What exactly is a tender, and what do I need to do? Don’t worry; we have the answers.
No doubt, paperwork is not the most exciting part of any job. However, writing quotes is not something you would brag about at home.
This article is a guide on what a tender is, the types of tenders and how the process works.
We’ll cover the following topics:
- What is a tender
- Types of tenders in the construction industry
- Tips on winning a tender
- Types of tenders
- The tender process
What is a tender?
A tender is a formal document that allows businesses or suppliers to submit a written offer (tender response), including costs, timelines, and more, to complete work specified by a client. A tender can be used to hire for anything from a large-scale construction project to a small project.
Construction and commercial construction tenders are the most frequently seen tenders. Because each job is unique, you cannot copy and paste the same price from the last job. In addition, the thousands of components in a construction project require serious attention at every level.
Everything from who to what, when to how, and everything in between is included in a tender response. They require a bit more effort (which, unfortunately, isn’t compensated), but they may be worth it in the long run for that big payday.
Types of tenders in the construction industry
When talking about bids, you may encounter a variety of terms, such as:
- Request for Proposals (RFP)
- Invitation to Offer (ITO)
- Approach to Market (ATM)
- Request for Tender (RFT)
- Request for Quote (RFQ)
- Invitation to Respond (ITR)
These requests are all similar in nature, but you are more likely to receive a Request for Tender or Request for Quote.
A tender is a process for selecting a builder, contractor or supplier.
Before receiving an RFT or RFQ, you may receive an expression of interest (EOI) request. An EOI is typically the first step in a multi-phase tendering process. You will be requested to express interest in a job set by a client.
You don’t have to provide any costings with your EOI response, similar to a tendering process. However, the client will only select a business to perform the job at a later time.
Consider it an audition to demonstrate your business’s interest and abilities in moving to the next round.
Tips on winning your next tender response
A client’s tender request provides a list of requirements (at least as many as possible) for each supplier’s response.
You should be able to find all the information you need for tenders from other construction businesses or even your suppliers. However, sometimes you will receive very little input from clients, so you should provide what you can based on what they’ve given you.
Your minimum tender response should include the following:
- Company overview & background
- Company capabilities & services
- Straightforward answers to any questions
- Timeline
- Schedule of rates
- Terms and conditions
Listing your team and their experience listed can be helpful as well. Many people prefer to know the professionals behind the job before deciding.
All those who reply to a bid must meet the same standards. You must therefore ensure that your answers count. But, as always, practice makes perfect.
Types of tenders
Across the globe, open, negotiated, selective, single-stage, and multi-phase competitive tenders are the most common.
However, in Australia, open, negotiated, selective, single-stage, and multi-phase tenders are the most commonly used.
Open tender
Anyone can submit a response, whether big or small, new or old, as long as the tenders are open. It’s an excellent way for emerging businesses to get their name out there.
The open tender is the most frequently used bid for the construction and engineering industries.
This tender process is the most competitive, so you must be prepared to be considered.
Single-stage tender
A client typically requests a single-stage tender when enough data is available to generate an accurate quote before the project begins.
In contrast, the more traditional method is a single-stage tender process.
After pre-qualification work, an invitation to tender is sent to prospective suppliers.
From there, suppliers can submit their tender response for review, and the battle to win the job begins.
Two-stage tender
Before having all the required information, two-stage tenders, also known as multi-phase tenders, involve the early appointment of a business to a project.
This can also be referred to as early contractor involvement (ECI) in Australia. It’s typically used by clients who might not have fully fleshed out their plans yet.
The developer may get a builder involved early with the architects to design the project within budget to save money and ensure accuracy. Having all parties involved from the beginning saves time and money in the long run.
Once you have everything you need early in the project, you can offer them a set price for the rest of the work.
Selective tender
A selective tender is a type of single-stage tender. The client sends a request for tenders to multiple contractors that they believe are appropriate for the job.
A selective tender is similar to a selective tender. For example, this could be their preferred five construction organisations for a professional or sophisticated job.
Smaller businesses are often neglected when using this type of tender.
Negotiated tender
The client chooses a supplier based on prior relationships or a positive track record when a single supplier is approached for a negotiated tender.
Having this type of bid is advantageous for highly specialised projects or expanding a current contract with that supplier (in the event you work hard, you will always be rewarded). Negotiation, therefore, becomes much more straightforward.
The Tendering Process
The Tender Process occurs after the buyer has made an approach to the market.
Step 1: Tender released
A buyer prepares the tender documents and formally issues them, requesting responses.
To Bid or not? That is the question
During the bidding process, builders should ask themselves whether they should participate in the process or not. Builders must determine whether they are suitable candidates for the job and whether the process is worth the time and resources required.
Step 2: Prepare a response
When you see the tender being released, you can ask the buyer questions before you bid. In addition, you may be invited to attend a site visit or a briefing session. These sessions are optional but highly recommended and may or may not be required.
The knowledge you gain from these visits is critical. You can interact with the buyer and identify rivals. Because time is limited and deadlines are strict, it is crucial to know when opportunities are released.
Step 3: Submitting your response
Make sure to use the specified method to lodge your documents before the closing date and time and to account for upload times.
It’s crucial that you lodge your response in the requested format.
Congratulations on finishing your response document! Now all you have to do is wait.
Step 4: Tender evaluation
Before selecting a preferred builder, the buyer will evaluate all the tender responses.
The buyer may schedule an appointment with you or send you questions via email or text, so keep your phone close.
Step 5: Tender awarded
Once the buyer accepts or shortlists your tender, you will be known as the “Successful Tenderer” or the “Preferred Tenderer”. If the tender was publicly advertised, you would see whether it is “closed” or “awarded”.
Step 6: Contract negotiation
Once you’ve established the points you want to negotiate and the points you are willing to compromise on, you can begin negotiating the contract.
Even if the tender is “awarded”, the contract will usually involve some negotiation.
The negotiation may include:
- Warranties and guarantees
- Terms of payment
- Maintenance/Service Levels
- Completion dates
- Repairs or after-sale services
Step 7: Contract Signature
The last step in the procurement process is to sign the contract, which should be a simple formality. You’re now bound by the agreement and a supplier of goods or services.
Congratulations! This marks the end of the procurement process.
