Last edited 25 Sep 2019

Purpose of Tendering and Procedures

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Contents

[edit] Introduction

A tender is a submission made by a prospective supplier in response to an invitation to tender issued by an employer. It makes an offer for the supply of goods or services.

There are two purposes in tendering:

  1. To select a suitable contractor at a suitable time
  2. The offer of a price is required from the contractor at an appropriate time. This offer will be the basis for the ensuing contract.

Along with the conditions, the contract drawings and bills of quantities (if used) make up the contractual agreements.

There is no direct relationship between the type of tendering procedure and the form of the contractual agreement. The tendering process marks the beginning of the contractual relationship.

Main methods:

1. Open Tendering

2. Selective tendering - single or two stage

3. Nomination / negotiation

4. Serial

5. Joint ventures

[edit] Legal obligations

[edit] The parties’ obligations

[edit] European Union control on procurement in the public sector

[edit] Open tendering

  • Traditional method
  • Advert placed and interested suppliers can apply for documentation
  • Advert or documentation may state that the employer is not bound to accept the lowest tender, or indeed any tender
  • It is an indiscriminate request for tenders, and there is no method of ensuring high quality building
  • Preparation places unnecessary burden of time, effort and expense on the industry as a whole
  • Its use has been declining in the UK, but because of the effect of certain European Union legislation, its use in the public sector is increasing

[edit] Single stage selective tendering

[edit] Selection of contractors

  1. The firm’s financial standing and record
  2. The firm’s recent experience of building at the required rate of completion
  3. The firm’s general experience and reputation in this area
  4. The firm’s competence and resources in respect of statutory health and safety requirements
  5. The firm’s approach to quality assurance procedures
  6. Whether the management structure of the firm is adequate for this type of contract
  7. Whether the firm will have adequate capacity at the relevant time
  • This can be achieved by means of the NJCC Standards Forms of Tendering Questionnaire
  • Lists should be periodically reviewed to exclude firms whose performance has been unsatisfactory and to allow the introduction of suitable additional firms

Advantages of Single Stage:

Disadvantages of Single Stage:

Problems with Single Stage tender:

Proceeding to tender with unresolved design issues will eventually result in:

Successful single stage tendering include:

[edit] Preliminary enquiry

  1. Project name
  2. Type and function of building
  3. General description of the project
  4. Employer’s name
  5. Employer’s professional team
  6. Location of site
  7. Approximate cost range
  8. Number of tenderers it is proposed to invite
  9. Nominated sub-contractors for major items
  10. Form of contract and any proposed amendments
  11. Examination and correction of bill (Alternative 1 or Alternative 2)
  12. Anticipated date of possession
  13. Period for completion of works
  14. Approximate date for dispatch of tender documents
  15. Tender period
  16. Details of guarantee requirements
  17. Particular conditions applying to the contract

[edit] Interview

After the responses to the preliminary enquiry letter have been received, each contractor suitable should be interviewed in order to:

[edit] Sending out documents

Tender documents will include:

The covering letter should include:

  • Invitation to tender (if not already sent)
  • List on enclosures
  • Date and place for delivery of tenders
  • Whether the site is open for inspection and if so what arrangements should be made to visit
  • Request for acknowledgement
  • Also enclosed should be an envelop for the delivery of the tender already addressed and marked ‘tender for…’ on the face

Time for tendering

The formulation of bids

  1. take account of the way in which the costs are incurred (brickwork on second floor is cheaper than brickwork on seventeenth floor)
  2. necessarily mean that the actual rates are the same as those in the in the bills
  1. If the project is at the end of a tax year, they may reduce the rates at the beginning of a project and increase them at the end – back loading
  2. Or the contractor may wish to get cash quickly to meet liabilities and will therefore inflate the rates at the beginning – front loading

[edit] Withdrawal of tender

[edit] Opening of tenders

  • When returned, the marked envelopes will be left unopened until the time stated for delivery has passed and a check has been made that all have been delivered.
  • Bills may be returned in separate envelopes and only the bill accompanying the lowest tender will be opened.
  • A list is prepared for the client in order of price, and the contract period may also be entered against the contractor’s name if this has been requested from the contractor
  • As soon as any tender is accepted, all tendering contractors must be notified

[edit] Examination of a priced bill

  • The QS will make a mathematical check and generally look through the rates for any possible serious errors or omissions in the pricing
  • If there are none, the tender can be recommended for acceptance
  • If mistakes are found, the contract administrator, employer and contractor must be notified
  • Under Alternative 1:
  1. The contractor will either be invited to stand by the tender price or to withdraw
  2. If they withdraw, the next lowest bid may be considered
  3. If they stand by the tender, an endorsement should be added to the priced bills indicating that all rates and prices inserted therein by the tenderer are to be considered as reduced or increased in the same proportion as the correct total or priced items exceeds or falls short of such items
  • Under Alternative 2:
  1. The contractor should be given the opportunity of confirming their offer or amending it to correct genuine errors
  2. Should they elect to amend the offer and the revised offer is no longer the lower, the offer of the firm now lowest in the competition may be examined
  3. If the tenderer elects not to amend the offer, an endorsement will be required as above

[edit] Negotiated reduction of tender

[edit] Preparing contract documents

[edit] Two stage selective tendering (negotiated tendering)

Reasons for selecting a two-stage tender:

[edit] First stage

The first stage competition is typically based on deliverable including a construction programme and method statement, detailed preliminaries pricing, overheads and profit.

  1. Provide a competitive basis for selection
  2. Establish principles of layout and design
  3. Provide unambiguous pricing documents related to preliminary design and specification information in forms sufficiently flexible for a basis for pricing the second stage tender
  4. Define obligation, conditions of, and programme for second stage procedures
  5. State the conditions of contract
  • When the first stage procedure has been completed and a contracted selected for the second stage, no contract for the execution of the work will have been entered into
  • The costs incurred in preparing and submitting the first stage will be borne by the tenderers
  • Tenderers should not be required to submit a response to the health and safety plan with their first stage tenders: the tenderer whose bid is most favourable should be required to submit its response as soon as possible

[edit] Second stage

The second stage is concluded with the agreement of a lump-sum contract sum, typically based upon competitive tender of between 70 and 80% of the value of work packages.

What are the advantages of 2 stage tendering

What are the disadvantages of 2 stage tendering?

[edit] Selective tendering for design and build

[edit] Selection of tenderers

  • Preliminary list should comprise six to eight contractors
  • Final list should (in additional to criteria outlined above) take into account:
  1. Whether the firm has had recent experience of designing and constructing to type of building envisaged by the Employer’s Requirements
  2. Whether the firm’s customary design capability is in-house and if not, what method will be used
  • Final list should be limited to no more than three firms, due to the high costs involved in in preparing tenders for work with contractor’s design involvement
  • If two stage tendering is used, the list may be increased to no more than five firms with either one or two going through to the second stage

[edit] Employer’s Requirements

The Employer’s Requirements should state the priority of the following items that will determine the successful tender:

[edit] Cost of tendering

Where substantial high quality design work is required or excessive competition is introduced, it may be in the employer’s interests to offer payment fro the preparation of unsuccessful competitive tenders

[edit] Single stage or two stage?

Most employers would benefit from a two stage procedure that would enable post-tender changes and development to the design and cost.

In exceptional circumstances where the employer’s requirements are well defined, then single stage tendering may be used

[edit] Extent of information

A full set of drawings and specification should not be expected at tender stage. Therefore the employer must indicate the minimum require to enable him to select a contractor

Tenderers should be instructed to indicate in their tender the period they require to elapse between the acceptance of their tender and the commencement of work on site to enable them to complete production drawings and obtain necessary statutory approvals

[edit] Tender period

Depends on the nature of the Employer’s requirements and whether a single stage or two stage procedure is being followed. For most projects, the period is three to four months

[edit] Assessment

The evaluation should be carried out in accordance with the criteria specified in the preliminary enquiry The best tender, which may not be the lowest, should be accepted

[edit] Two stage tendering

The process of finalisation of the contractor’s proposals resulting in an acceptable basis for the contract. Where the employer fails to reach an agreement with the selected contractor, it will be necessary to either recommence the second stage procedures with another tenderer or invite further first stage competitive tenders

[edit] Negotiation

[edit] Joint ventures

[edit] Points to consider when preparing a Tender enquiry questionnaire to be sent to various contractors

Tender enquiry questionnaire

[edit] Points to consider when preparing an agenda and objectives for a structured interview to establish a shortlist of contractors who will be invited to tender.

Agenda for interview

Objectives

  • To establish whether the firm has the requisite skill and experience for this type of development
  • To judge their competence
  • To ascertain whether they have the adequate resources necessary to carry out the project
  • To meet the firm face to face
  • To give the firm an opportunity to ask any questions about the project, client and design team

List of attendees

Bonds and/or parent company guarantees are commonly used to protect the financial interests of the employer.

What are bonds?

What are parent company guarantees?

In what ways do they provide security?

How are the requirements for these included in the tender documents?

How would you deal with errors in tender returns?

Depends on which alternative chosen on instructions to tenders:

  • • Alternative 1 – the QS should amend computing errors arriving at a new tender sum. They should inform the contractor who can choose to either confirm or withdraw
  • Alternative 2 - QS should amend computing errors arriving at a new tender sum. They should inform the contractor who can choose to confirm or amend.

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