What is Tendering in Construction?

Why do Businesses Tender?

So now that we know the answer to the question “what is a tender in construction?”, who actually benefits from it? The answer to this is parties on both sides of the contract: the client and businesses applying for work.

The client benefits because they can take applications from multiple businesses and select the best one. For instance, a local council might be looking for a construction company to build a new bridge, connecting two parts of a city and reducing traffic going through the city centre. The tendering process helps them find the most qualified firm offering the best value for money for the taxpayer.

At the same time, the business applying for work also benefits. Successful applicants can often secure multi-year contracts worth millions of pounds. For instance, a government agency might hire a firm to take care of all the roads in the town for the next five years. It’s guaranteed income and much easier to acquire than seeking out individual projects.

What is the Tendering Process?

Figuring out how to tender for construction work is essential for both small and large firms. Companies that succeed, as previously stated, can win multi-year contracts and secure income both medium- and long-term. So, how does it work? We’ve outlined the process below:

Tender Invitation

The first step is the tender invitation. Here, the client writes a letter to the applicant business inviting them to tender and providing some preliminary information, such as the nature and type of the project, design drawings, pricing documents and so on.

Clients bundle data into packages to make it easier for businesses to formulate an estimate. Clients can then use this information to compare different tenders.

In some cases, clients will arrange mid-tender interviews. These meetings are helpful because they help clarify the parameters, scope and terms of the project for both sides. Interviews and “checking in” services avoid inaccurate tender submissions and firms applying for work they can’t complete.

Submission

Once firms are ready, they submit their tender. They tell the client how much it will cost for them to carry out the work, and specifically how they will meet their client’s needs.

Tenders should include critical information, such as:

• References from other clients
• The company’s experience in the particular type of work being solicited
• The availability of plant and resources to complete the project
• The tender pricing document that set out the construction firm’s rates and costs
• Design proposals that meet the client’s specification
• An estimate of how long the work will take
• Key people who will facilitate the completion of the project

Negotiation of Tender

Once the submission is complete, construction firms and the client begin tender negotiations. This process is an opportunity for parties to agree on specific terms or clarify aspects of the deal that might not be clear. It may also involve changing some tender documents to help a deal go through.

When parties reach agreements, they sign the relevant documents. These form the basis of the final contractual documents.

Execution of Contract

Lastly, comes the execution of the contract. Here, the client chooses the successful applicant and agrees to enter into a relationship with them. Parties can execute contracts in two ways:

• Under hand, in which both parties sign the contract
• Under seal, in which both parties sign the contract and then witness and execute it as a deed

Whichever method parties use, the contract is binding. The client must pay and the business must provide the promised services.

If you have further questions on the tendering process, or want to enquire about any construction works – be they industrial, commercial or residential, please get in touch with a member of the team at PPVS today.