risk management in tendering process - Quantity Surveyor Blog

The tendering process in construction-1st step Incorrect tendering and estimation process can lead a company into dangerous situations. Underestimation of a project can hurt owners and employees of the company at the construction stage. And overestimation can push the company out of the competition (tender rejections). Therefore any company should have a proper strategy or a process to submit a competitive tender. In this article, we are here discussing the vital essential factors of an effective tendering process in the construction industry. Tendering process in construction 1st step-decision to tender First and most crucial planning factor is in the tendering process in construction is the decision to tendering. The contractor should decide whether it is worth to work on or not. based on below mentioned key factors the contractor can decide whether to proceed with tender. Type or amount of the works currently handling by the company Before quoting for another project, a company should evaluate the current commitments of it. As well as the cash flow predictions for ongoing projects. If they are busy and engaged, it is difficult to receive another job.so the best option is not to quote for another project. Also, there might be a chance to identify potential and beneficial projects based on the above factors (contractor can determine the best tenders to benefit the cash flow of the company). Approximate amount of the project to be tender (based on the available documents and Information) Approximate value can be evaluated based on the previous project analysis. Most of the contractors are having per square meter rate for a different type of buildings and projects. Experience contractors are frequently analysing past executed projects to determine these per square meter rates. By evaluating the project (to be tender), the contractor can easily decide it is worth to be quoted. Value can be lesser or more significant than the contractor's capacity (Smaller contractors are not able to handle bigger projects, and bigger contractors will suffer from smaller projects). Necessary resources and workforce based on the approximate figure Some projects may require additional or special requirements. So the contractor should be aware, what is needed to complete the project (to be tender). Based on the workforce requirement of the project (to be bid) Contractor can determine whether they need additional workforce or not. Based on these details and contractor's capacity, they can decide whether they can handle the project to be tender. This is a crucial factor that a contactor should evaluate before commencing the tendering process. Time duration, commencement date & closing date of the project Commencement date, complete dates are essential to determine cash flow requirements and workforce arrangements. If the project is running on the timeline which contractor is so busy, they can evaluate and reject the tender invitation by politely. Importantly the contractor can determine the possibility of completing the project according to the given duration. Contract method, method statements and any special requirements Understanding of the contract type, terms and conditions of the contract is also an essential factor before deciding to tender. Special requirements biased condition (to the client) can include in the agreement. So the contractor should be aware of these conditions, and he should address it accordingly. The submission date and time duration provided for tendering process Another most important factor that can affect the submission of tender is the time given for the submission of the bid. Most of the clients are expecting contractors to submit proposals in a minimal time frame. Insufficient timing can increase the risk of offering a false offer. The contractors can evaluate actual time frame to submit the proposal and may request for an extension. If the client is refuse to grant one, the contractor should focus on some other tender rather than concentrating the current one. Risks The contractor should asses the risks such as adverse site conditions, social and environmental risks of the project. Some projects may require a massive amount of temporary works to minimise construction risks. Bonds or warranty requirement & payment terms Biased payment terms and bond requirements can be a threat to the contractor's cash flow. So contractor should aware of these kinds of situations and necessary precautions to be taken to prevent any harm. Image by Tumisu from Pixabay Check related article Construction-Risk assessment at tender stage