Tendering in Construction

The word “tender” (in the construction sense) within the industry often releases screams of hate from Contractors and yawns from Clients. Below we thought we would touch on the pros and cons of using this approach to procurement.

What is tendering?

Put simply, competitive tendering is construction is a formal process which results in an “offer” made by a contractor or consultant in response to an invitation to tender. Contractors tendering for construction work are often competing with two or three others and so are encouraged to submit their most competitive tender. As they don’t know who else is quoting, this ensures that the client receives quotes of the best value.

For this post, we will be talking about single stage tendering with a detailed schedule of works.

What are the advantages of tendering?

With a good Quantity Surveyor preparing and monitoring the tender, they are designed to ensure that the client gets best value for money. Not only this, but as part of the tender package the client also knows the proposed programme time as well as the number of errors and omissions made in the pricing.

Part of the Quantity Surveyors role in the tender process is to review every tender and identify any anomalies within the pricing. This ensures that the contractor is content with their tender return and are fully committed to carrying out the work for the price quoted. Low items especially can cause issues down the line, so rather than letting the contractor find this out during the project (and start claiming every extra they can to make it up) it is often better to work collaboratively at the beginning of the project.

So, the advantages are:

1. Ensures that the client receives the best value tender for every project.
2. It gives the client a set of competitive unit rates for use in variation negotiations.
3. Ensures that the client is comparing “like for like” quotations.
4. Contractors take part in formal process with clear selection criteria.
5. Demonstrates to the client the commitment of the potential contractor.

What are the disadvantages of tendering?

There is no way around it, tenders take longer and cost more than an email saying, “here are some drawings, send us your price”. However, we would urge the clients to look at the project as a long-term commitment and see that often money saved at the beginning is spent later.

Some smaller builders will not take part in a tender process as it is more expensive than quoting directly for work. Similarly, many “premium” contractors will not competitively tender due to demand for their services without having to compete.

Competitive tenders are often only cost-effective on projects over £200,000, unless the smaller project is particularly complicated or of a high specification.

So, the disadvantages are:

1. More expensive (initially) than sending out drawings to builders and asking for a quote.
2. Take longer than the above scenario.
3. Can exclude small builders who do not have time to price.
4. Can exclude builders in high demand who do not need to compete for work.
5. Only suitable for mid-high value residential projects.

How can you ensure effective tendering?

A mistake that many Quantity Surveyors make is the issue of a tender pack which would be in keeping with a commercial project but is far too complicated for a domestic project. Residential contractors are often very different to their counterparts in the commercial sector.

A Quantity Surveyor should be sympathetic to the tenderers, ensuring that all information is clear, concise, and obvious. It is not up to the tenderer to do the Quantity Surveyors job.

Residential builders often have a smaller backroom staff and look at far more projects than commercial contractors. It is therefore imperative to make the process as pain free as possible and to only send over what information is important.

There is absolutely no point in burying a tenderer in paperwork and asking them to pick the bones out of it.

Laziness seems to be an issue at the moment with many tenders consisting of a set of drawings, an NBS and possibly some room data sheets. There needs to be a central document dragging these all into one easily digested set of information.

Here at White & Lloyd we have worked on “both sides of the fence” and are far too aware of the issues from the contractors’ side as well as the client’s side. Our aim is to simplify the construction process – Thinking clearly about HOW and WHY we do things rather than following a set process is a good start.