Construction projects can be impressive. Massive machines move vast mounds of dirt and debris. People in high-vis clothing and hard hats scurry about with powerful tools. Entire swathes of a city landscape are dug up. Old buildings are torn down and shiny new structures are put up. It’s all a bit exciting and extraordinary.
But significant construction projects don’t just happen. No one just casually gives a company the right to build a new skyscraper. There’s an involved and methodological process in winning a construction contract.
The process of contractors submitting competitive bids on a construction project is called ‘tendering’. ‘Tender’ doesn’t mean the people involved are warm-hearted and sweet. No, the tendering process can be pretty cutthroat.
If you’ve ever wondered what is a tender in construction, then keep reading. We’ll closely examine the tendering process and the different types of tender.
What is a Tender?
When talking in business-speak, a tender has nothing to do with how you feel.
A company that needs services or goods from another entity will publish a formal request for these services or goods. This can be called an Invitation to Tender or a Request for Tender.
A tender is a submission made by a company to provide those goods or services. The company submitting the tender has to demonstrate why they are the best choice for the job.
They need to address all the criteria specified by the client and provide evidence of how they will meet these specifications.
Tendering can take various forms and is used by many businesses. It’s most used by public sector clients like councils, government agencies, charities and non-profit organisations. It’s considered the fairest and most transparent way of securing new business.
The tendering process is frequently used in IT, business consulting, engineering and construction industries.
What is a Tender in Construction?
For most larger construction firms, the tendering process is a crucial way to get new clients. Via tendering, a construction company can win more significant contracts from clients they were previously unaware of. Successful tendering helps a company to grow as it demonstrates its ability to take on larger and more complex projects.
Almost any construction work you can imagine can be considered for tender.
Construction tenders can be requested for:
- Architectural work
- Developments
- Design and building work
- Building work
- Facilities management
- Electrical work
- Flooring services
- Demolition services
- Building materials
- Housing-related services
- Groundworks
- Infrastructure
- Plumbing
- Project management services
- Minor works
- Repairs and maintenance
- Handyman services
- Roofing services
When Would Tendering Be Used in Construction?
Tendering is usually used in the construction industry for:
- Traditional contracts: A contract that involves a client, consultants and contractor. The contractor must build per the design, meet pre-agreed deadlines, and perform the work within a pre-arranged budget.
- Design and build contracts: The contractor is responsible for the design and building of a project. This gives the client a single point of contact.
- Management contracts: In these contracts, individual designers and contractors are appointed. This contractor is then given a fee for managing the project. These types of contracts can often run into budgeting issues as building work can outpace design.
- Contractor-led contracts: A contractor-led tender is where the contractor hires a design team and creates a concept for a proposal to the client. While this option is more time-consuming and complex, it can reduce overall costs.
What Are the Different Types of Construction Tenders?
Not all tenders are the same. Different types of tender processes are used depending on what the client requires. The three main types of tender processes that are usually used in the UK construction industry are:
- Open tendering
- Selective tendering
- Negotiated tendering
Open Tendering
An open tender is basically a free-for-all. The client puts out a Request for Tender, and anyone can respond. Usually, open tenders are advertised in trade magazines, websites, or newspapers. It’s a highly competitive method but can often result in a broader selection of applicants.
Open tendering is transparent and removes any accusations of bias from the process. A drawback of open tendering is that too many contractors might apply, making it time-consuming to find the right one. Also, issues of public accountability can arise if the lowest bidder isn’t selected.
Selective Tendering
Selective tendering is used when you want to be a bit pickier about your construction company. Also known as pre-qualification tendering, this process is used for complex projects where clients only want to receive bids from companies they know can get the work done.
A client will issue an Invitation to Tender to a few select companies. Only the lucky ones that are selected can submit a tender. Companies that wish to put in a tender must meet criteria set out in pre-qualification questionnaires (PQQ), selection questionnaires (SQ) or a PAS91 form.
Selective tendering improves the bids’ quality and helps make for a more manageable, shorter list of applicants. Unfortunately, selective tendering often results in higher bids, allows for collusion between suppliers and contractors, and favouritism and bias. Smaller, newer companies might be excluded as clients don’t know about them.
Negotiated Tendering
If clients only have eyes for one company, they may choose a negotiated tendering process. The client requests a tender from just one company and then enters negotiations for the final price.
Negotiated tenders are helpful if a client has a tight deadline and has worked with a company before. However, they reduce the pool of available work for the unlucky companies that aren’t chosen, which often results in higher prices.
How Does the Tendering Process Work?
The tendering process is like a mating ritual between two exotic birds. It’s a finely choreographed dance with many predetermined steps.
The Pre-Tender Process
Tendering begins with the pre-tender process. This is where the client defines the project’s scope and sets out their budget and timeline.
Advertising the Tender
Next, the client needs to advertise the tender. Tender advertisements take a different form from regular ads. They’ll usually contain a range of details such as:
- Preliminary information
- The form of the contract
- Employer’s information requirements and building information modelling (BIM) protocol
- A pricing document
- The drawing schedule
- Design drawings
- Prescriptive or performance specifications
- A timescale for the tender process
- Details on the evaluation process and the evaluation criteria
- Details on the submissions required
- Policies regarding alternative or non-compliant bids
- Policies on feedback for unsuccessful bids
Closing of Tender
A tender notice must contain the time and date the tender process closes. If contractors fail to submit a bid in time, they can’t be considered for the project. Contractors can also withdraw their bids as long as the tender is valid.
Tender Opening and Evaluation
All bids must be evaluated after the tender is opened as soon as possible. This is usually done by an evaluation panel that must be seen as impartial and objective. Once they have reviewed all the bids, the evaluation panel prepares a report outlining their recommendation.
Tender Award
When the client decides, the winning company must be advised in writing in physical or digital form. The decision letter must contain the contractor’s evaluation score and is legally binding once agreed upon by the client and the contractor.
Where to Learn More About the Construction Industry
Most of the time, there are winners and losers in the construction tendering process. The more you know about the industry and the better your firm’s reputation is, the more likely you are to succeed.
Completing our Construction Training Courses will enhance your industry knowledge and show prospective clients that your company takes health and safety compliance seriously.
