The Tendering Process in Construction
Construction tendering has become a popular business model for large and small organisations alike worldwide. Particularly as procurement requirements become more intensive and complex, tenders simplify project management for construction companies. A construction tender may be issued for one specific type of product or service, though many choose to aggregate a variety of products and services into a single contract.
Irrespective of the nature of the products or services required, the tendering process in construction looks a little like this:
- Invitation to Tender. The purchasing organisation may approach potential suppliers directly, or simply issue a public invitation to tender online. The invitation to tender will usually detail all key information regarding the organisation’s requirements, deadlines for completion of delivery and other contractual obligations.
- Clarification. In most instances, the supplier or service provider will seek further clarification of the terms and requirements by contacting the purchasing organization directly. This is where online procurement can be uniquely beneficial, allowing service providers and purchasing organisations to communicate conveniently and in real-time.
- Application submission. The supplier or service provider interested in the tender will then submit their application to the purchasing organisation. The application will typically include detailed information such as the services or products to be provided, timescale for delivery, total costs, key project personal and so on. The more detailed the application, the greater its likelihood of being accepted.
- Variant Bids. The applicant may believe that they are able to offer something that represents even better value for money, while meeting or exceeding the requirements of the purchasing organisation. If this is the case, they may choose to issue what are referred to as ‘variant bids’, along with supplementary information to explain their offer.
- Supplier Selection. When a sufficient number of applications has been received, the purchasing organisation will select the most appropriate candidate for the project. The winning bid may be selected in accordance with the lowest prices, the highest quality, the fastest delivery or any combination of factors.
- Final Negotiations. Prior to entering into a contractual agreement, the purchasing organisation and the supplier will carry out additional negotiations on key terms and requirements. If there are any issues that require final clarification, it’s a case of now or never.
- Contractual Agreement. When all involved parties are happy with the terms and conditions the agreement, the final contract can be signed and the deal becomes legally-binding. Until the moment the contract is signed, the purchasing organisation may choose a different applicant, just as the service provider may walk away without providing justification.