What are Tenders for Construction?

What are Tenders for Construction?

• What is Tendering?
• Tendering as a Risk Management Process
• Different Types of Tendering Processes
• When to Use Different Types of Tendering
• Challenges in the Tendering Process
• What is a Tender in Construction?
• Tenders for Construction: Methodologies
• Stages of the Tendering Process
• Tips for Successful Tendering
• How do you know which is best for your project?
• Conclusion

Construction is a highly technical industry with multiple trades and areas of expertise, making it near impossible for anyone to understand all the different specialties. Tendering for construction work is, therefore, incredibly difficult and requires the buyer to have a clear comprehension of both the technical elements of the product being purchased and the most appropriate route for tendering the work. The construction sector underpins our economy, forecasted to grow significantly in the coming years, contributing to both public and private sector projects.

There are many different tenders for construction a buyer can go through, but before all that, how do we as an industry define what tendering is?

What is Tendering?

Any time a buyer publishes a request for goods and/or services and invites suppliers to respond, whether they are offering a formal contract, asking for pricing, or just wanting information on what can be supplied, this might be referred to as a Tender. However, each type of request can differ in terms of the documents required and the outcome of the request.

The National Building Specification (NBS) defines tendering as:

“…the process by which bids are invited from interested contractors to carry out construction work. It should adopt and observe the key values of fairness, clarity, simplicity and reinforce the idea that the apportionment of risk to the party best placed to manage it is fundamental to the success of a project.”

In my opinion, the latter point is the pivotal one: it is critical that risk is apportioned to the party best placed to manage it, and often, it is not.

Tendering as a Risk Management Process

When you tender for construction work, it is much more than just getting prices back for elements of work. Instead, I believe tendering is more of a risk management process. Risk management involves:

• Identifying the major risks of a project.
• Assessing their likelihood of occurring.
• Deciding how best to manage them.

Different Types of Tendering Processes

In construction, there are many different options for dividing the risk between stakeholders; that is why we have many tender processes. When you tender for construction works, there are many ways you can do this as listed below:

1. Open Tendering: Open Tendering allows anyone to submit a tender to complete the works. Typically, a project notice will be placed by the client, giving notice that a package of works is being tendered and requesting that organizations register interest to submit a tender. Open Tendering in construction is the procurement route that offers the most significant competition and allows SMEs to reach a broader client base. This encourages innovation and will enable buyers to view more proposals. However, the challenge is that this can lead to unsuitable contractors tendering for the works or multiple contractors tendering, making it difficult for the buyer to suitably reply to each of them.
2. Selective Tendering: Selective Tendering differs from Open Tendering in allowing contractors to submit tenders by invitation only. Selective Tendering is not ‘open,’ and a pre-selected list of possible contractors is prepared based on the client’s initial pre-qualification. Once the buyer has determined a list of contractors suitable to tender for the construction works required, the client will invite them to tender. The exact number will differ from contract to contract and package to package, and we advise that this is no more than 4 to 5. Most Quantity Surveyors and buyers opt for the Selective Tendering procurement method because it involves pre-qualification, ensuring that the buyer quickly identifies contractors capable of delivering the scope of work. This method improves the quality of bids received and makes the tendering process more manageable, reducing the cost and ensuring efficient use of resources.
3. Negotiated Tendering: Negotiated tendering is when the client approaches a single supplier, and the contract terms are negotiated with this company and this company alone. It is often considered most appropriate when the tender is for highly technical or specialist construction work. This method reduces the period involved in appointing the contractor, allowing for early contractor engagement and increased cost certainty. Despite the advantages, it can be seen as anti-competitive and exclusive and often is not permitted due to a perceived lack of accountability.
4. Two-Stage Tendering: Two-stage tendering for construction work occurs in two separate and clearly defined stages. In the first stage, a limited appointment is issued by the client to allow the contractor to commence work, and in the second stage, a fixed price is negotiated for the agreed scope of work. The focus of two-stage tendering is early contractor engagement, enhancing buildability, and increasing cost certainty before the scheme is fully designed. Two-stage tendering is typically applied to complex projects where the client wants to appoint a Main Contractor, or more commonly by the Main Contractor in their employment of a subcontractor for a design-oriented package such as M & E, cladding or curtain walling.
5. Framework Tendering: A framework agreement is an agreement between one or more businesses or organizations. In entering into a framework agreement, a contractor is usually one of many contractors contractually bound to deliver the client’s requirements. Clients with a continuous line of work to tender can reduce timescales and other risks using framework agreements. Such arrangements allow the client to invite tenders for construction work from contractors on a call-off basis as and when required. For clients, framework tendering is a really efficient procurement route when they have repeat work, reducing administration and costs, and promoting long-term working relationships with the supply chain.

When to Use Different Types of Tendering

As a client tendering for construction works, ascertaining the correct tender process for a given project will be based on a balance of factors, including the level of specialism required, local market, and budget. For standard projects, pre-qualification of the supply chain is advised to ensure competitive tenders from suitable contractors. For technical projects, two-stage tendering can be beneficial due to early specialist engagement. For maintenance work, framework agreements offer time and cost efficiencies.

Challenges in the Tendering Process

Procurement for construction covers a vast range of products and services, from supplying building equipment to major works contracts. Therefore, identifying relevant construction tender opportunities can be challenging. Effective tender responses require a thorough understanding of the buyer’s criteria, accurate pricing, and demonstrating the contractor’s unique selling points (USPs).

What is a Tender in Construction?

In construction, to secure the work, businesses have to demonstrate through their tender why they are the most appropriate contractor or supplier for the construction contract. It is normally a formal process, aimed at procuring the most economically advantageous options for the buyer. The contractor or supplier addresses the buyer’s specification and evidences how they will meet the criteria of the contract. The range of tenders available in the UK for goods, works, and services relating to the construction industry is vast and includes architecture services, development, design and build, building, facilities management, electrical, flooring, plumbing, project management, minor and major works, repairs and maintenance, handyman services, roofing, demolition, and supply of building materials.

Tenders for construction: Methodologies

When it comes to procurement in construction, the methods used to procure goods, works, and services typically fall into four categories:

• Traditional Contracts: Traditional procurement is the most commonly used method in construction management procurement, involving an arrangement between the client, consultants, and contractor. Following a tendering process, the client appoints the building contractor to construct the works in line with the design, within an agreed timeframe and cost. This method is low-risk due to time predictability and cost certainty.
• Design and Build Contracts: This method involves the contractor taking responsibility for the design as well as construction, providing a single point of contact throughout the project. This approach is beneficial for projects where the client values continuous communication and oversight.
• Management Contracts: The client appoints designers and a contractor separately, paying the contractor a fee to manage the construction works. This method offers less price certainty but can shorten the overall process.
• Contractor-Led Contracts: Contractors provide a design team to create a concept design as proposals for the tendering process. This route can reduce costs in the long run but is more complex.

Stages of the Tendering Process

The tendering process in construction includes the following stages:

1. Pre-Tender Stage: Buyers undertake preparatory activities such as defining the scope, time to complete, and budget. This stage is crucial as it lays the foundation for the tender process.
2. Tender Advertisement Stage: The opportunity to tender is advertised in various ways, including e-tendering portals like Find a Tender Service (FTS) and Supply2Gov, trade publications, and social media forums. The advertisement generally contains a notice inviting tenders, the form of tender, preliminaries, contract terms, BIM protocol, tender pricing document, drawing schedule, design drawings, specifications, instructions to tenderers, and the evaluation process.
3. Closing of Tender: The tender notice specifies the time and date for tender closing. Bids must be submitted by the deadline to be considered.
4. Tender Opening and Evaluation Process: Proposals are evaluated objectively against pre-determined criteria by an evaluation panel, which recommends the most suitable contractor or supplier.
5. Tender Award: All bidders are informed of the decision. Once a tender is accepted, it is binding on both parties.

Tips for Successful Tendering

1. Read All Tender Documentation: Understand what the buying organization is looking for and develop a strategy to fill any gaps.
2. Work Through the PQQ: Ensure all pre-qualification requirements are met, such as accounts, insurance, and policies.
3. Visit the Site: Make tenders specific and relevant with accurate pricing.
4. On Time and On Budget: Demonstrate your ability to complete projects on time and within budget.
5. Use Your Experience: Provide case histories, testimonials, and team experience to assure the evaluator.
6. Supply Accurate MI: For facilities management tenders, provide accurate management information and monthly reports.
7. Focus on Strengths: Highlight how your services provide value and use customer testimonials to support your bid.
8. Explain Your Benefits: Sell your services by explaining the benefits, not just the features.

How do you know which is best for your project?

When client tenders for construction work, ascertaining the correct tender process for a given project will be based on a balance of factors, including the level of specialism required, local market and budget.

If you consider construction work in three headline categories; standard projects; technical projects, and maintenance projects, our advice for the most appropriate tenders for construction is as follows.

On a relatively standard project, our advice is always to undertake a level of pre-qualification of the supply chain before issuing Invitations to Tender. In doing this, you ensure that you have appropriate, interested contractors with whom to tender, and as a result, you should receive at least 4 to 5 tenders back to ensure the process is competitive. An Open Tender can result in too many tenders being returned and returned by contractors whom you consider unsuitable: this is neither effective use of your nor the contractors’ time, and therefore, we advise against this.

Where the scheme or package involves more technical elements, two-stage tendering can deliver good results owing to the early specialist engagement and should always be considered. With maintenance work, specifically longer-term maintenance work, we recommend exploring Framework agreements which can often result in both time and cost efficiencies.

Conclusion

In conclusion, there is no simple off-the-shelf tender process to choose from. Each construction project is unique, with different risks, opportunities, and stakeholders. Therefore, the client should always tender for construction works with their specific scheme in mind to ensure they best manage and allocate the risk. The construction industry is vast, and by understanding and choosing the appropriate tendering process, clients can ensure they receive competitive and suitable tenders for their projects. Construction tenders are often highly competitive, so it is imperative to submit high-quality, compliant tender bids that demonstrate the ability to successfully deliver goods, works, or services to a high standard.

Photo by Greyson Joralemon on Unsplash

About Paul Heming

Paul was a Quantity Surveyor who gained 10 years experience of managing £200 million worth of flagship UK projects, including 20 Fenchurch Street and Battersea Power Station. In 2015, Paul founded C-Link with the intention of sharing his expertise of managing major projects with the SME market.