Among various types of tendering methods, selective tendering allows only selected vendors to place bids. In other words, only prequalified vendors can put their proposals in the bidding process. Selection criteria for prequalification may be set based on the nature of the project, vendor’s capabilities and past performances.
In most cases, clients are requesting vendors to submit prequalification documents before the bidding stage. Based on the documents submitted, few suitable vendors (contractors) will be chosen based on the project’s requirements. Only these selected vendors (contractors) will receive the bidding documents to place their bids.
Advantages and disadvantages of selective tendering
Advantages of selective tendering
- Time consumption for the tendering process is low.
- Can select a reliable, experienced contractor for a reasonable price
- Easy to evaluate
- Shorter and easy tendering procedure
Disadvantages of selective tendering
- Less competition
- Can be biased
- can be risky (at the negotiation stage)
- An obstacle to new contracting companies
As mentioned in the introduction, in the selective tendering process client is requesting a few selected (prequalified) contractors to bid for the project. But the most crucial factor of selective tendering is the prequalification process of prior to the bidding process.
Mostly, clients will follow one of the below-mentioned methods to select a suitable contractor,
- The client may ask the consultant to select suitable contractors based on the consultant’s previous projects experiences.
- The client may advertise (mentioning the selection criteria), so suitable contractors can send their details expressing their interest to participate.
- The client can check with governing authorities (such as RICS, CIOB), Most of these authorities register and categorise firms, and the client can select based on project criteria.
Prequalification process for selective tendering
Mainly clients will evaluate both the technical and financial capabilities of each Contractor separately. Under technical evaluation, they will consider,
- nature of the projects carried out
- Size and reputation
- clients’, consultant’s appraisals (received after completion of each project)
- Details of current projects handled by the Contractor
- Quality of the completed project
Under Financial evaluation, they will evaluate,
- Financial stability
- Contractor’s cash flow
- Credit rating of the Contractor
Based on these considerations client will prepare a credit score for each Contractor. And all the contractors who pass or matches their benchmark will be qualified to submit bids.
Different methods followed in the selective tendering
There are two types of procedures followed in the selective tendering process
- Single-stage selective tendering
- Two-stage selective tendering
Single-stage selective tendering
The single-stage tendering process is the most traditional way of the selective tendering process. Only invited contractors will participate in the bidding process. The overall Process of Single-stage selective tendering can summarise as follows,
Request for expression of interest:- The Client may send a brief of the project to each selected Contractor, asking their expression of interest to participate in the tendering process. Each Contractor will evaluate their current commitments and project details before confirming their participation. In some projects, the client may ask the Contractor to sign and submit an NDA (non-disclosure agreement) along with their expression of interest.
Prequalification and selecting the most suitable:- After receiving the Contractor’s acceptance, the client may ask the Contractor to submit prequalification documents. If the client wants to verify submitted documents thoroughly, they may physically visit previously completed projects, factory facilities and office facilities. After a stringent evaluation process, they will select the few most relevant parties to submit their bids.
In some cases, the prequalification process can come before the Request for expression of interest.
Releasing the documents and tendering: Then, the client will issue tender documents to the selected contractors. The time frame for tendering will be agreed upon; A specific timeline will be given to submit the Contractor’s bids and the particular time to clarify queries arising at the tender stage. All pre-bid meetings and site visits will be arranged, and the client will answer clarifications in this stage.
Submitting and Assessment:– Based on the final deadline client will receive sealed tenders. And the client will assess the technical proposal and commercial proposal separately. In best practice, they will evaluate the technical proposal first. If any contractor cannot match the minimum required benchmark in the technical proposal, they will be disqualified without moving to commercial evaluation.
Negotiation and finalisation:– Final negotiation may happen after evaluation of the submitted offers. The lowest bid with the highest technical marks will be the most preferable in the negotiation stage.
Two-stage selective tendering
The two-stage selective tendering process is used when the client needs additional support at the design stage or the client wants to start the project with conceptual drawings. In the first stage, selected contractors (prequalified) will be asked to bid based on approximate quantities and conceptual (preliminary) drawings. And whoever the chosen Contractor will actively participate with client and consultants to prepare detailed design, project programme, etc. Most probably, the contractor choose will work under a consultancy agreement or service agreement at this stage. After all, planning and design completion client will request the selected Contractor to submit the final tender.