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Tendering strategies

The three most commonly used tendering strategies are: single stage, two stage and negotiated.

*If you need a reminder of the RIBA stages, refer to your copy of the RIBA Plan of Work 2020, downloadable from their website.

1. Single-stage tendering

The most common type of tendering strategy is the single-stage competitive tender used for obtaining a price for the whole of the construction works.

The single-stage tendering process is as follows:

  • Invitation to tender documents 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 (technical design) 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, time 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 two-stage tendering process is as follows:

  1. The process involves first-stage tender enquiry documentation being issued to bidding contractors at RIBA Stage 2 or 3 (concept design or developed design).

    Rather than requesting a bid for constructing the entire project (which is still in the process of being designed), the tenderers are typically sent what has been designed so far (or part of it).

    The tenderers then return a competitive price of the defined work packages, submit a proposed construction programme, method statement, price for preliminaries and a percentage for overheads and profit during the life of the project. They can also be asked to submit a lump-sum figure or cost reimbursable quote for the pre-construction services and design fees.

    The preferred contractor is chosen on the basis of the quality of their bid, the quality of their team and their preliminaries price, and overheads and profits allowances.

    Employers can obviously vary these tender documents from project to project, dependent on specific project details and circumstances.

  2. 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.

    Stage 2 is completed with agreement of a lump-sum price for completion of the project. The contract is normally awarded to the stage 1 contractor, albeit both parties can walk away at this point. The employer and stage 1 contractor will usually have worked closely together, enabling them to reach a mutually satisfactory agreement as to the price and terms of the contract. Given the contractor’s involvement in the development of the design, the contract entered into will typically be a design and build contract.

3. Negotiated tendering

A negotiated tender is effectively a single-stage tender with a single contractor who returns with an initial price. Therefore negotiated tenders are obtained by the employer inviting a contractor of their choice to submit their price for a project. This is then negotiated with the client’s professional team (usually the client’s quantity surveyor).

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.

A negotiated tender has a good chance of being satisfactory because, more often than not, it is based on previous satisfactory experiences of working together by the client and the contractor.

Your task

There is also a method of tendering called ‘open tendering’, which is normally used in limited circumstances and is commenced by advertising in the press, so any number of organisations can respond.

Debate what you consider to be the advantages and disadvantages of this approach.

Is open tendering a viable option for a project like Arthur’s museum, which was introduced in Week 1 of this short course?

Post your thoughts in the discussion.

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This article is from the free online course:

Pre-Contract Management for Construction Projects: The Basics

Coventry University