The tendering process is single-handedly one of the most important stages for any construction company or supplier. With the landscape for the industry becoming increasingly competitive due to an ever-growing need for lasting infrastructure, it’s a prime opportunity for firms to make some serious money.
By 2026, it’s estimated that the industry will reach £227,627.2 million thanks to increased government contracts and large-scale projects. With major money in play, ensuring your tender process is bulletproof has never been more vital. Utilising digital technology, such as ERP software, to support you will ensure all relevant data, evidence and files are stored safely and are easily accessible for analysis before submitting a tender.
What is a tender?
A tender is an invitation to submit a bid on a project. Those entering into the tendering process will need to produce a bid with accompanying evidence, documents and data before they can even be considered for the project.
Tendering is often a longer process as it requires several stakeholders to make a uniform decision about the most suitable supplier or contractor for the job. The result is often determined based on several factors, including:
- cost for completion
- product availability and suitability
- additional requirements to be considered, such as recruitment and training
- CO2, environmental impact and sustainability factors
- KPIs and quality control
Once these factors have been considered and approved, a contractor is selected and awarded the tender. Tenders will typically last for the duration of a project or for a set length of time. Upon tender renewal, suppliers can then reapply for the contract with new supporting evidence.
What is tendering in construction?
Tendering in construction typically follows the same rules as any tender with the addition of industry-specific requirements. For construction firms, there is a greater onus to produce waste management statistics and acknowledge environmental impacts in Whole-Life Carbon Assessments (WLCA). This is especially true for authorities offering tender for the large-scale refurbishment of existing buildings and infrastructure. Without these figures available, it’s unlikely firms will qualify for tenders of this nature.
With increased legislation around procurement, construction firms and suppliers must supply valid accompanying evidence that proves they are committed to achieving net zero targets alongside the UK government. In fact, for suppliers aiming to bid on contracts worth over £5 million, a Procurement Policy Note (PPN) 06/21 is mandatory to be considered for the tender.
Tendering must also include a series of accurate time estimates and budget planning that allows buyers, or clients, to view the overall budget and suggested deadlines. Surveying and estimating software allows contractors bidding for tenders and organisations inviting the tender process to keep on track with targets, estimates and data. This will also help in producing or responding to a tender document.
The types of tenders used in construction
Tendering in construction can be approached in three different ways: open tendering, selective tendering and negotiated tendering. Each of these is designed to meet various project requirements and is up to the discretion of the buyer.
Open tendering
1. What is open tendering?
Open tendering allows project managers within construction firms to submit a tender for the supply of goods, work or services within a construction project. Open tendering means there is no restriction on who can place a bid for work.
2. When would you use open tendering?
Public sector projects, such as government contracts for major infrastructure, more commonly use open tendering processes to fulfil the need for goods, services and work. However, it has also been used on a range of private-sector projects too. This form of tendering is a great solution when offering equal opportunities to a range of suppliers. It also offers fair chances for companies to bid on a tender and minimises discrimination among contractors and suppliers, creating transparency between various bidders.
3. How does open tendering work?
Of the three tender types in construction, open tendering is the simplest. It follows a two-step process that results in a buyer procuring goods, works or services from a chosen contractor.
The selection for tender is broken down based on a range of ranking factors, with each applicable bid scrutinised and evaluated to determine their suitability to fulfil the contract. For greater success, utilising estimating and surveying software means firms can accurately track and analyse the data they wish to submit during the tender process.
5. What are the pros and cons of open tendering?
Pros
- Allows more diversity within the bidding process, giving smaller firms a chance to compete against renowned and well-known contractors
- Removes any possible bias from the point of invitation
- This method of tendering is universal and can be found in other industries
Cons
- It is an expensive operation that takes a lot of time and effort to complete
- It can hold organisations accountable when slightly sketchy decisions have been made causing suppliers to be excluded from the process
- For those with mediocre evidence collection, such as paper-based surveys and disorganised data spreadsheets, it can make the process of bidding even trickier
Pre-qualification / Selective tendering
1. What is Pre-qualification / Selective tendering?
This style of tendering is designed for complicated and large-scale projects that must adhere to set criteria. For the sake of the organisations inviting firms to bid on their tender, a set of pre-agreed terms must already be met by the suppliers and contractors before they can be considered.
Terms to be met can vary dependent on the project, but they could range from requiring WLCAs to aligning closely with an organisation’s ethos and beliefs.
2. When would you use Pre-qualification / Selective tendering?
The more complex the project, the more suitable pre-qualification and selective tendering become. If organisations already have a set understanding and level of requirements to meet, it works more in their favour to target suppliers and contractors that will directly accommodate their expectations. Organisations requesting bidders to complete pre-qualification questionnaires (PQQ) will only require specific relevant to the contract being offered.
3. How does Pre-qualification / Selective tendering work?
Before the bidding process, a PQQ, such as PAS 91, the construction industry standard, can be used to determine a supplier’s level of suitability to service a project. This standardised prequalification questionnaire system enables buyers to decide on who can be invited to tender based on the answers returned.
Once these have been received, reviewed and evaluated, buyers can establish which contractors are suitable to be invited to tender.
4. What are the pros and cons of Pre-qualification / Selective tendering?
Pros
- For buyers, it improves the quality of bids received and allows greater control during the selection process
- This version of tendering causes less strain and minimises administrative tasks
- Costs and time are reduced as this ensures a more cost-effective use of time and resources
Cons
- Price quotes could be higher than in comparison with open tendering
- Collusion between contractors is possible, especially when submitting favourable tenders and bids
- It’s difficult to avoid bias during the shortlisting stage
Negotiated tendering
1. What is Negotiated tendering?
For buyers who already know the contractor they want, negotiated tendering formalises the invitation process for both parties. A contractor or supplier of the buyer’s choice can submit prices for the completion of a project without competition from others.
2. When would you use Negotiated tendering?
Whilst it’s typically used for emergencies where urgent repair work is required, it can also be used for specialised work or when particular equipment is required on existing projects. Negotiated tendering can also be used when buyers have had favourable and successful relationships with suppliers. This normally happens when contracts are fulfilled to exact requirements, budgets are not deviated from or suppliers have shown initiative when errors have occurred.
3. How does Negotiated tendering work?
In the instance of tight deadlines or specific work requirements, negotiated tendering can be utilised to approach one supplier or contractor to fulfil the need for goods, services or work. Between both parties, pricing is agreed and a formal contract is written up.
4. What are the pros and cons of Negotiated tendering?
Pros
- Buyers are already familiar with a contractor’s way of working and might already have several successes on other projects due to this contractor’s reputation
- An excellent and speedy solution when emergency work or urgent repairs are needed
- Reduces the risk of failure during the tendering process
Cons
- Reduces the availability of work for other contractors and suppliers that would have been suitable
- Costs can be higher as there’s no competition
- Buyers can be critiqued for supplier bias
How to respond to a construction tender
1. Decide on suitability
Dependent on the tendering process, the buyer might already state the type of contractor they are looking to work with. Within the tender document, the client will lay out every component required from the project, as well as how they will evaluate each bid.
It’s worth reviewing the goods, services and work your firm can offer, alongside existing supporting evidence and data from similar projects that have been successful. Public sector contracts worth over £5 million also require suppliers to submit a WLCA that addresses environmental impact. Tenders of this nature must be accompanied by relevant evidence.
2. Read the document in full
The tender document includes a lot of detail, which can be easily misinterpreted or forgotten. It’s a valuable trick to have multiple sets of eyes look over the document, especially for more complex projects. That’s also why responses to tenders shouldn’t be rushed or left until the last minute to submit.
3. Answer every question
During the tender process, you’ll need to ensure every question is answered accurately. It’s easy to oversell and over-commit, but it’s also possible to miss vital evidence that strengthens your case to the client.
4. Offer value
The tender process is a simple transaction of goods, but the effects of it can leave lasting impressions on clients and buyers. It’s always important to identify similar successful projects and ways that clients can get more than their money’s worth without overselling your services. The added value could mean your firm is invited back for a negotiated tender.
What happens when you lose a tender?
Most of the time, contracts are lost simply because the pricing has not aligned. Many contractors and suppliers score very high on quality and miss out only because someone else submitted a more favourable bid. In some cases, it can be that prices are slightly higher, whereas, in others, the pricing your firm submitted is reasonable.
It’s more than acceptable to ask the buyer for feedback which will enable you to see how you performed against the winning bid. Losing a contract is a prime opportunity to understand where you might have missed out on vital information. Take this on board and apply it to upcoming pitches and tenders.
Why digitising the tender process can help
Once a tender has been lost, it’s valuable to revisit the process internally and find out what worked and what caused unnecessary stress. Digitising the process could iron out any kinks. Not only can ERP software offer a holistic view of estimates and budgets, but it can also:
- Present all relevant information in one place
- Ensure complete transparency regarding estimates and budgets
- Align all members involved in the bidding and pitching process
- Allow real-time data analysis
- Provide a visual tool for buyers during the pitching process
- Evidence commitment to net zero targets
How RedSky can support you
Using ERP software simplifies the tender process, reduces stress and ensures all information is reported cohesively. At RedSky, we want you to feel empowered as you enter bids and submit tenders. Our teams are on hand to assist you with a bespoke service that directly meets your needs.
