed health and safety management, their track record and level of experience, and any interesting or innovative ideas proposed.
Then, the client may choose to invite the contractor which submitted their favourite tender to a meeting in order to negotiate the specifics. This will usually mean clarifying any details, agreeing on the terms which both sides want to be included in the contract, and making any adjustments to the tender which the client deems necessary.
Contract creation and execution
When negotiations are concluded and the parties are in agreement on the terms, a contract has to be drawn up which both the supplier and the client are satisfied with. Once the contract has been signed and the tender officially awarded, it becomes legally binding on both parties. This means that they must both meet the obligations laid out within the contract, so the supplier must complete all of the works they have committed to at the prices they offered, and the client must pay them the amotun specified at the agreed time.
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