Typical tender process for construction projects

1 Introduction
2 What is a tender?
3 When is an invitation to tender issued?
4 What does an invitation to tended include?
5 Clarification of tender documentation
6 What should tender include?
- 6.1 What are variant bids?
- 6.2 What are qualified tenders?
7 Tender settlement and negotiation
8 Contract engrossment and execution
9 What is the tender process on public projects?
10 What is two-stage tendering?
11 What is construction management?
12 What is a management contract?
13 Related articles on Designing Buildings
14 External references

[edit] Introduction

This article describes in detail the tender process for a typical commercial construction contract.

For a wider description of the range of tender processes that might be adopted on different types of project, see Tender processes.

For more information about different contractual procurement routes, see Procurement route.

[edit] What is a tender?

A tender is a submission made by a prospective supplier in response to an invitation to tender (ITT) issued by a client. It makes an offer for the supply of goods or services. An invitation to tender might be issued for a range of contracts, including; equipment supply, the main construction contract (perhaps including design by the contractor), demolition, enabling works, and so on.

[edit] When is an invitation to tender issued?

An invitation to tender may follow the completion of a pre-qualification questionnaire (PQQ) in response to an advert posted by the client and perhaps a pre-tender interview. The purpose of a pre-qualification questionnaire and pre-tender interview is to enable the client to produce a shortlist of suppliers that are likely to be most appropriate for their particular project who will then be invited to tender. This helps reduce inefficiency and wasted effort in the tender process.

[edit] What does an invitation to tended include?

An invitation to tender might include:

A letter of invitation to tender.
The form of tender.
Preliminaries (including pre-construction information and perhaps a site waste management plan).
The form of contract, contract conditions and amendments.
Employer's information requirements if BIM is being used.
A tender pricing document (or contract sum analysis on design and build projects).
A drawing schedule.
Design drawings, and perhaps an existing building information model,
Specifications.

Ideally, tender documents should be broken down into a series of packages (even if there will only be one main contract), each with its own design drawings and specifications suitable to be issued by the main contractor to potential sub-contractors. This makes the tender easier to price for the contractor and easier to compare with other tenderers for the client. It is important when this is done to ensure that the interfaces between packages are properly identified and clearly allocated to one package or another. Having too many packages increases the number of interfaces and also the potential problems. The cost plan (pre-tender estimate) should also be re-assembled package by package to allow easy appraisal of tenders received.

[edit] Clarification of tender documentation

Mid-tender interviews may be arranged to allow clarification of matters that might otherwise lead to an inaccurate tender being submitted; they can also give the client insights into potential problems or opportunities in the project as it is described by the tender documentation.

Responses to queries raised during the tender process can lead to clarification or amendment of the tender documentation which may also result in an extension of the tender period. It is better to allow sufficient time during the tender process to investigate opportunities and clarify problems, as the resulting tenders will then be better prepared and will be likely to save time and money later.

It is important that any clarification, additional information or changes to the tender documents are circulated to all of the tenderers to ensure a level playing field. However, this should not give away a particular supplier's proposed methodology, commercial proposals or programming advantages, which may have been divulged to the client consultants in interviews. Such information must be treated as confidential.

[edit] What should tender include?

In response to an invitation to tender, invited tenderers will submit their tender, which will include their price for supplying the goods or services along with proposals for how the client's requirements will be satisfied - if these have been requested.

The precise content of tenders will vary considerably depending on the procurement route, however they might include:

A tender return slip, with details of the contract, including information such as return address and tender checklist.
A completed tender pricing document (or contract sum analysis on design and build projects).
Schedules of rates.
An initial construction phase plan.
Any design proposals or method statements that have been requested.
Programme.
Procedures to be adopted, such as procurement procedures and cost management procedures.
Demonstration of capability, for example design capability, systems used etc.
A BIM execution plan - if building information modelling is being used.
Key project personnel, which may require submission of CVs.
Management organisation.
Plant and labour resources and availability.
Prior experience.
References.

[edit] What are variant bids?

Alternative or non-compliant proposals, sometimes referred to as 'variant bids' may be submitted if the tenderer believes that what they are proposing offers better value for money. However, non-compliant proposals should only be submitted if they have been requested and should be accompanied by a compliant proposal.

For more information, see Variant bid.

[edit] What are qualified tenders?

Qualified tenders are tenders which '...include reservations or statements made to limit liabilities if that tenderer is given the contract' (ref. Civil Engineering Procedure, 7th Edition).

[edit] Tender settlement and negotiation

Once the client has identified the preferred tenderer (this may involve further interviews) they may hold a tender settlement meeting during which negotiations are undertaken. This may result in further adjustment of the tender documents and the submission of a revised tender.

For more information see: Tender negotiation.

[edit] Contract engrossment and execution

Contract engrossment is the process of preparing the final agreed form of contract and its schedules and appendices so that it can be executed.

Contract execution is the process of signing an agreed contract, after which its terms become binding on the parties to the contract.

[edit] What is the tender process on public projects?

On publicly-funded projects the procurement processes preferred by the Government Construction Strategy are all based on inviting tenders from an integrated supply team (including designers, suppliers and contractors) to design, build and sometimes operate and finance the development. On private finance initiative (PFI) projects, the process of securing offers from integrated supply teams is referred to as 'bidding' rather than 'tendering'.

For more information see:

Public projects or publicly-subsidised projects may be subject to rules requiring that contracts must be advertised before tenders are invited (OJEU rules when the UK was part of the EU). This is of particular importance because the time taken to advertise contracts can be up to 52 days, and procedures for the selection of suppliers may be regulated.

For more information see: Public procurement.

[edit] What is two-stage tendering?

Two-stage tendering is used to allow early appointment of a supplier, prior to the completion of all the information required to enable them to offer a fixed price.

In the first stage, a limited appointment is agreed allowing the supplier to begin work and in the second stage a fixed price is negotiated for the contract.

This process can be used to appoint the main contractor early or more commonly as a mechanism for early appointment of a specialist supplier such as a cladding contractor. A two-stage tender process may also be adopted on a design and build project where the employer's requirements are not sufficiently well developed for the contractor to be able to calculate a realistic price. In this case, the contractor will tender a fee for designing the building along with a schedule of rates that can be used to establish the construction price for the second stage tender.