What are The Types of Tendering?
Tendering is the process of obtaining valid offers from the prospective tenderers and evaluate & selecting the successful bidder to award the contract. Therefore, types of tendering are used to choose the most suitable contractor for the project.
Types of tendering can be used for any project, obtain of services, goods or material, etc. irrespective of whether it is too large or too small tendering can be applicable. There are many types of tendering that serve any kind of aspect. When making a selection through accountability & the transparency of the selection procedure is high. Thus for the selection of government-related aspects, the tendering is a must. Not only the government but most of the private sector investors or clients are also like to use tendering considering the many advantages of it.
Importance of Tendering Types
It is important to select a contractor to execute a construction project. A wrong decision can cause the client to be dissatisfied, the contractor to go bankrupt, and both parties to be unhappy. Therefore, We have to select a suitable contractor considering the nature of the job. Contract organizations are doing their projects in a specific size or price range and are not going to bid outside that range.
What should be considered when finding a better-contacting company?
- The business record of the Company has to be good.
- The company should be financially stable.
- The size of the project has to be under the company price range.
- The company should have a reputation for working in good quality and efficiency.
- The company has a good track record of construction industry relations.
Types of Tendering
- Open Tendering
- Selective Tendering
- Serial Tendering
- Nominated Tendering
You can download the Types of Tendering – Diagram as a PDF.
In this tendering method, the client is openly inviting bids for a particular project from any prospective bidder without applying any restriction. An invitation will be most of the time in the form of a newspaper notice or gazette notice if it is a government project. Usually, a refundable tender deposit or a tender bond is required to discourage frivolous applications. The deposit is refunded, or the bond is released on the submission of a bona fide tender.
Advantages of Open Tendering
- No favoritism
- Opportunities are made available for newcomers
- Opportunities are available for capable contractors.
- Since there is a high competition client can enjoy the maxim benefits.
Disadvantages of Open Tendering
- The tendering process has some high cost due to the number of bidders are high.
- Much time-consuming.
- Because of the open opportunities, inexperienced contractors are going bid.
Selective (Competitive) Tendering
In this type of tender, the major disadvantages of the open tendering method have been removed and further improved. This is practicing in the industry as Single Stage Tendering & Two-Stage Tendering.
Single Stage Tendering: Tenderers are shortlisted by the client & the consultant, and the bids will be obtained from the selected tenderers only. The adequate number of bidders maybe eight.
Advantages of Single Stage Tendering
- Bids will be received only from capable contractors.
- Savings on time & tendering costs
Disadvantages of Single Stage Tendering
- Due to less competition comparatively to open tendering
- Three are no opportunities for new capable contractors.
Two-Stage Tendering: In the first stage, suitable contractors will be selected by evaluating their pre-qualification parameters (Past Experience, Strength of Resources, Financial Capabilities, etc..). In the second stage, negations will be carried out with the selected contractors and finalize the contractor, who is getting the award of the contract.
Following documents will be examined in the first stage,
- Schedule of rates for main items
- Detailed preliminary breakups
- Construction program with resources & method statements
- Percentage of overheads & profit.
- Basic rates of primary resources (Material, Labour, and Plant)
- Past qualification details
- Past finance details
In this tendering type, a series of negotiations and awards taking place with the project timeline. These types of serial tenders are used for large & complex nature projects where there are many phases of constructions involve.
As the initiation, first phase designs & specifications are completed. Based on those details, the contractor for the first phase is selected. This first selection will be made according to selective competitive tendering & negotiations following the tendering process.
While the constructions of the first phase are progressing on the designs & specifications of the other phases will be completed. Then the negations are carried out to select the contractors for these extended phases. Since there is a selected contractor for the first phase, negations will be started with the same first phase contractor first. Depending on the success or failures of these negotiations, other contractors may become involved or not for the negotiations.
Since the first contractor is already mobilized to the site, he can offer a good competitive offer at the negotiations, and the client can have some savings on mobilization costs.
Disadvantages of Serial Tendering
- The client may lose competitiveness in the tendering.
- High markups may add to the extended phases.
In this tendering method, the employer is directly inviting one or two contractors of his choice to offer their bids, and the negations will be carried out base on these bids. Most often, this method will be used for specialized works, refurbishment work, or extension projects. In a negotiated project, there is a good opportunity to be satisfied for both parties because negotiation is carried out base on the previous satisfactory working experience & the relationship.
Advantages of Negotiations
- The client has an excellent opportunity to get a good comfortable price.
- Time-saving is there since this not require a lengthy tender process.
Disadvantages of Negotiations
- Not suitable for all types of clients, especially for the public sector.
- Limitation to the newcomers.
- Favoritism is highly entertained.
- The contractor has a significant chance of manipulating market prices.
Nominated Tendering is also mainly used for specialized works, refurbishment or extension works. Most of the time, contractors could offer high prices since there is no competition at all. But the control will take on the invitation will be base on the excellent relationship between the contractor & the client.
Read more about Tendering Process in The Construction Industry.