Construction is the most crucial stage of your real-estate venture.
Likewise, tender in construction are crucial to ensure you gain insight into all potential contractors and choose the right ones for your property development project.
When property developers, investors, or organisations need a construction project, they usually perform a tender to get the most competitive price and efficient time frame. However, the tendering process in construction can be more complex based on the scope of your projects.
With different types of construction tenders, a series of steps, and paperwork, you’ll need some help getting through the tendering process in Victoria.
In this guide, we cover everything you should know about tendering in construction. You’ll find all the details to get started, from what it is to how it works.
So let’s jump right in!
What is tender, and why is it required?
Generally, a tender is a quoting process to find contractors and suppliers who are interested and capable of working on a project. The tenderers must return with a tender submission that includes construction cost, program, proposed project team/personnel, similar project experience, proposed construction methodology, response to contract, and special conditions.
In many industries, like construction, tenders are important because they help buyers choose the best contractor for the project.
The buyer must consider price and quality when choosing contractors, and running a tender allows them to shortlist potential candidates on their terms. Tender for construction can be critical because of it:
- Prevents bias – To choose a winning tenderer, the bids are evaluated based on certain predetermined factors. This way, all interested parties have a fair chance of being chosen.
- Provides value for money – You can choose contractors and suppliers to produce the best work at the lowest price.
- Encourages competitiveness – The tender process pushes contractors and suppliers to be more efficient and deliver the best possible work. This helps create a competitive market where all contractors and suppliers strive to be more creative and innovative.
- Shortlists the best deals – With several contractors and suppliers reaching out and bidding on their services, you can choose the best fit for your property development project and make the most out of it.
5 types of tenders for construction
You can choose different types of tender processes based on the expertise, nature of the contract, and complexity of your project demands.
Some common types of construction tenders include:
1. Open tender
Open tendering is a way for organisations to get bids for work by posting an advertisement online. It allows anyone to submit a proposal, and the best bidder may be chosen.
Open tendering can have benefits, such as driving competition and allowing less experienced suppliers to get contracts. However, it can also have drawbacks, such as attracting many different bidders who may not be suited for the work.
2. Negotiated tender
When tendering, you may negotiate with a single contractor by sending them an invitation to tender. This means that the contractor has already been selected, which reduces the cost and effort involved. It also guarantees a certain quality of work but removes the benefits of bidding.
3. Selective tender
When an owner wants to find a contractor for a specific work, they might generate a list of potential contractors with a reputation for doing great work in that area. This is called selective tendering. This type of tendering is usually reserved for contracts that are complicated or have specific guidelines.
It’s a way to ensure that the work gets done correctly or at a high standard because only contractors who’ve been pre-approved can participate in the bidding process.
However, it has one big downside: it excludes much smaller and fresher talent from the pool who could’ve done better at a lesser cost if given the opportunity.
4. Single-stage tender
A single-stage tender is usually used when you have a good idea of the price you want to pay and you don’t need to wait for the whole process to start.
An invitation to tender is sent out to potential contractors, and after pre-qualification work is done, they can submit their bids. From there, the winner is chosen.
5. Two-stage tender
Two-stage tenders also called early contractor involvement (ECI), are when a business is appointed early to a project before having all the information they need to quote the job properly.
This is usually done by owners who still need to figure out their plans fully. A limited appointment happens at the start of the project, and the fixed price is negotiated in the second stage.
What is the tendering process in construction?
The construction industry typically uses the tender process to choose contractors to build the work. But, as procurement has grown more complex, tenders are also used to find many different types of suppliers and contractors.
Simply put, to begin a tender in construction, you will have to invite to tender (ITT). This document includes all the information needed to price the proposed scope of work.
Based on this information, contractors will provide tender submissions to your request. Once the tendering is closed, you or other parties involved can review the tenders and select the one that is the best fit for your needs.
What are tender documents in construction?
There are several documents you’ll need to produce and issue during the tendering process in construction. The number and types of documents often depend on the size and scope of your project. Typically, the documents include the following:
- Letter of invitation to tender.
- Tender form / tender statutory declaration (it’s an acknowledgment that tenderers accept the terms and conditions of these documents and the process)
- Preliminaries or pre-construction information
- Form of the contract outlining contract conditions and amendments.
- Bill of quantity or a cost table for specified trades.
- Developer or owner’s information that will be required for the development project.
- Project brief outlining specifications describing the products, materials, and work required.
- Tender drawings (Architectural design drawings, engineering design and computations, soil report, site survey, etc.)
Now that you have a general understanding of construction tendering let’s get into the step-by-step implementation of tender contracts.
How do tender contracts work?
The long process of tendering can be broken down into 5 main steps:
1. Invitation to tender
An invitation to tender means that someone is asking for tenders on a project. It includes information about the project, what supplies will be needed, and the closing time of the tender.
The invitation to tender also includes details about how the tenders should be submitted and any pre-qualification or pre-tender interviews that may need to be done.
2. Tendering period
The contractor must complete and submit the tender within a set timeframe nominated by the tender officer. During this time, the contractor’s estimator will analyse the tender documents, forward the different sections of the trades to different contractors for pricing and timeframe, and check product availability.
If there are any discrepancies or amendments to the tender documents, the tender officer will issue a notice to tenderers to update all prospective contractors. This makes it fair for all of them and prevents discrepancies in the tendering process.
There is also a threshold timeframe for the issue of the tender amendment, there is usually no amendments within 5 days from the closing of tender; it restricts the owner/developer from making too many changes and does not allow enough time for the contractors to obtain quotes from their suppliers and consolidate the quotes to form a final tender price.
3. Submission of proposals
After reviewing the invitation to tender, contractors who want to do the work send in proposals and tender submissions that include information like the project’s estimated cost, time, inclusions and exclusions, and what the contractor plans to do to meet the client’s needs.
The tenderer needs to complete a tender form / tender statutory declaration form of the tender, which confirms that the tenderer accepts the terms and conditions of the tender documents and that the proposal submitted will be adhered to.
Other documents submitted by tenderers would include the tenderer’s experience, safety and risk management procedures, and the schedule of rates. Any plant or labor resources necessary for the project would also be included along with the construction program.
4. Negotiation and settlement
After the owner selects a tenderer, the tender officer must issue a letter of intent to the winning tenderer. The owner may then meet with the contractor to discuss the project. This is the stage where the contractor and owner discuss the terms of the project, and it’s an opportunity to clear up any questions.
A revised tender is created to reflect the new agreement between the contractor and owner. Once both parties agree to the terms, they sign the contract to finalize the deal.
The losing tenderers will also get a tender result notification informing them that they are unsuccessful this time round.
5. Final contract execution
The final step in tendering is contract engagement, when you and the other parties agree on the final contract and contract terms. You can do this either by signing it yourselves or having it sealed so that it’s official. Contract execution completes the tendering process.
Why you should never tender for contracts without consulting your architects
Cost analysis based on the design specification and architectural details are essential for every tender. When unexpected costs arise, going in without proper information can cost you thousands later.
Consulting an architect will allow you to determine and share complete details about your property’s design and help your construction contractors and suppliers to form a tailored proposal with a realistic budget.
Moving ahead with clarity is necessary to avoid bumps in your property development journey. Getting an architect on board will also benefit you in handling council permits, getting your design approved, and managing tender documentation to make a well-informed decision.
The architect could also act as your tender officer to manage the tendering process and ensure the tender is held in a fair and impartial environment.
SQM Architects – Consult the Experts in Victoria for Construction Tenders
At SQM Architects, we are the construction experts who create successful designs for property developments, from small projects to large-scale developments.
While we assist you with architecture designs, we also manage your tendering processes with our experience and make it easier for you to find the best contractor.
From investigating feasibility to getting the building and design approvals, our experience in the sector allows us to create detailed tender documents that will help you get the best deal on your property.
With our tendering and negotiation services we:
- Assist you in determining the preferred type of tender process
- Prepare tender documents and send them out to all tenderers
- Respond to inquiries from tenderers
- Receive and open the tenders
- Assess all submissions from prospective contractors required to establish the contract price and final project scope.
- Negotiate with the preferred tenderer if required to obtain an offer acceptable to you.
- Prepare reports on tenders and recommendations for acceptance
- Assist you in determining the preferred negotiation process
Are you ready to send out tender invitations?
Consult our experts and work with us to make the most of your tendering process and hire the best construction team for your project needs!
