How To Know Which Tendering Process Is Right For Your Project
In our role as quantity surveyors, it is our duty to ensure our employer gets the best value for money. This is pursued at all stages of the project lifecycle, from the initial feasibility studies through to the negotiation of the final account. Our goal in this article is to help you determine the most appropriate tendering option for your project by explaining the different tendering options available.
When it comes to construction project management, it’s easy to think there is a one-size-fits-all solution. However, the reality is far from this – especially when it comes to tendering. Prior to deciding which tendering method to use, we have to take into account a number of factors. Some questions we have to ask ourselves include:
- What is the time frame?
- Are there any specialist / bespoke works?
- How much control over the design of the product do you need?
- What is the Employer’s appetite for risk-taking?
- What level of quality is required?
- How early is cost certainty required?
- How much design has been progressed so far and how much will be done by the time the works are tendered?
Your answers to these questions will help determine which tendering options are most suited to your construction project. So without further ado, let’s go through each of the main tendering methods.
Arguably one of the most common types of tendering procedures and is often used by the public sector. Open Tendering allows for anyone to apply to tender for the works. This method usually begins with an invitation to tender (ITT) notice being published on a tendering portal. How Open Tendering differs from most other tendering methods is that it results in a large pool of potential suppliers to choose from.
The benefit of this is that you will have a large selection of suppliers to pick from, so you can selectively pick the right suppliers for the job as well as give opportunities to potentially overlooked suppliers. However, the one considerable and pretty obvious drawback to this is that a lot of time can be spent vetting returned tenders.
This is generally the preferred choice of the private sector. Sometimes referred to as Restricted Tendering, Selective Tendering removes the open invitation to all suppliers and instead, only prequalified vendors that have been invited by the buyer can tender for the contract (generally less than six). The significant benefit to this, as opposed to Open Tendering, is that a handful of contractors have been pre-selected. This saves a great deal of time and effort going through tenders, thus reducing the vetting process required after tenders are received. It also allows the Employer to use their preferred workforce, utilising relationships with suppliers they know and trust, which is so important in construction works.
There is also the certainty of the contractors’ competency as they are known to be suitable for the works in question. Selective tendering is especially useful when the works are specialist or there are certain expectations from the client that few contractors can guarantee.
Under this option, a single supplier is invited to tender and the contract is negotiated. The supplier is normally selected based on their track record. This is a favourable option for a project in which the works being carried out are specialist in nature. However, while the clear benefit here is that time spent during the tendering process is significantly reduced, the competitive aspect of the tendering process is removed, therefore risking reduced value for money.
Slightly different from the aforementioned tendering methods, Serial Tendering involves pricing of the works on the basis of a notional bill of quantities or schedule of works. Contractors then return their tenders with the rates filled in, with tenders then being assessed based on the rates provided. Notable benefits to this tendering option are:
- Useful when works consist of multiple smaller projects.
- Contractors are inclined to submit lower rates to secure work, increasing value for money to the employer.
This is often used for the procurement of maintenance works and repetitive works on multiple projects. The one drawback to this method is, again, the time spent going through the various tenders.
Under this arrangement, potential suppliers have an agreed overarching contract which lasts a certain period of time. This can range anywhere from a few months to several years and is open to extension in order to meet the demands of the project.
During this timeframe, the client may wish to utilise different contractors’ services for specific projects which they will procure under a framework agreement. The advantage to this is that time is saved during the procurement process for each project as a number of the terms and conditions have already been agreed upon.
Single-Stage & Two-Stage Tendering
For each method of tendering, it then needs to be determined as to whether the tendering process will go through the Single-Stage or Two-Stage process. However, this will be apparent based on how much information on the project is available to the suppliers bidding for the tender.
The Single-Stage Tendering process is used when all project information is readily available for contractors to provide a robust price for the works required of them.
The Two-Stage Tendering process is used when the client needs additional support at the design stage, or the client wants to start the project with conceptual drawings. This works by contractors submitting an initial price for the works based on approximate quantities and conceptual (preliminary) drawings. They are often required to provide a fixed price for part of their submission, normally the preliminaries through the main construction period and fee for the preconstruction stage.
This allows for work to begin, with the final fixed price being negotiated later on. The benefit here is that Two-Stage Tendering allows for Early Contractor Involvement (ECI) which contains its own cost-saving benefits. However, the disadvantage is that through the second stage, competitive pricing can be lost as the Contractor is not in competition during the second stage, much like a negotiated tender.
At Caliba, we can expertly guide you through all things pre-contract when beginning your project, including tender management. If you need a quantity surveyor for an upcoming project, or you’d like to know more, feel free to get in touch by leaving your details below: