2. Tender

2.1 About

A tender is a bidding process that is open to all qualified bidders and where the sealed bids are opened in public for scrutiny and are chosen on the basis of price and quality. Tender is used in many areas other than construction and may differ depending on what kind of tender. In this case the tender document is submitted by contractors or also known as tenderers that wish to participate in a tender invitation. The tender process is also taken into account the procurement method which is selected by the employer after discussion with the consultants. The tendering methods chosen can affect the outcome of the project even if by a small degree. There are 3 common categories people look into which are cost, quality and time. There 3 categories will be the main factors of which tendering method is best suited for the situation.

The three more common tendering methods are open tendering, selective tendering and negotiated tendering.

2.2 Open Tendering

Open tendering is the most common amongst the three methods as it is basically a free-for-all method for any contractors interested to tender for the job. It starts with an advertisement being published publicly via newspapers, websites and various other mediums. The advertisement contains information such as type of job, location of site, location of collection, closing date of tender, document fee and tender deposit. The tender documents are then printed to suit the number of participants which can be quite difficult to predict as it tends to vary from project to project. Sometimes the number of participants may vary from 10 up to 25 participants. Upon collection of the tender document the contractor will have to fill up the rates of all the materials required for the construction project. After the price has been determined, the completed tender document shall be submitted to the employer at the appointed location together with a tender deposit stated in the advert. The employer together with 1 or 2 consultants will open and record all the tender documents submitted. Out of all the tender documents submitted only one contractor will get the job, so the employers has to make a decision on which contractor should get the job. It is the consultants’ job to evaluate each individual tender and come out with a report which shows the recommended choice of tender. The employer usually follows the recommendations given by the consultants however he is not obliged to follow the recommendations. When the decision is made, the successful tender will meet the employer and consultants for further negotiation of price. Once the price has been set, the contract document is produced by the consultants and distributed to all the parties involved in the project including the newly appointed contractor. At this point construction can commence.

2.2.1 Advantages of Open Tender

Open to all qualified bidders

Having a project available to all contractors has a higher tendency to find new promising contractors which can satisfy the cost to quality to time ratio of the employer. Open tenders also provide a larger variety of options to choose from which doesn’t limit the composition of the project.

No favouritism

Every participant has an equal chance of getting the project and is not bias to any single tenderer. This not only allows new firms to enter the market but also promotes professional etiquette.

Highly competitive

Forces the contractors to submit competitive prices to obtain the project. This can prove to be advantageous for the employer in getting value for money.

2.2.2 Disadvantages of Open Tender

High cost of tendering

The number of copies of tender will have to depend on the number of participants tendering. Open tendering being the method with usually the most tenderers, cost of tendering is generally higher.

Novice contractors

One of the risks of possibly selecting a new and unknown contractor is higher with open tendering method. The contractor may also potentially not have the sufficient experience for the job at hand.

Underpriced tenders

Since all the contractors are trying to beat each others’ prices for the tender, employers need to be careful of underpriced tenders. Underpriced tenders may include low quality materials, poor quality of works and other factors to cut corners.

Long tender process

Open tender is generally longer since it calls all possible contractors to tender and upon submission of tender it requires the consultants to go through every single one of the tenders which is very time consuming.

2.3 Selective Tendering

Single stage selective tendering

Single stage selective tendering starts off where the employer invites a few known and reputable contracts to tender for the job. The contractors are not obliged to accept this invitation but will be blacklisted if they do so by the employer. The number of contractors involved ranges from 5-10 participants. Upon accepting the invitation, the contractors will purchase a copy of the tender document and fill in the rates of all the materials like in an opening tendering method. The completed tender documents are sent back to the employer to be opened and recorded together with the consultants. The consultants will then evaluate each of the tender documents and come out with a report of the recommended choice of contractor. The employer again is not obliged to follow the recommendation but in most cases employers usually do follow them. Before accepting the offers, the employer will usually call the several potential contracts to further negotiate the price. This is without the contractors knowing where they stand in the list. After negotiation, the employer will make his decision and the contract documents will be made and sent out to all parties involved including the newly appointed contractor. At this point the construction can begin.

Two stage selective tendering

Two stage selective tendering starts off where the employer chooses a few contractors by pre-qualification. The prospective contractors are chosen based on their experience and financial capabilities. Other criterions also include management of projects at hand, quality of workmanship, type of company and reputation. After a hand-full of qualified contractors are picked, they are invited to participate in the tender. Similar to single stage selective tendering, they are not forced to accept this invitation but are blacklisted by the employer if they do so. The number of contractors involved in the pre-qualification can reach up to 20 participants that will then be knocked down to the default 5-10 tendering participants. The interested contractors will then purchase a copy of the tender document and fill in the rates of the project. Upon completion, the completed tender document will be sent back to the employer to be opened and recorded together with the consultants. The consultants will evaluate each one of the tender documents submitted and come up with a report of recommendations for the employer. Usually the employer will abide to the recommendation. Once the contractor is selected, the contract document is made and sent out to all parties involved. Construction can begin at this point.

2.3.1 Advantages of selective tendering

Better quality of workmanship

Since the average quality of workmanship has been raised it is natural to expect better than quality of workmanship than compared to open tendering method.

Simplified tender evaluation

The contractors participating are all reputable contractors so the quality of materials and workmanship will only differ slightly, hence consultants can just focus on the price of which these services come at.

Shorter tendering process

Less contractors involved means less time spent on evaluating tender documents and better management of the tendering process.

Low cost of documentation

Less tender documents are required to accommodate the participating contractors this lowers the printing fee. This method also allow for the consultants to know the exact amount of copies of tender documents to print which isn’t the case for open tendering.

2.3.2 Disadvantages of selective tendering

High price

Since the average quality of materials and workmanship is higher than the open tendering method, the price of the project is bound to rise. This is also because it is not as competitive as there are lesser contractors tendering for the job.

Employer incurs resources

Preparing the list of contractors for pre-qualification requires for the contractor to make his on list using his own resources and means to do so.

2.4 Negotiated tender

Negotiated tender starts with the employer selecting only one contractor due to his reputation and ability to perform. The contractor shall then proceed to directly price the Bill of Quantities. Upon completing the pricing of the materials, the contractor will enter a negotiation stage with the quantity surveyor for the best value for money possible. After the negotiation process, consultants will prepare the contract documents and send it to all the parties involved in the project. At this point construction can commence.

2.4.1 Advantages of negotiated tender

Quality assurance

Since a highly reputable contractor is engaged, quality is sure to exceedingly high. This can also be said for experience for similar projects.

High success rate

The chance of the contractor successfully completing the project is high as the contractor has the experience and resources to do so. This cannot be said for open tendering.

Suitable for emergencies

In case of an emergency, engaging a contractor is crucial and cannot rely on the long process of an open tendering method.

2.4.2 Disadvantages of negotiated tender

Highest price

This method prioritizes construction quality and time but not cost. It is a method with a highest cost when compared to open tendering and selective tendering.

Long negotiation period

Negotiation can end up in endless arguments on the price of which the project can be constructed. Worst case scenario is the agreement is called off due to not being able to agree on a right price.

2.5 Recommendation

The building to be constructed is a multi-storey car park so it requires a considerable amount of quality as it can be quite dangerous if any failure of components were to occur. Having said this, it is also illogical to have too high a cost as it is only a car park. To acquire the optimal balance between the 2 factors, selective tendering seems to be the right choice for this project. This is because it provides higher than average quality without the need to incur too much cost. All the contractors are reputable which makes this method generally low risk high reward. Seeing as how Taylor’s University is not an active client in construction, it also helps to keep both the tendering process and negotiation phase simple. Other advantages include having low documentation cost which is an extra bonus to save cost. The tendering time is also shorter making the total construction time shorter which allows for consumers to occupy the infrastructure in a shorter period. As for consideration on single stage selective tendering or two stage selective tendering, it will depend on Taylor’s University’s knowledge of any reputable contractors. If unsure of any, it is recommended to use two stage selective tendering.