Tendering Process In Construction – Types, Advantages & Disadvantages


What Is Tender?

A tender is a fixed-price offer to execute a work or supply products. During the first step of this tender procedure, contractors are invited to submit sealed bids for construction or provide particularly planned services or items within a specific time limit. In this article, we will briefly discuss the tendering process and different types of tenders.

Types Of Tenders In Construction

Tenders are of various types, including open tender, selective tender, serial tender, negotiated tender.

1. Open Tender

The primary tendering technique used by both the private and public sectors is an open tender. The customer promotes the tender offer in the local newspaper, with crucial details about the intended works, and invites interested contractors.

Advantages of Open Tender

1. High levels of transparency and competition

2. Create opportunities (for a more significant number of contractors) so that the owner can receive a better price.

3. There will be no partiality in the selection of contractors.

4. It is a traditional way of tendering that is well-known throughout the engineering and construction industries.

Disadvantages Of the Open Tender

1. There may be a large tender list if there are too many contractors bidding for the task.

2. The tendering process consumes additional time.

3. The source is being used inefficiently.

4. If the lowest bid is not taken, public accountability may be called into doubt.

5. Can choose a contractor with no prior experience

6. Untrustworthy competition

2. Selective Tender

Selective tendering is an option that has been created to address the limitations of the open tender system. This tender seeks to improve the quality of proposals received by ensuring that contractors with the necessary experience can submit bids.

Advantages Of Selective Tender

1. The tendering procedure takes very little time.

2. Can choose a dependable, competent contractor.

3. It has brought down the cost of tendering. 

4. Cost-effective resource utilization.

5. Better tender process management.

6. Only qualified contractors are requested to tender.

Disadvantages of Selective Tender

1. Less competition can lead to bias.

2. It reduces the amount of work available to other contractors, particularly for new contractors.

3. The tender price is almost always greater than it would have been in open tendering.

4. Collusion is more likely.

5. Favoritism may occur throughout the shortlisting process.

3. Negotiation Tender

This tendering process is commonly used in the engineering and construction industries, where pre-contract and post-contract negotiations take place.

Advantages of Negotiation Tender

1. This form of construction tendering process decreases the danger of failure.

2. Special circumstances, like emergencies or security concerns, are the best alternatives for the employer to consider.

3. Work on the job site will begin as soon as possible. It shortens the time required to select a contractor for any tendering work.

4. During the design stage, the contractor might offer his knowledge.

Disadvantages of Negotiation Tender

1. The cost of the work is likely to be higher than the cost of a competitive tender.

2. It reduces the amount of work available to other contractors.

What Is Tendering Process?

Tendering is the process of inviting bids for significant projects, which is typically used by government entities. The primary goal of the Tendering Process in Construction is to eradicate bias and corruption in the granting of construction contracts.

It is an invitation from the proprietor to the contractor to perform particular work at a given cost and within a specified time frame. It is advertised in the form of a tender notice in newspapers, notice boards, etc.

The tender permits the client to compare different prices quoted by various contractors for work. The tender is always won by the lowest bidder, who is also the most experienced. The tendering process in construction is critical in determining the lowest and highest-quality bidder for work.

tendering process types in construction
Source: eqmagpro.com

Characteristics Of Tendering Process

1. All prospective contractors and suppliers submit their proposals by the client’s deadline.

2. The bid shall include all necessary information regarding the materials to be used, the estimated cost of the project, etc.

3. After the deadline has passed, the client evaluates all offers based on a set of established criteria such as price and quality.

4. The tendering process starts with an invitation to tender or request for tender (RTF) and concludes with a public evaluation procedure in which one of the firms that made a bid wins the project or contract.

5. Tenders are widely marketed in several media before the client floats them.

Stages Involved In Tendering Process

The construction tendering process consists of the following stages:

  1. Pre-tender Stage
  2. Tender Advertisement Stage
  3. Closing of Tender
  4. Tender Opening Process
  5. Tender Evaluation Process
  6. Tender Award

1. Pre-tender Stage

When the client has a concept at the pre-tender stage, the client will employ a consultant to discuss the project further.

The consultant will advise, manage the tender and contract, and also translate the idea into a drawing. At this point, the client and consultants will be discussing the scope, timeline, and budget.

The pre-tender stage is initial and most important since it initiates the next stage of a project. The project will not be completed if the pre-tender stage fails.

2. Tender Advertisement Stage

Tender advertisement is also known as tender notification. The tender will be published in the local newspaper. The following fundamental requirements should be included in the tender notice:

  • The project’s title
  • Tender document fees.
  • Contractor, head, and subhead are all required.
  • The location, date, and time when the tender document will be obtained.
  • Location, date, and time for tender document submission

3. Closing Of Tender

The closing time and date of the tendering cess will be specified in the tender notification. If the contractors fail to submit their proposals by a certain time and date, it is assumed that the contractors have refused to bid on the tender.

The tender validity period begins at that moment as well. Contractors can withdraw their tender papers at this point if they are no longer interested in competing for the tender. During this time, consultants review and evaluate each of the offers.

4. Tender Opening And Evaluation Process

Quantity surveyors typically handle tender openings. To assure the integrity of the competitive process, offers must be evaluated fairly, consistently, and without bias toward certain providers.

Tenders are typically judged based on a predetermined set of criteria. Tender evaluations must be completed as soon as possible after the tender opening.

The Quantity Surveyor will prepare a report to describe the evaluation’s conclusions in tables and graphs format. Finally, the Quantity Surveyor will recommend which tenderer, in his opinion, is most suited to the job.

5. Tender Award

An evaluation team will look over each tender and suggest which tender offers the most value for money. The tendering authority will contact both the successful and unsuccessful tenderers and hand over the work.

The tender administrator generates the tender results notification in letter form and then sends it to all participating contractors once the final decision on the tender award to the specific contractor has been made.

Once the client or the government accepts a tender, it is binding on both parties. It means that the agency or firm that won the tender must deliver the goods or services in an agreed-upon manner.

Advantages Of Tendering Process

1. No Nepotism 

Tenders or bids are reviewed based on established criteria such as price, quality, and value for money. In other words, the company that offers the highest quality product or service at the lowest price will be awarded the contract because most tender documents are examined and assessed in public.

2. Value For Money

From the client’s perspective, tenders provide the best value for the money spent. It is due to the client’s ability to select from a large pool of possible suppliers who can deliver the greatest quality product or service at the lowest price point.

It enables the firm, establishment, or organization to save money without sacrificing quality. As a result, despite being time demanding, tendering is a profitable long-term procedure from the perspective of an organization.

3. Encourages Competition

The tendering procedure promotes a competitive market. This is because each project allows many possible contractors, firms, or suppliers to bid on it.

And, because the selection is based on both quality and price, each bidder makes every effort to remove operational inefficiencies and redundancies as much as feasible to cut costs and increase quality.

This entire process promotes healthy market competition and discourages complacency and sloth, promoting creativity and new ideas.

4. Easier Entry

The tendering procedure makes it easier and simpler for new firms to enter the market or a specific industry. This is because contracts under this system are given based on predetermined, objective criteria.

As a result, even a new entry to the market with no industry connections or contacts might win a prestigious and lucrative contract by giving the best value for the client’s money.

As a result, this method assists new firms in quickly establishing a footing in the market or industry, drastically lowering traditional barriers to entry.

Disadvantages Of Tendering Process

1. Use of low-cost, low-quality materials and/or labor

The contractor who is compelled to play the competitive bidding process may feel pressured to keep costs low to maintain a reasonable profit margin. Using cheaper labor and materials is one method a contractor might cut costs. If the cheaper labor and materials are of poor quality, the client will likely receive inferior goods or services.

2. Shortcuts for safety:

Safety requirements are another area where contractors may be motivated to cut costs. A contract’s safety costs might quickly spiral out of control. Reduced safety costs are a definite method to keep the bidding price low.

3. Competitive bidding can be exceedingly time-consuming

When the government, as well as private firms, use competitive bidding, the awarding of the bid can take years. As a result, customers may have to wait for extremely long periods of time.

4. Bidders are being threatened 

Genuine bidders are sometimes threatened and prevented from submitting their bids. 

5. Insufficient profit margin to allow for R&D, modern technology, or equipment investment

Competitive bidding may compel a contractor to accept a relatively small profit margin. Because of these poor margins, a contractor may have little or no money to spend on R&D, new technology, and equipment.

Also Read –

Types Of Construction Contract

House Construction Procedure

Valuation Of Building Methods

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