What is Tendering in Construction?

From small tasks to entire projects – employers have numerous reasons for hiring services from contractors and suppliers. To protect yourself from unexpected risks, you may decide to enter legal agreements through ‘tendering’.

Tender contracts not only outline duties and expectations, but they also provide legal protection for you and your business. Remember, tenders are legally-binding; meaning, employers could face serious consequences if terms are breached. Like compensation fines, business disruption, and even court summons.

For more information on tender contracts, speak to one of our expert HR consultants today. For now, we’ll look at what tendering is, examples of different agreements, and how to apply a tender process when hiring external construction services.

What is tendering?

In the construction industry, tendering is the process of requesting and receiving a price for a particular form of labour or service.

Tender processes allow employers to scope out competitors (and their rates) – helping them choose services that best fit their means, budget, and objectives.

Tenders are usually used by public entities during their bid processes. However, they can be found within the private sector, too. The main aim is to find a suitable contractor or supplier that’s appropriate for your imminent task or project.

Who uses tendering?

In the UK, there are numerous examples of tenders being used across industries. Some of the most common ones found in construction are:

• Architecture and design.
• Building.
• Electrical.
• Flooring.
• Demolition.
• Supply of building materials.
• Groundwork.
• Plumbing.
• Repair and maintenance.
• Roofing.

Are there different types of tendering contracts?

Yes, there are different types of tendering contracts regularly used in construction. Some of the most common ones include:

Open tendering

This method promotes a culture of transparency and openness within the process. Once an employer announces their invitation for a service, anyone can contact them,

Open tendering is quite competitive, as it’s accessible to a wider audience. It allows new or emerging contractors/suppliers to attain work opportunities. Employers then need to filter through applications to find suitable candidates.

Selective tendering

This involves compiling a list of potential providers you’d like to contact for potential work. Only those sent the invite are allowed to submit their tender.

Employers benefit from selecting specialist contractors or suppliers. It also reduces time spent on finding viable professionals. However, the process can disregard qualifiable companies who may not have built a name for themselves as of yet.

Negotiated tendering

Here, employers will choose one contractor or supplier they’d like to initiate work with. Both parties specify their own terms, reaching mutual grounds regarding the project objectives.

Employers may use negotiated tender processes for highly specialised contracts or contractual extensions. Because one proposal is discussed, it saves both parties time and money. However, it does discourage competition amongst contractors – leading to a monopoly on service charges and negotiation terms.

Serial tendering

Employers will choose a specific contractor who will provide their services over a certain amount of time. They’ll outline their terms in regard to the project; i.e., what the work includes, as well completion estimates.

Serial tendering contracts are considerably cost-effective. That’s because contractor prices are often lower for ongoing work. And there’s less need for look for future tenders, as you’ve already built a long-term business relationship.

Framework tendering

This process involves selecting a contractor to perform on-call work over a set period. They provide their terms before initiating work. For example, like schedule rates, overhead charges, and a breakdown of resources.

Framework tendering reduces costs for owners, as they often get quick responses and immediate resolutions for on-the-day problems. This isn’t from having a steadfast work ethic – it’s literally part of their contractual terms and the format of the tender.

Single-stage or two-stage tendering

This process consists of two formats: single-stage and two-stage tendering. With single-stage tendering, documents are completely designed before any invitations are sent out. Only one contract is awarded for the entire project.

With two-stage tendering, the initial design is still in progress either with intention or not. The contractor is chosen based on their expertise, resources, or even price. However, they’re expected to take part in both stages of the project. After design stages are completed, another tender may be submitted for the construction side of the project.

How to incorporate a tendering process in your workplace

Once you’ve decided on what type of tender you’d like to use, it’s time to send them out. Advertising them in the proper manner will help attract the most suitable, competent, and qualified businesses to work with.

Let’s look at how to incorporate a tendering process in your workplace:

Invitation

The first step involves sending out a tender invitation to potential contractors and suppliers. The invitation should outline details like:

• Primary notes on the task or project. (Like, pre-construction information or site waste management plans).
• Contract terms, conditions, and amendments.
• Employer’s information requirements if building information modification (BIM) is used.
• Tender pricing document (or a contract sum analysis on design and build projects).
• Drawing schedules and design projects.

Clarification

The next step involves providing clarification on the project. Prospective constructors may submit questions or queries on the tender to help gain a better understanding of the work involved.

Any feedback from contractors should be addressed appropriately before any work is started or agreed to. This clarification period allows everyone involved to fully understand what role each party plays, what their expectations are, and where duties lie.

The tender deadline can also be extended to give contractors more time to review the information before agreeing to anything. Not only does it encourage clarification, it also provides contractors with more room on necessary pricing.

Submission

At this step, contractors submit their own bids to the owner. Their submissions may include price rates, time periods, and additional information related to the work at hand. They can also include:

• Tender return slips (with details on contract terms, tender checklists, and even return addresses).
• Finalised tender pricing document (or contract sum analysis on design or build projects).
• Schedule of rates.
• Initial construction phase plan, design proposals, and method statements.
• Work procedures (for things like procurement or cost management).

Variant bids and qualified tenders

Contractors may decide to submit any alternatives or noncompliant proposals to the owner. These requests are known as variant bids and are usually less expensive compared to tender documents. Variant bids are often provided only if they’re requested and accompanied by a compliant proposal.

In some cases, a contractor may decide to submit a proposal with specific reservations or limited liabilities. This usually occurs if they can’t or won’t provide a certain service that’s included in the proposal documents.

Final contract drafts

The last step involves passing a final draft for the tender. If all terms are agreed to, both parties should sign the contract.

If negotiations are still being discussed, these must be settled before any tenders are signed. And if changes are proposed during the project, they’re added to as contractual terms to the agreement later – only through mutual agreement.

Get expert advice on tendering in construction with Peninsula

When it comes to hiring external services, it’s important to outline your terms and conditions through lawful agreements. That’s where tendering comes into play. Following the right procedure ensures you’re investing in the right people for your projects.

Peninsula offers expert advice on tendering in construction. We offer specialised guidance with HR contracts and documentation– ensuring your contract terms are legitimate and compliant with the law.

Want to find out more? Contact us on 0800 028 2420 and book a free consultation with one of our HR advisors today.