Tender price appraisal in the construction industry
Contents |
[edit] Introduction
A tender is a submission made by a prospective supplier in response to an invitation to tender (ITT). It makes an offer for the supply of goods and/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.
Once tenders have been received, a thorough process of assessment is undertaken to identify the preferred tenderer. The tender pricing document is a key aspect of the tender return that will be assessed by the cost consultant to determine where value lies within the different tenders and to enable a like for like comparison between tenderer prices.
[edit] Preparation
To ensure a like for like comparison, the tender consultants need to ensure that a standard format is completed by all tenderers. The format of the document can be different depending on the form of contract selected.
Examples of pricing formats include:
- Bill of quantities (with quantities).
- Bill of quantities (without quantities).
- Schedule of rates.
- Contract sum analysis.
- Any other bespoke template formulated by the tender consultants.
[edit] Assessment
The tender price assessment will commence once all tenders have been received and opened and reviewed for compliance. Non-compliant tenders may be excluded unless they were specifically permitted in the invitation to tender.
The pricing comparison will then be carried out by a cost consultant. The cost consultant will use their own benchmark document to compare the tender prices against.
The assessment will enable the consultant to:
- Provide a like-for-like comparison between tenderers and the cost plan (benchmark).
- Assess value for money.
- Check arithmetic.
- Identify significant differences in pricing to ensure tenderers have interpreted the specification correctly.
- Identify potential areas of savings that can be negotiated with the tenderers.
- Review rate distribution (ensure that the tenderers have not front loaded the project).
- Prepare a tender report.
[edit] Review and action
Arithmetical errors will need to be reviewed in accordance with the tender guidance rules. Government contracts might have strict guidance on the correction of errors and disallow contract sum changes. The private sector might be more lenient and allow price reduction corrections. It is important to capture any changes and confirm this in writing and keep records of any communication.
Any other areas of qualification by tenderers must also be assessed. Tenderers might add qualifications to their price that will influence the contact sum. An example is a clarification that might limit the tenderers price to only a certain depth when it comes to excavations.
Any other big price discrepancies should be highlighted and reviewed. If a price is too low it can also be a risk to the project. The project can become a financial burden on the tenderer and they are unlikely to perform satisfactorily. The cost consultant will have to assess the reason for the low price. If it is due to misinterpretation of the design or low wages, it can have an impact on the outcome of the project. It is important to distinguish between a legitimate keen commercial price and a non-compliant tenderer price.
The cost consultant will provide a summary of the cost assessment and conclude with a contract sum that will form part of the tender report and subsequently become part of the contractual documents.
However, the tenderer with the lowest price may not necessarily be awarded the contract, as other criteria such as experience, availability, value for money and so on may also be considered. For more information see: Selection criteria.
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
Registered building inspectors
Building types and conflicts of interest updates explaineed.
Engineering services still struggle with labour shortages
According to latest quarterly services survey of the sector.
Infrastructure that connect the physical and digital domains.
Harnessing robotics and AI in challenging environments
The key to nuclear decommissioning and fusion engineering.
BSRIA announces Lisa Ashworth as new CEO
Tasked with furthering BSRIA’s impressive growth ambitions.
Public buildings get half a million energy efficiency boost
£557 million to switch to cleaner heating and save on energy.
CIOB launches pre-election manifesto
Outlining potential future policies for the next government.
Grenfell Tower Inquiry announcement
Phase 2 hearings come to a close and the final report due in September.
Progress from Parts L, F and O: A whitepaper, one year on.
A replicated study to understand the opinion of practitioners.
ECA announces new president 2024
Electrical engineer and business leader Stuart Smith.
A distinct type of countryside that should be celebrated.
Should Part O be extended to existing buildings?
EAC brands heatwave adaptation a missed opportunity.
Definition of Statutory in workplace and facilities management
Established by IWFM, BESA, CIBSE and BSRIA.
Tackling the transition from traditional heating systems
59% lack the necessary information and confidence to switch.
The general election and the construction industry
As PM, Rishi Sunak announces July 4 date for an election.
Eco apprenticeships continue help grow green workforce
A year after being recognised at the King's coronation.