Construction Tender Process

This article explores the construction tender process, the science of it and how that process defined how we built C-Link to follow that process. In previous articles, I discussed the challenges around the construction tender process, the fact that a typical project can involve the procurement by the main contractor of more than 20 different, technically diverse subcontract packages, and how difficult this can be.

For me, tendering for subcontract work always required a process.

The construction tender process was a science more than art, with specific elements that needed ticking off to deliver a whole and proper tender process.

When we built the business C-Link, this science defined much of our thinking. So, in this article, I wanted to describe how I see that science and explain how this impacts the design of C-Link.

Tender Process Part 1 – Package definition and project strategy

At the start of any project, you need first to identify the scope of the work, define each potential package on the project and build a ‘procurement list’. For many, this involves going through the drawings and specifications to ascertain the different elements, which can be laborious. C-Link software uses AI and machine learning to read construction drawings to complete this process more quickly.

Once you have a procurement list of potential trades, it is critical to take a step back and define the potential risks within the scheme.

Each project is unique, and given your resource, the programme at hand and your budget; you need to think about how best to allocate risk. In many cases, I would, at this point, think about how to manage risk through package management.

I will exemplify this by looking at a Mechanical and Electrical (M & E) package. With M & E, you have many procurement strategies, but the three in the headline (in my mind, at least) are:

• Employ a single M & E contractor.
• Employ a Mechanical contractor and an Electrical contractor.
• Employ specialist trades separately, too, i.e. employ Mechanical, Electrical, Sprinkler and BMS packages individually.

All three approaches have pros and cons.

If, for instance, the M & E package was particularly specialist and your in-house resource lacks expertise, you may think it better to employ a single M & E contractor to manage the entire process. If expertise was higher, you might feel it better to split the packages.

There are also budgetary constraints which come into play. Naturally, the more you break things out, the more you are likely to reduce costs. So you may want to look at option three if the budget is tight, but again, this has to be considered against the risk of taking on more responsibility in coordination – do you have the resource to manage things?

These are all key considerations, and I often advocate for a tender process where you tendered based on items 1 and 2 above to understand the cost difference between these two strategies and, therefore, better define the financial ‘pro’ versus the resource ‘con’.

Regardless, the important thing is to define this strategy early.

Tender Process Part 2 – Subcontractor selection and prequalification

Once you have a definition in your procurement strategy and the package list agreed upon, it is time to start collating a procurement list of appropriate and interested subcontractors against each package.

Regarding volume, I firmly believe that you need four subcontractors per package, a maximum of five, to undertake a genuinely competitive and fairly balanced tender process. If you consider that you have 20 packages on the project, you need a minimum of 80 subcontractors to tender with, not a small number.

For me, this is perhaps the most critical element of the tender process: identifying the best subcontract partners for the project. It was the most time-consuming and challenging, so we created C-Link to support this.

C-Link has built into it a prequalified supply chain of subcontractors across each trade so that subcontractors can register interest in working with you as and when you have packages you need to procure.

Rather than you going to the market, the market comes to you.

Not only does this save you a tremendous amount of time in identifying interested parties, but we have also prequalified them. It would frustrate me endlessly that you might find subcontractors you deemed suitable, but once you completed prequalification, you’d understand they didn’t have the correct insurance and render them inappropriate for your project.

C-Link deals with that, all contractors are prequalified with their data held on the system, and they raise their hand to show interest in your project – this transforms the tender process.

It means that within hours rather than weeks, you can fully populate a procurement schedule with interested and suited subcontractors and start to tender quickly. In my example in part 1, I could match with M & E contractors and Mechanical and Electrical contractors and tender both options super quickly to understand the cost/risk variance between each approach.

In doing so, I can drastically increase my understanding of the risk profile of both approaches early on in the project and plan accordingly. Often this was not possible due to time constraints, which led to less-informed decision-making to the detriment of the project.

C-Link was designed to defend against this. We wanted every subcontract package to be tendered with absolute clarity and understanding.

Tender Process Part 3 – The invitation to tender

I managed many Quantity Surveyors in the past; some were excellent at tendering, and some were less excellent, let’s say.

When it comes to creating an invitation to tender, I’ve talked endlessly about why I believe you should include a measured pricing document, so I won’t further labour that point, but when it comes to inviting to tender, there are elements which you must always include, non-negotiables I call them.

For me, these non-negotiable elements are:

• All the relevant drawings and documents
• Programme
• Measured Pricing Document
• Scope of Works
• Subcontract Particulars
• Key contract terms (retention, defects period, payment terms)

Without the above, I believe that you will not receive comprehensive tenders nor be able to properly and effectively analyse them.

In the past, I created standard tender documents including all of the above, but it was always time-consuming and prone to human error managing this in word and excel, so we designed C-Link to enshrine the above elements as part of any tender process. Our Document Creator process makes it super simple to consider and explain all these elements, and you cannot issue a tender through the platform without evaluating them.

This standardises the documents you issue out, which in turn should standardise the tenders you receive back from subcontractors, enhancing your tender analysis process.

Tender Process Part 4 – The tender analysis

The tender analysis is perhaps the most technically challenging component of the tender process. When undertaking the tender research, you will be incredibly grateful that you created a measured pricing document for subcontractors to price against in part 3. The number of clients I see losing valuable time during this stage because all subcontractors return their pricing document/measure in their own individual format is ridiculous.

Completing the tender analysis should allow you, as the person procuring, to understand the tender in much greater detail. The critical elements of this process are naturally the financials – so compare your measured pricing document, but often the aspects which are more neglected are:

• The programme – how does each subcontractor approach the programme?
• The prequalification – how does each subcontractor stack up in terms of their expertise, portfolio and experience generally? Are they the best-suited subcontractor for me?
• The contract – how has each contractor considered the proposed contract terms in our tender document?

These matters need analysis, so you are comparing apples with apples. Naturally, C-Link was designed to assist you with this process by:

• Allowing you to create comprehensive tender documents that include all the programme and contact information.
• Connecting you with the most suitable, prequalified contractors for your project and package.

I believe the tender analysis should be the most extensive period of any package procurement in that it should involve mid-tender meetings, followed by tender addendums being issued and best and final prices then being issued by the subcontractors, ideally with value engineering elements considered.

Once you have completed these elements, you can achieve a final tender analysis of the best and final proposals against the package. In this rigorous analysis, you should theoretically be in a position to make the best decision for the package by considering how to balance the time, quality and cost of each package and balance.

The above is a lengthy tender process for each package. I appreciate that over 20 subcontract packages are a huge challenge, and I believe the way we work can be better automated and improved, which is why we designed and created C-Link the way we did.

Regardless, I genuinely believe that procurement is the secret to success on a package and project. The tender process is a fundamental part of this, and being scientific in your approach will lead to greater chances of success.

Photo by Patrick Perkins 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.