Construction tendering is something every project manager will need to go through in their career. Tendering on construction projects typically signals that a project is close to starting, therefore it can be an exciting time period.
While the time may be exciting, having a proper tender can dictate the success of the project. Selecting the wrong vendor could mean quality suffers or worse they go bankrupt and impact the the progress on the whole project.
What Is Subcontractor Tendering?
Subcontractor tendering is the process of selecting a vendor to perform a certain scope of work by having a group of vendors compete for the work. A selection of vendors are solicited and submit their bids which are then analysed. The successful trade typically has the most complete scope of work and the lowest number.
Start By Defining Your Construction Timelines
Before you start tendering you need to understand your construction project. If you need help developing your work break down structure and schedule, check out our article on construction scheduling. The reason for developing your schedule is to assist you in understanding the sequence of your tenders.
Not all projects are the same, and on one project you may need your mechanical vendor on site first, another you may need your drywaller. Understanding this sequence is critical to tendering.
Once you have your priorities established start by scheduling your tenders. List all of the subcontractor scopes you’ll need a tender package for and list timelines beside them. Here’s some timeframes to give yourself:
- Tender Package (With Trades) – 2 Weeks
- Time for Addendum (Questions and Answers) – 1 Week (just incase)
- Post Tender Interviews – 2 Weeks
- Contracts – 1 Week
Overall you should be able to tender and award a package in six weeks. If it’s a larger more complicated package you may need to give yourself and your trades more time.
Who Will You Be Tendering To?
Now that you’e established your timelines you need to determine who you will be going out to. If you’re part of a larger company you may already have a prequalified list of vendors that can perform your work. If not, consider reaching out to your local construction association. They keep a list of subcontractors and can help you in selecting vendors for your project.
Each package should have a minimum of 3-4 bidders and each bidder should be unique (ie not two divisions of the same company). There may be certain restrictions limiting who can be on your list, some of them include:
- Capacity of the trade for work
- Unionized or non-unionized (are you or your owner obligated to use union trades)
- Timeline and schedule
- Quality requirements (not all companies can build luxury product)
Create a spreadsheet, and along with each of your packages and timelines associated with each, add in all of your vendors per package.
Before you go out to tender, make sure to call each of the bidders and confirm that they would be interested in providing a price. Simply sending the package out without talking to them could waste your time and theirs.
Preparing Your Tender Package
A tender package should consist of a front end document, tender forms, drawings, specification, schedule and any other important information you think the subtrades should have. The front end document is the most important, and while we won’t go into great depth as to what it should include, here are some key items:
- Details on the tender duration itself (time and date for submission)
- Where and how to submit bids (ie by email, in person, by fax etc)
- Duration pricing will be good for
- Contract type and summary
- Accounting requirements
- Safety Requirements
- Logistics Restrictions
- Detailed trade scope of work (ie drywall, painting etc)
Your tender forms should follow the main tender package, typically tender forms are broken down into a few different pages
- Main Price Breakdown
- Itemized Pricing (Pricing included in the main number but broken out (ie a washroom within a house))
- Seperate Pricing (Pricing that is NOT included in the base price but you may want to add the scope (ie a the price to add a second washroom to a house)
- Alternate Pricing (pricing to use alternate methods or products)
- Unit Rates (Unit Pricing for their materials – ie Supply and Install of a SF of Tile – typically used to evaluate changes)
- Staff Rates
Once you have your tender forms prepared it’s time to send out your tender package.
The Construction Tendering Period
Typically nowadays tender packages are distributed by email or by way of an online bid submission software. Drawings specifications and any other information is also distributed digitially (dropbox or box help greatly with this). In the old days (not that long ago) the general contractor would make documents availablke in their office for the trade to come and review.
[bctt tweet=”#cnstrctrtip – Once the #construction documents have been sent out to the sub-trades for tender it’s important to follow up with them regularly. You don’t want to waste two weeks only to find out noone is pricing the job. ” username=”cnstrctrdotcom”]
Once the construction tender has been issued you should arrange for a site walk. This will allow the trades to view the site, and give you the chance to walk them through the logistics and site restrictions.
It’s important to remember that the tender is supposed to be confidential therefore, do your best to limit emails or correspondence where the trades see eachother’s email addresses. BCC when sending information out via email.
When questions get asked by trades you need to ensure all vendors get the same information at the same time (in order to ensure fairness). Answers should be compiled into a document called an addendum and issued to all of the trades of the same package. Any changes to the tender scope and information should also be issued via an addendum as well.
Closing the Construction Tender, Interviews and Award
The closing details should have previously been outlined in your tender package, therefore when it comes time to close it should be pretty clear. Wait until you’ve received all of the bids, and then open them.
The bids should all be initialed by yourself, and your owner if necessary to ensure there is no page swapping once they are open.
After you’ve opened them it’s time to prepare a bid evaluation. For a great article on evaluating construction bids check out this link – it goes into great detail on what to look for and how to grade them.
Interviewing the vendors is an important part of the evaluation process. Bring the most complete and lowest vendors in for a meeting, in it discuss the details of their bid, your tender package to ensure they have a firm understanding of the scope of work and the construction project.
Once your meetings are done, the evaluation has been completed and you know which vendor it’s time to prepare your contract and issue an award letter to the selected vendor to let them know they are successful.
As a matter of best practice it’s important to let the other vendors know they weren’t successful. Issue a letter of regret to the bidders who won’t be getting the project. This will help to maintain relationships with the others for future projects.
Do you have a best practice or need some help with your specific tendering problem? Let us know below in the comments or shoot us an email. We also offer consulting services. Reach out to us at firstname.lastname@example.org for more information!