Last edited 07 Dec 2017

How to select a contractor

Contents

[edit] Introduction

Contractors are organisations appointed by clients (or employers) to carry out construction works. This role is vital to the success of a project, and so great care should be taken to ensure an appropriate contractor is selected. This may involve seeking advice from consultants if the client is inexperienced.

In the construction industry, the process of selecting a contractor is generally referred to as ‘tendering’ and involves preparing tender documents that describe the project, and then inviting tender submissions from prospective contractors from which as selection can be made.

A tender is a submission from a contractor making an offer to carry out the works.

This article describes in general the process commonly used to select a preferred contractor from a list of potential contractors. Other processes may be used on certain types of projects, such as Private Finance Initiative (PFI) projects.

[edit] Pre-qualification

If a contract is advertised, there may be a pre-qualification process to allow a long list of contractors that have submitted an expression of interest to be reduced to a reasonable number that can be invited to tender. Typically three or four. More than this would waste the contractors time and reduce the likelihood of receiving sensible tenders as the likelihood of a contractor being selected would be too low. Fewer than this and there may not be sufficient competition, or enough information to be able to sensibly compare offers.

Pre-qualification involves seeking information about the contractor’s experience, capacity and financial standing. The answers to these questions enable the client to produce a short list of suppliers that are likely to be most appropriate for their particular project. Short-listed suppliers may then be invited to tender for the contract. For more information see: Pre-qualification questionnaire.

Financial checks should be carried out on potential tenderers. Ideally, the value of the contract should be no more than 20% of their annual turnover.

[edit] Pre-tender interview

The client may wish to carry out pre-tender interviews before short-listed contractors are invited to tender. This is an opportunity to:

  • Assess their understanding of the commission.
  • Assess their likely approach to the project.
  • Assess their current workload.
  • Assess their enthusiasm.
  • Clarify ambiguities on either side.
  • Verify that the proposed timescale for the tender process is achievable.
  • Verify that the proposed nature of the tender process will obtain the best results.

If the pre-tender interviews reveal that one or more prospective candidates are unsuitable, the initial short list may be reduced and the remaining candidates invited to tender.

For more information see: Pre-tender interview.

[edit] Tender process

The tender documents describing the project and what is required from the contractor are then issued to the short-listed contractors. For more information see Tender documents.

There may be queries from contractors, and in this case, responses should be sent to all contractors. The client may organise mid-tender interviews or site visits. This can be beneficial both to the client and to the tenderer as they allow clarification of matters that might otherwise lead to an inaccurate tender being submitted, and they can give the client insights into potential problems or opportunities.

When tenders are received, they should be assessed, and perhaps further interviews carried out.

Selection should not be made purely on the basis of the lowest price. It is generally more effective to identify the best value tender, based on pre-defined selection criteria that relate to the aspects of the contractor performance the client most values. This might include consideration of past performance, relevant experience, technical ability, sustainability, health and safety record, innovation, resource availability, management skills and systems, proposed methodology and so on.

For more information see: Tender evaluation and Due diligence when selecting contractors or subcontractors.

The client can then enter into tender negotiations with the preferred contractor. Some of the elements of a contract that may require negotiation could include:

A reserve tenderer may be retained in the event that negotiations with the preferred tenderer are unsuccessful.

For more information see: Contract negotiation.

The next stage is the process of appointing the contractor. To find out more see: How to appoint a contractor.

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