Tendering Strategies / Options, NJCC Flashcards
What are the main tendering options?
a) Open tendering
b) Selective tendering – single or two stage
c) Nomination / negotiation
d) Serial
e) Joint ventures
What is selective tendering?
- Restricts the number of tenderers by pre-selecting a limited number of contractors to tender for the work
What is single stage tendering? And what should be provided by the Contractor during pre-selection (PQQ)?
- A structured process of receiving competitive tenders from a number of pre selected capable contractors, who provide a lump sum for the works
What are the advantages of single stage tendering?
- Ensures only capable and approved firms submit tenders
- Tends to reduce the aggregate cost of tendering
- Client gets a lump sum for the whole works
What is two stage tendering?
- Separates the processes involved with selecting a contractor from the processes for determining the price for the works
- Used when it is desired to obtain the benefits of competition and have the advantage of bringing a contractor into the planning of the project and gain an earlier commencement
What is the purpose of the first stage (two stage)
- To select a suitable contractor by means of limited competition
What is the purpose of the second stage (two stage)?
A negotiation process with the selected contractor on the basis of the first stage
What do tenderers return as part of the first stage?
a) Detailed build up of prices for the preliminaries items
b) Percentage additions for profit and overheads
c) A construction programme
d) Proposed sub letting of the works
Are there any precautions you should take before entering the 2nd stage process?
- Define procedure for either party to withdraw should 2nd stage negotiations prove abortive, what payments become due.
What are the advantages of two stage tendering?
a) Early involvement of the contractor
b) Encourages collaborative working
c) Potential for earlier start on site
d) Greater client involvement in selecting the supply chain
e) Contractor can help identify and manage risk
What are the disadvantages of two stage tendering?
a) Cost certainty may not be achieved before construction starts
b) Additional pre-construction fees for the contractor
c) Contractor could take advantage of second stage negotiation – increase costs
d) Potential for parties to not agree contract sum – risk – cost of retendering
Why should you use 2 stage tendering?
- Building is complex
- Magnitude of work is unknown at time of contractor selection
- Early completion is required
- Design team would like to make use of contractors expertise on buildability issues.
How does negotiation/nomination work?
- There is no competition – likely to lead to a higher price
- BUT client may think it is worth it for a quicker or better quality job
- The contract sum is arrived at by a process of negotiation
- One party usually prices a schedule of rates / bill which is used as a basis
What is a framework agreement?
- A list of contractors selected by the client after a formal tendering procedure to work over a long period of time
- The contractor may have to wait his turn for a contract or tender repeatedly with the same group of contractors
What is a joint venture?
- Used on large complex projects when 2 or more companies take on a joint and several liability for design and execution of the project.
- Would normally be backed up with PCG, Performance Bonds.
