There are three main types of tendering strategy which are common to the construction industry, although there may be subtypes of each. Note that the chosen procurement route should not affect the tendering strategy as each tendering strategy can be used within most procurement strategies.
1. Single-stage Tendering
The most common type of tendering strategy is the single-stage competitive tender for obtaining a price for the whole of the construction works. Invitation to tender documents are issued to a number of competing contractors who are all given the chance to bid for the project based on identical tender documentation.
This is usually done at RIBA Stage 4 so that the tendering contractors receive the most detailed information to base their bid on. The bidding contractors are given a predetermined amount of time to submit their tenders. These are then analysed, in terms of cost and quality, before a single contractor is declared the preferred contractor. They then ultimately enter into a building contract with the client to deliver the tendered works.
2. Two-stage Tendering
Two-stage tendering has become more common in recent years and is often used where time is constrained (as it enables design and tendering to overlap). It is also used if the design process would benefit from the technical input of a contractor in the later design stages. In this sense it is used to obtain the early appointment of a contractor.
The process involves first-stage tender enquiry documentation being issued to bidding contractors at RIBA Stage 2 or 3. Rather than requesting a bid for constructing the entire project (which is still in the process of being designed), the preferred contractor is chosen on the basis of the quality of their bid, the quality of their team and their preliminaries price and overhead and profits allowances. The preferred contractor then joins the design team on a consultancy basis using a pre-construction services agreement (PCSA). The preferred contractor then works with the professional team to complete the design, usually to RIBA Stage 4, before presenting a bid for the works at this stage. There are benefits and disadvantages of this route which are discussed in subsection 3.2.
3. Negotiated Tender
A negotiated tender is effectively a single-stage tender with a single contractor who returns with an initial price. This is then negotiated with the client’s professional team (usually the professional quantity surveyor (PQS)).
The benefit of this route is the speed with which a price can be obtained for the works. However, the competitive advantage of a formal bidding process is compromised. Also, many public bodies and government departments will not allow negotiated tenders except in exceptional circumstances as it is difficult to prove that value for money in the current market has been achieved.
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