Tendering Methods and Procedures in Construction.
Tendering is the process by which bids are invited from the interested contractors to carry out the specific packages of the Construction work.
Types of Tendering
1 – Open tender
Open tendering is main tendering procedures employed by both the Govt & private sector. The client advertises the tender offer in local newspapers. Giving detail & key information about the proposed works & inviting interested contractor to the tender. In the legal sense such tender notices constitute invitation t0 treat, a mere request by the employer for the suitable contractor to submit their bids or offers.
If the pre-requisite to the tendering on the form of possession of the necessary registration has been identified in the tender notice, then the advertisement is the directed to only that particular class of public having the said qualifications. In the order to reduce number of enquirers, earnest money is deposited (for private project). Until the receipt of the bone fide tender selected then it will be returned. Although Cost is very important in the decision on which tender or bid to accept, it is not the only factor taken into the account. Client does not bind to accept lowest or any offer. The advantages & disadvantages of open tender are stated below.
- It allows any interested contractors to tender. Therefore it gives opportunity for an unknown contractor to the compete for the work.
- The tender list can be long as too many contractors tendering for the 1 job.
- Allowing the tender lists to be made without bias. Client will obtain the bargain possible. No favoritism in the selecting contractors.
- Uneconomic use of the source.
- Ensuring good competition not obliged to accept any offers.
- Public accountability may be questioned if the lowest offer is not accepted.
- Traditional method of the tendering, familiar to all sector of the Engineering & Construction industry.
- Does not attract reputable & established contractor unless they are forced to due to lack of the work.
2 – Selective Tender
Selective tendering is 1 alternatives developed to address the limitations of open tendering procedure. In this method, a short list of the contractor is drawn up & they are invited to submit tenders. The purpose of elective tendering are to improve the QTY of the bids received, to ensure that contractors with necessary experience & competence are given the opportunity to the submit necessary bids, due to the urgency work involved, for specific reasons of the employers, e.g. security reasons in Govt projects Etc. & to make the tendering procedure more manageable & less a burden on the parties involved. Such list may be prepared through recommendation from the Clients professional adviser whom have knowledge of the Contractors undertaking the work in the past or advertisement through the newspapers ( pre-qualification ).
The advantages & disadvantages of selective tendering are stated below.
- Only the competent contractors were invited to the tender, then the lowest can be accepted.
- Reduces the availability of the work for other contractors especially new contractors.
- It reduced the Price of tendering (economic use of the resources, reduced tender documentation, shorter tender periods, better management of tender process etc.)
- Tender Cost may invariably higher than would have been in the open tendering.
- Greater chance of the collusion.
- Tendering period longer Coz it involved 2 distinct stages.
- Favoritism’s may occur in short listing.
A problem with both open & selective tendering is that a contractors circumstances can change after he has submitted his tender. He can make losses on the other contracts which affect his financial stability or may be so successful at the tendering that he does not have enough skilled staff or men to deal with all the work he wins. Neither method of the tendering nor any other means of the procuring works can therefore guarantee avoidance of the troubles.
3 – Negotiation Tender
Negotiation tendering is the extensively used in the Engineering & Construction industry commencing from tendering till dispute resolutions, i.e. under the styles of the pre-contract negotiations & post contract negotiations. Usually with 1 contractor but may be up to 3 contractors.
Negotiation process involves are as follows.
- Identification by employer of a suitable contractor to negotiate with.
- The contractor can be selected either from the employers own list of the preferences or on the advice of the professional team.
- The contractor being apprised of work scope.
The selected contractor is the issued with details such as the scope of the work involved relevant drawings, design & – or information to enable him to appreciate the extents of the obligations & the employer’s actual needs. Some employers prepare & issue to the contractor proper tender documents inclusive of a nominated ( Bills of QTY ) to assist the contractor in pricing the works for the 4thcoming negotiations.
Negotiations can be applied to the following type of the contract.
- In Partnering type of the contracts under the so called win – win formulas.
- Where the employers has a long term business relationship with contractor.
- In situations where the parties are in a relationships of the holding & subsidiary companies.
Where the contractor is involved in the financing of the project.
- In situations where the employer finds it the advantages to employ the same contractors to continue an initial or existing contract for the new works.
- Where there is a pressing need to have a very early start of the work on the site & to complete the works on a fast tract basis.
- In special circumstances e.g. Security reasons, emergencies and etc. where it is the expedient to secure the services of a particular contractor only.
- Where there is only a one contractor who is the only 1 available or with ether the special skill or resources to carry out the particular works.
- The employers resources are either limited or constrained thereby making the use of the other tendering impractical.
- Only reputable contractor are invited for the negotiation.
- The Price work is likely higher than competitive tender.
- The Contractor can contribute his expertise during design stage.
- Reduces the availability of the work for other contractors.
- Early Commencement of the work on the site. It shortens the period involved in appointing the contractor.
Selection of the Suitable Contractor
- This involves the selection of a suitable contractor & the establishment of a level of the pricing for subsequent negotiations.
- The objective is to select suitable contractor as early as possible is to work-together with the professional teams & to establish a level of the pricing for subsequent negotiation.
- The criteria for the short listing is normally confined to items such as technical & financial capability, experience in similar works & extent of resources (manpower, plant & equipment).
- The pricing document should be flexible enough to cater for the adjustment of the price fluctuation for the period between 2 stages & the pricing of the second stage.
- In selecting a suitable candidate, a basis for the pricing the subsequent second stage should be established accordingly.
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