Tender price

A tender is a submission made by a prospective supplier (the ‘tenderer’) in response to an invitation to tender (ITT). It makes an offer for the supply of goods or services. A tender price (or cost estimate) is therefore the price supplied by the tenderer to the client for the supply of those goods and services.

The tender price is usually based on information about the prospective project that has been supplied by the client in the ITT documents. These documents are usually as comprehensive as possible to allow the formulation of accurate tender prices and may include:

• A letter of invitation to tender.
• The form of tender.
• Preliminaries.
• The form of contract.
• A tender pricing document.
• A drawing schedule.
• Design drawings.
• Specifications.

If the client’s documents to not adequately describe the project they could lead to unrealistic tender submissions and therefore prices.

When suppliers submit their tender price, it will represent the price at which they have decided to do the works or supply the goods or services, along with proposals for how the client’s requirements will be satisfied - if these have been requested.

The tender price supplied will be presented in a way that complies with the tender pricing document A tender pricing document sets out the way the client and design team wish to review the breakdown of overall tender prices provided by the tendering contractors.

Because the tender pricing document is designed to allow easy, like-for-like comparisons between the tender prices submitted by the various suppliers, it can reveal to the client where best value for money lies among the tenderers, identifies significant differences as well as areas where savings can be made.

[edit] Tender price indices

Tender price indices allow tenderers and clients to see how tender prices for building contracts have moved over the years. The indices may be used in estimating, cost-checking and fee negotiation with reference to particular sectors e.g private housing, commercial work etc.

An example is the Tender Price Index of Public Sector Building Non-Housing (or PUBSEC) that is produced by the Building Cost Information Service (BCIS) on behalf of the Department of Business Innovation and Skills (now called the Department for Business, Energy and Industrial Strategy (BEIS).

PUBSEC is based on rates of measured work contained in Bills of Quantities or quantified schedules for accepted tenders. The index, published quarterly, is accurate as it is based only on projects where the procurement process has produced ‘measured work’ documents.

[edit] Related articles on Designing Buildings Wiki

• Appointing consultants.
• Auction theory.
• Best value.
• Common mistakes in construction tenders.
• Competitive tender.
• Construction contract.
• Due diligence when selecting contractors or subcontractors.
• Form of tender.
• How to prepare tender documents.
• Pre-tender Interviews.
• Margin.
• Mid-tender Interviews.
• Pre-qualification questionnaire.
• Private Finance Initiative.
• Procurement route.
• Tender evaluation.
• Tender processes.
• Things to avoid when tendering.
• Two stage tender.
• Invitation to tender.
• Tender documentation.
• Tender return slip.
• Tender settlement meeting.