There are various types of tendering methods, to analyze, negotiate and award a project to a contractor. But We can only identify two types of contractual bindings in the construction industry. The first is a standing offer under a maintenance work for a specified period, and this contract type is rare compared to others. The acceptance of such a contract does not create a binding agreement itself. A simple offer which was done by the contractor to carry out the relevant work which is mentioned in the invitation to tender is the second type of tender. It is more usual than the first one, and it creates a binding contract legally.
Choosing a suitable type of tendering method
So main intention of the tendering process is to evaluate the ability, competency of a contractor (in the construction industry) in an unbiased way. To select a suitable contractor, there are various types of tendering methods used in the construction industry. Based on the nature of the project clients can choose what type to be used. In this article, we have discussed six types of tendering methods(Pros and cons, suitability & basic introduction).
In a project (Based on the project and client’s requirements), The quantity surveyor is the most suitable person to advise regarding the most suitable type of tendering method to follow.
Extent competition is the main feature here. Most of the time the lowest price will be selected, and it has caused to dissatisfy the competition. However, these are some tendering procedures which can be considered as the standard procedures in the construction industry.
6 types of Tendering methods
- Open tendering method
- Single-stage selective tendering method
- Two-stage selective tendering method
- Selective tendering for design and builds
- Joint ventures
Below, we have discussed more details about each these types,
Open tendering method
Even though there are several types of tendering methods, this is the most used tendering method for government projects. They use an advertisement with the details of the type, scope and other relevant information in brief. Then, contractors those who are willing to accept it, apply for the advertisement. This procedure has many issues. It does not provide reliability about the quality of the work. And the preparation may create many expenses and losses. People have declined the use of this method because of such disadvantages.
What are the advantages and disadvantages of the open tendering method?
Advantages of Open tendering method
- High transparency and competition
- Create opportunities (to more number of contractors)
- The owner will get a better price
Disadvantages of Open tendering method
- Can select a contractor who has no experience
- Time consumption is more for the tendering process.
- Unreliable competition
Single-stage selective tendering method
Initially, a limited number of contractors will be selected by the owner. If the employer builds regularly, he will also have a short and approved list of contractors unless he can use ad hoc lists where the names of the contractors are mentioned who have proved their abilities and competency.
What are the advantages and disadvantages of the Single-stage selective tendering method?
Advantages of Single-stage selective tendering
- Time consumption for the tendering process is low.
- Can select a reliable, experienced contractor.
Disadvantages of Single-stage selective tendering
- Less competition
- Can be biased
Two-stage selective tendering method
This is also called as, ‘negotiated tendering’. In this procedure, the employer takes the contractor’s service as advice instead of giving him the responsibility for the design. Two-stage selective tendering consists of two stages.
The first stage: This step includes the process of selecting a suitable contractor and establishing the price levels using the collected information. Those details should be strong enough to make such decisions.
The second stage: The selected contractors start the production drawings. As a result of this stage, they complete the documentation of the contract after making bills to include in it.
What are the advantages and disadvantages of the Two-stage selective tendering method?
Advantages of Two-stage selective tendering
- Time consumption for the tendering process is low.
- Can select a reliable, experienced contractor for a reasonable price
Disadvantages of Two-stage selective tendering
- can be risky (at the negotiation stage)
Selective tendering for design and builds method
In this method, the contractor has two responsibilities. They are, designing and building the project. He must give the services in a very professional way. There is an agent for the employer, who is responsible for his constructive interests and requirements. They present a price as a total amount that must pay to carry out the project till the end according to the conditions and policies in the contract.
What are the advantages and disadvantages of the Selective tendering for design and builds tendering method?
Advantages of Selective tendering for design and builds
- Can save the design time and cost
- Less risk to the client.
Disadvantages of Selective tendering for design and builds
- Price may be high
- Final quality may be affected.
Negotiation method of tendering
It is more radical compared to other methods. Negotiation goes beyond from the traditional procedures and it best suits with procurement strategies. Mostly used for specialized works such as Elevators, special access control systems (Because these type of works only can carry out by several unique contractors only).
Serial contracting is a special term that goes with negotiation. In such a contract, employers ask contractors to bid for the contract. And negotiate the final price before work awarded to them. If the contractor is succeeded and the client is satisfied with the job done, more works will be awarded based on the agreed prices. This method is developing good relationship between both the parties, which will be good for the project.
With respect to other types of tendering methods, This method is mainly used for complex projects which determined as hard to handle. This is the best solution for the problem of distributing liability among consultants and contractors. It does not require to establish a special company for this purpose, but it will be possible to do so. The parties those who are participating must pay attention to the agreement before entering it.
For further reading about methods of tendering check FIDIC Tendering Procedure 2nd Ed (1994
Check our article about How to form a valid contract with 4 Key elements.