Tendering in Construction – A Simple Guide to Lowering Costs

What is Tendering?

In a nutshell, construction companies compete for a project through tendering, and the client awards the project to one of them. It involves inviting bids from a range of potential contractors who want to do the work, with the client or project manager ultimately choosing the successful applicant. This approach ensures transparency, keeps costs down, and helps the client select the contractor best suited for the job. The idea is to prompt competitive pricing, maintaining quality standards and fair competition.

This means it’s crucial to put time and effort into making the tender documents. These documents clearly state what the work requires and, depending on the contract type, how to complete it as well. This information ensures that contractors do the work properly, work efficiently, and provide accurate, fair pricing. Tender documents can take on many forms, but the most common is a selection of:

As well as other details important that make sure the client can comply with their legal obligations, for example Health and Safety.

Different Forms of Tender

Just to confuse things, there are several different types of tendering methods used in construction. Each method has its own unique purpose depending on the project requirements, budget and timeframe. The most common types you will see are:

Open Tendering:

This is widely used in public sector projects. It allows any contractor to submit a bid, ensuring maximum competition for the job. However, open tendering can attract unqualified bidders, which can lead to a time-consuming evaluation process.

Selective Tendering:

Inviting only pre-qualified contractors to bid. This method ensures quality in the contractors, but does limit competition and can potentially drive costs up. But, in our experience, when compared to open tendering, the cheapest quotes also tend to be the least stable, and costs can escalate.

Negotiated Tendering:

Clients mainly use this for specialised projects and negotiate directly with a preferred contractor. While this method does speed up the process and make sure you’re using someone experienced, it can risk reduced cost competitiveness.

Serial Tendering:

Here, a contractor agrees to complete multiple projects based on a set of pre-agreed rates. This method is efficient for ongoing works, but lacks price competition.

Two-Stage Tendering:

This involves an initial tender for selecting a contractor based on preliminary costs and capabilities. This is then followed by a second-stage tender for final pricing. Useful for promoting collaboration, but it can slow down the tender process.

Short vs Long Tender Period 

If you’re at this stage in a project, odds are you want this decided yesterday. But in the tendering process there’s something called the tender period. This is the time given to contractors to prepare and submit their bids. You have the choice of opting for a short or a long tender period, and there are advantages and disadvantages to both.

Short Tender Periods:

If the works are simple or strictly designed, this approach can be a good option. It encourages fast decision-making, cuts down any delays and allows for quicker mobilisation of the chosen contractors. But if your project is more complicated, then short tender periods tend to lead to rushed submissions, fewer submissions in general and potential mistakes in cost estimates. It’s important to remember that giving contractors less time to price items will also pose more of a risk to them, which means they’ll err on the side of caution and price higher, instead of working to get the best costs to complete the works.

Long Tender Periods:

Longer tender periods allow contractors to conduct that thorough cost analysis, which then leads to more accurate bids and ultimately lower costs. Another advantage is that it increases competition and ensures quality submissions. This is especially important in fixed price contracts like design and build. The downside is that this can delay the start of the project, increase administrative costs and keep any capital tied up in land value or the existing property, which will add to the financing costs for the overall project.

At the end of the day, deciding on how long your tender period should be is a balancing act, and it depends on your priorities.

So, there you have it! Tendering is sometimes overlooked, and it should be one of the first steps in a project. Tendering plays a vital role in ensuring projects are awarded fairly and efficiently. Choosing the right type of tender and setting an appropriate tender period can significantly impact the outcome of your project. If you have any questions about the tendering process, or how we can help, just get in touch with the Harrison Clarke team on 02381 55 00 51 and we would be delighted to help you.

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