Client tips on how to gain an edge with your tender returns (Pt 1)

PART 1 OF 4: INTRO TO THE CLIENT SIDE OF THE CONSTRUCTION TENDER PROCESS.

Most main contractors have participated in the construction tender process.

They are challenging and sometimes infuriating exercises which have a high probability of failure.

Unfortunately, they are a necessary and unavoidable part of working in construction.

What most contractors haven’t experienced is what the tender process is like on the client’s side.
If more contractors knew how to stand out or even gain an edge during the tender process, they could reduce wasted time, increase the likelihood of tender success and increase their pipeline of work.

They may even become the first contractor called early in the development process.

If this sounds appealing, read on.

WHY DOES GAINING AN EDGE BEFORE & DURING TENDER MATTER?

This is a fair question. If you submit the lowest price surely that should be enough to win, right?

That’s not quite the case.

Smart clients (the kind you want to work with) see the construction phase as the riskiest part of the development. And Contractors as the riskiest appointment.

This means that if a contractor submits the lowest tender price but they have a poor reputation or vague schedule of work, they will still lose.

The downside of making a poor impression during the tender stage is very expensive.  Alternatively, the upside is very good.

Not only can it lead to tender to success, but even if you aren’t successful, it could make you a front-runner for another project.

WHAT IS THE TENDER PROCESS?

All experienced contractors are familiar with this process.

Broadly speaking it is composed of 10 stages (from a client’s perspective):

• Tender List Creation
• Invitation to Tender
• Tender Issue (Docs are sent out)
• Tender queries / RFIs during the tender stage
• Tender Returns
• Tender Analysis
• Value Engineering / Initial Negotiation and clarification
• Tender Award (Contractor is selected and unsuccessful are notified)
• Building Contract Negotiations and clarifications (Insurances, Contract Sum Analysis, Appointments, Novations etc)
• Contract Signing and Commencement

This series of blogs will provide you with insight and advice on how to gain an edge at every step of this process. The insights and advice will be adjusted to match different contract sizes.

SO, HOW CAN A CONTRACTOR GAIN AN EDGE DURING THE CONSTRUCTION TENDER PROCESS?

The simple truth is it depends on the contract value, contract size and familiarity with the client or employer’s agent.

While there may be a range of variables most clients still fall somewhere on the Speed, Quality, and Cost Triangle. Precisely where will be influenced by a range of factors. We provide some insight below.

Broadly speaking most construction contracts fall into 3 categories.

Small/ Domestic £250k – £3M:

Small and/or domestic clients are (unsurprisingly) the most concerned about quality and cost.

Their emphasis on quality is understandable. The project is either their home, or it’s a small project for sale. Either way, poor-quality work would really sour things with this kind of client. Emphasizing attention to detail and a track record of constructing impressive projects will go a long way for clients working at this scale.

As mentioned above, projects of this scale tend to be very cost-sensitive and have few reserves. Either because its personal savings or large reserves would have made the project unviable. Emphasising an ability to not only stick to the budget but propose time and cost savings would impress most clients.

These clients tend to have some flexibility around time because their livelihoods don’t always depend on the work being completed by a strict date. However, their cost sensitivity means that cost overruns related to programme overruns will be poorly received.

Working with smaller clients allows a Contractor to become a trusted adviser. Especially if there isn’t an architect or designer on the project. Smaller clients absolutely love when contractors are able to provide advice that speeds up the project and reduces costs. Whether it be finish specifications or structural designs.

Large Buildings £4M – £9M:

Large building clients tend to be professional owners. The exception is institutions such as Universities.

Broadly speaking, this group prioritises speed and quality.

Speed (or time) matters because they will often have several financial commitments which rely on timely completion. This could be construction finance, admission of students or leases. Emphasising the ability to complete work on time without compromising quality will pay dividends.

Quality matters because:

• The owner is selling the building. So it needs to look good and honour any agreements.
• Leasing the building. So it needs to attract good quality tenants and the highest rents.
• Or operating it themselves. Which means they want to feel proud of what the building says about their organisation.

In some rare cases, it’s all of the above.

Large Buildings + Multi-phase £10M+: 

The clients of very large projects are tricky because they genuinely prioritise speed, quality and cost.

I’ll explain.

Due to the size of these projects speed and cost are closely related. A delayed project can result in very expensive penalties from lenders, and the expiration of legal agreements with landowners and other stakeholders. On very large projects it can result in material cost inflation as well as a loss of earnings or drop in stock price (if they’re listed). As mentioned above emphasising ability and willingness to hit project milestones is essential.

Because these projects are so large, poor-quality execution often results in reputational damage for the client and the contractor. On the positive side contractor proposals can pay a real dividend if proposed diplomatically and to the benefit of both parties. Any contractor working at this scale that uses specification ambiguity to save the project money will be very popular.

As an isolated factor, cost narrowly comes third for a few reasons. The first is that these contracts are often so large that there is ‘fat’ to be found in the specification of the scheme and there is enough time to conduct early/mid-contract Value Engineering if final package costs start to mount.

In rare cases, very large projects can secure additional financing. This can be from third-party investors or from renegotiating with large lenders. Large projects require a lot of investment. As such no one wants to see them fail and be left with a partially built project.

HOW ELSE CAN I GAIN AN EDGE IN COMMERCIAL TENDERING?

C-Link is helping market-leading contractors save hundreds of man-hours by digitising and streamlining their tender processes.

If you’d like to discuss how C-Link can help you do the same, drop us a note here.

If you’re not ready but you’re intrigued, why not check out our platform?

 

Photo by Jeriden Villegas on Unsplash

About Martin Prince-Parrott

Martin is an ESG Real Estate Developer and former Award-Winning Architect. He’s spent the last decade designing and developing a billion-pounds worth of mixed-use institutional-scale real estate. He’s worked with and for market-leading companies such as Gensler, Microsoft, Barratt Homes, Legal & General and Barclays Bank.