Imagine a new building is under construction and needs electrical services. How would you find the right company? Who would you contact? This is where tendering comes in.
What is a tender process?
Tendering is where a buyer invites suppliers to submit proposals for goods or services they require. By looking through bids from multiple suppliers, buyers can compare offers and choose the one that best meets their project needs. In the world of construction, where tendering for work is incredibly common, a construction company would act as the buyer, inviting electrical businesses and contractors to submit proposals for handling the building’s electrical work.
What is the tendering process in construction?
Tendering can be used for a variety of needs — equipment supply, construction needs, and demolition — across public, private, and non-profit sectors. In the tendering process, buyers can ask for specific pricing, a formal contract, or just share information on what they need assistance with. However, there are a couple of key steps to be aware of in the tender process that must be followed.
Step one is to start with an invitation to tender. This is where an organisation publishes a ‘request for proposal,’ (RFP) that invites suppliers to register a tender submission. In this proposal, the following details are shared:
- Conditions of tender: How long the tendering process is and what the rules are for the response.
- Form of tender: Details that are required in the supplier’s response.
- Scope of tender: Precise details of the goods and services the buyer needs.
- Evaluation criteria: A clear outline of how the buyer will assess responses.
- Conditions of contract: Details on the legal contract that will be awarded to the picked supplier.
Step two of the construction tendering process is where prospective tenders submit questions they have about the work and buyers make any necessary changes.
Step three involves the supplier completing and submitting their tender with all the necessary information needed, such as their capability statements and schedules of rates, so they can respond directly to the requests of the RFP.
Step four is where the buyer reviews the submitted tenders and undergoes the picking process. They may negotiate, they may propose new options, or they may make a formal offer — it just depends on the circumstances.
Step five is where the final contract is prepared and signed by both parties, solidifying the winning supplier and closing the deal.
What variations are there in the project tendering process?
There are seven different methods of tendering depending on what kind of situation the buyers and suppliers are in.
- Open tendering: Allows anyone to submit a bid in response to an invitation, creating competition and opportunities for new contractors.
- Selective tendering: Involves the owner inviting a shortlist of qualified contractors to submit bids for specialty or complex projects.
- Negotiated tendering: The owner selects a single contractor to negotiate terms, which simplifies the process for specialised contracts but can discourage competition and lead to higher prices.
- Serial tendering: Allows a contractor to provide pricing for a series of similar projects, enabling the owner to choose specific work.
- Framework tendering: Selects a contractor for on-call work over a set period, providing cost efficiency and quick responses to repairs since the contract is already established.
- Single-stage tendering: Fully designed documents are sent out for bids
- Two-stage tendering: Allows for initial contractor selection during incomplete design phases, but is then followed by a second tender for construction once the design is finalised.
Knowing the situation well will help buyers pick which variation works best.
Who tenders?
Governments, councils, and non-profit organisations often use the tendering process. In many cases, they're required by law or procurement policies to go through public tendering and bidding for contracts over a certain value, to ensure fairness and transparency. Industries like construction, engineering, information technology, and business consulting also commonly use tendering, especially when the contract carries significant risk.
What’s the reason for tendering in construction?
Instead of hiring directly, buyers often use construction tendering for a few key reasons. It helps them get the best value for money by encouraging competition. It ensures that contracts are given out fairly and without bias and tendering also reduces risk by using a thorough process to check and choose the right suppliers.
Rather than searching for work on their own, suppliers choose to tender because it provides them with a steady group of projects to manage, helping them maintain long-term financial stability. It also offers suppliers an opportunity to grow their revenue and build lasting relationships with clients.
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