Tendering or bidding is one of the most crucial skills to master if you want to achieve Home Makeover project success.
The home makeover project process that’s key on many projects is called tendering or bidding.
Tendering or bidding is a long established and well recognised construction practice. Tendering is one of the most effective ways to get competitive costs for any construction project. In simplest terms, this means inviting a selection of contractors to submit their tenders or bids to carry out a defined scope of construction work – AKA your home makeover project.
By having more than one contractor submit their tender, you introduce an element of competition into the process. For any contractor to be successful they need to submit the lowest price that includes for all of the works to which the tender relates.
You need to be aware that it’s inevitable that not all tenders or bids submitted will include for all of the work and that means two things.
First, the lowest price may not be the correct price. And understanding that fact leads to second … this means you need to carry out a very careful and thorough tender analysis when the tenders are submitted to check them to find any missing items, math errors and so on.
The tender analysis process is just as important as the actual tender process – see the next Blog Post.
Here are three secrets of running an effective tender.
Secret number 1 :
In order for contractors to submit reliable, competitive prices for the construction work you’re inviting them to tender for, they need comprehensive, detailed and unambiguous information for every aspect or element of the proposed works.
This essential information is usually provided through a combination of what are referred to as tender documents. Depending on the size and complexity of your project, these typically include :
· drawn information – like architect or designer’s drawings,
· technical specifications – which may be included on the drawings or in separate schedules of the work
· schedule of works or tender sum analysis – you can ask contractors to provide a detailed analysis of their tender sum but at the very least give them guidance of the core work elements you want the work broken into … it makes tender analysis much easier and I’ll explain that in more detail in the next episode.
· Other documents that describe the work, the location, any restrictions that may affect how they execute the work and much more
When you don’t provide comprehensive, detailed and unambiguous information then the tendering contractors either make assumptions, qualify their prices or exclude works they don’t fully understand. It can even lead to them withdrawing from the tender process completely. Which is disastrous if you’ve taken the time to carefully select your tenderers.
Inadequate tender information makes the whole tender process pointless.
Secret number 2 :
There is a magic number of tenderers to invite. Invite too few contractors and you cannot rely on the lowest correct cost actually being both correct and lowest. But inviting too many contractors doesn’t mean even lower tender prices. In fact, with too many contractors, prices often increase.
And getting a bunch of inflated tender prices is also pointless.
If contractors lose interest and simply withdraw, then you might be losing from your tender process some of the best contractors in terms of capability, reputation, reliability, competence and so on. All the good reasons you added them to your list in the first place.
Over many years of running successful tender processes, I have learned to invite a maximum of three or four contractors, any of whom I would be happy to appoint if they were to win the tender evaluation.
So, secret number 2 is that the magic number of tenderers for any tender or bid process is three or four. Can you go to just two – yes; can you go to five or six – probably yes as well. There are influencing factors like market conditions, the size of the project, the profit potential if it is a complex or extra large project and many others. But my strong recommendation is to stick to three or four as a rule of thumb and you are unlikely to go too far wrong.
Secret number 3 :
To be certain that the contractors who you invite to participate in your bid process are the right contractors for your project, you need to run an effective pre-tender selection process to find the best available candidates before shortlisting the top three or, at a push four.
Among others, there are a number of key considerations to focus on. These include:
· Location – do they operate locally to your site ? Appointing an out of town team who have to travel longer distances, even from across a larger city, will increase their costs.
· Size – is their organisation the right size for your project – you don’t need a huge organisation for your kitchen refurbishment nor the significantly higher overhead and profit margins such a company would be likely to charge. But you also need more than two guys and their dog if you are adding a double-storey extension and don’t want to take forever for the work to get finished.
· Availability – selecting a brilliant local contractor but whose next available slot to execute your project is a year away is likely to waste time and cost you money. It’s likely you will be better served by a less stellar organisation who can get a team on your work site within a few weeks at most.
· Skillset – your favourite painter and decorator who’s done a ton of small jobs for you in the past may not be the best suited to taking on an attic extension requiring expert roofing, even if they do have a friendly roofer they can bring in. Their skillset is not aligned to organisation and execution of a more complex project.
· Reputation – what do their past clients say about them ? Do they come highly recommended ? How close was the final cost to the starting contract value ? Did they get the work done on time ? Did they pay close attention to carrying out the work ? Was the client satisfied with the quality and close of the project ?
Time spent in careful pre-selection of potential tenderers will pay dividends when you make your final shortlist and invite them to tender.
And here’s a hot insider tip. It’s worth having a top five or six list to draw from for your final three or four. Even with the best intentions, good contractors win work regularly and will usually accept work on a first-come-first served basis. Yesterday they may have had the capacity to tender for your project but after two clients suddenly give them a green light for other projects, they may have to regretfully withdraw. If you have no backups you could be left with only two or three teams still competing. And that can make the process less effective.
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