What is tendering?
May 8, 2020
Our take on tendering and why you shouldn’t assume the lowest quote is the best.
After a month of tendering 4 projects, we’ve been busy analysing tender returns and giving our recommendations as to which contractors each project should be progressing with. We thought we’d share a little on how we tender and what we look out for when recommending the right contractors.
So you’ve got your drawings, specifications, and designs ready and you’re ready to build. What now? Who do we approach?
We hold a list of approved contractors that we approach and use for multiple projects and sectors but we always ask the client to add a couple of names to the mix to ensure that each tender is competitive. It’s always advisable to have at least 4 contractors bidding for your project so you get a wider array of prices and more often than not, not all 4 will return a bid depending on their current project commitments.
We usually give 4 weeks for a good tender return, which we request to follow a certain format which allows for costs to be easily compared and analysed.
If we’re using an untested contractor, then we always suggest several checks prior to moving to the next stage.
Companies house – if they’re a registered company, check them out on companies house to see if there are any red flags you need to be aware of.
VAT status – there’s a few VAT schemes out there that offer a reduced rate or 0% VAT on your build. If your build isn’t VAT registered, then you’ll not be able to benefit from such concessions.
References – visit work that they’ve done before and/or request two or three references from their previous clients.
Website and portfolio – check out their work on their website, they should have a portfolio of work at a similar scale/sector that you’re looking for. See if the quality of work matches your aspirations.
Tender Analysis Reports
Checks completed, tenders sent out and returned? One of them comes in attractively priced? Do we go for that one?
Hold your horses, ask your architect or quantity surveyor for a tender analysis report. Don’t ever assume that the lowest price is the one to go with. More often than not, it’s not actually the lowest.
A tender analysis report will give you a better picture of the overall picture by placing each contractor's return against one another. Most of the time, each return is based on an itemised schedule which enables us to see what’s included and what’s not.
Just because the overall price is low, doesn’t mean that everything’s included. So we help give a weighted approach to each bid to ensure a fair comparison is given. This gives a more informed approach to the clients rather than an unfiltered tender return which may look deceivingly attractive.
Based on the analysis, we will give a recommendation on which contractor to progress with, but the final decision is the clients as each bid will come with pros and cons beyond pricing e.g. timely return, quality of tender return, and quality of portfolio. So once you’ve got a name in mind, we can progress with a pre-contract meeting.
If you’re happy with our recommendations and all the checks have passed with flying colours, we typically meet up with the client and the contractor to go through their returns to ensure everything that’s expected is included and everyone’s happy to work together.
There’s a few points to cover at the precontract meeting
1. Construction Programme
At the precontract meeting it’s always good to discuss timing, when the project is projected to start and finish but also to outline when each package is due to be tackled on site as this will enable your architect / contract administrator to value the works as it progresses to ensure your invoices are accurately aligned to the contract.
2. Provisional sums
There are typically some provisional sums on each project, a provisional sum is an allowance estimated by the contractor for a specific element that is not yet defined in enough detail.
Depending on what they are, it’s worth discussing with the contractor to see whether any further clarity can be provided on these items prior to signing contracts. Sometimes, it’s possible, sometimes it’s not but it’s always worth seeking some level of comfort to ensure these won’t balloon on site.
In order to confirm the contract particulars, the contractor will need to ensure he / she has the right insurances in place. Requesting proof of insurances is essential, don’t be a cowboy client and run into a project without proof in place.
You’re thinking about some potential design changes, don’t worry, the contract isn’t a device that will lock you in forever, there’s always time to change things post contract through the variations schedule. Any changes that you make, are best going through your contract administrator (typically your architect or quantity surveyor) as they’ll be able to log each change you make and relay the cost back to you to ensure a clear change tracker system is in place. This means that both you and your builder are protected as those hundreds of design tweaks on site are all logged and priced.
Following your pre-contract meeting your architect or quantity surveyor will send across the appropriate contract for both you and the contractor to sign. After this, get those shovels at the ready as you’ll be ready to start on site – fully protected and armed with a trusted contractor and design team!
So in summary, tendering is nearly always a complex process to find good contractors that will give a fair price. But be sure to get your design team to help you where possible as there’s more to the eye than just accepting the lowest tender.