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Construction projects – part 9 - Tendering



Financial resource

The aim of the tendering phase is to appoint a contractor to carry out the site construction work.

The client via the Project Manager will wish to appoint a contractor to carry out the construction.

In some instances, this may mean allowing anyone to put in a tender for the work, provided they have the financial background to purchase the tender documents.

The tender documents should comply with organizational, project and legal requirements via tender procedures.
All queries from potential contractors should be dealt with promptly, as should any areas requiring clarification via these procedures.

Size / resource

The company should be of a size and resource that meets the scale of the work and allows due consideration of health and safety aspects.

Prequalification

In order to assess only viable contractors a system of prequalification can be used.
The client and Project Manager will make sure that only those contractors that meet certain criteria will apply for the tender.

Experience and integrity

Experience in the area of construction and the integrity of the company are key issues.
In addition, one would consider the price and might consider also the company’s location, their current work loading, proposed time scale, compliance to technical and regulatory issues and quality assurance.

Central Tender Board

Potential contractors will be assessed via a selection panel according to predetermined criteria (compare with those referred to above).
The criteria should be well communicated with the potential contractors together with the procedure used.

The reasons for any invalid bids should be clear and recorded.
Notification to successful contractors should be according to the agreed procedures and legal requirements.

Procedure for bid selection should cover:

  • Opening of the tenders
  • Selection panel composition
  • Bid selection criteria
  • Confidentiality of information
  • Any presentations by potential contractors
  • Questions by potential contractors
  • Methods for ranking the bids
  • Options when no bids are acceptable
  • Decision mechanism
  • Communication with the potential contractors after the selection process has ended

Some sort of analysis and summary of the bids for the selection panel should be prepared.

Applications for tender may be assessed via a central Tender Board (e.g. for government contracts).

Standard forms

The central Tender Board will require the use of standard forms. These have distinct advantages:

  • Their content is more widely understood
  • Wording makes interpretation and enforcement easier
  • They may have been developed through legal challenge
  • Preparation of new forms can cost time and money

In the case of government contracts the Project Manager is unlikely to sit on the board but would be required to provide the necessary information.

The Project Manager should be prepared to challenge any timelines that a contractor puts forward.

Acceptance of any bids may be with suitable qualification e.g. subject to improvement / further information / changes in specification / changes in contract terms etc.

Should a legal challenge to the bid process be made the Project manager should have a suitable procedure in place to cover this.

Negotiation

Once bids are examined there is usually scope for negotiation. You should consider the following when negotiating:

  • Prepare a clearly defined agreed objective and scope
  • You need to think about the proposed changes you are seeking and their effect on project outcomes
  • What authority does the Project Manager have with regard to making decisions for changes? Record these
  • Check that the period for negotiation allows time for additional consideration for both parties that will not compromise the project
  • The negotiations are carried out in good faith and maintain friendly relations

Remember that you are looking for a ‘win / win’ situation.
When there is disagreement make sure that the areas are clearly recorded with any outstanding actions that minimise project impact.
This may include:

  • Repeating the tender
  • Continue to negotiate at a more senior management level either in your own organization or the contractor’s
  • Accept the position achieved so far
  • Abandon the project
  • Change the project specification or programme
  • Change the criteria for acceptance

Areas for negotiation may include:

  • Risk areas (commercial, health and safety, environment, project or financial)
  • Price / performance / time / quality / scope
  • Information supplied (quality, content and lack of)
  • Methods used to carry out the programme
  • Resources (personnel, equipment, facilities and finance)
  • Benefits to both sides
  • Conditions applied by the contractor or client

Negotiation may take place face to face at a meeting or by telephone or by letter or electronic mail depending on the depth of areas to negotiate.
The Project Manager may wish to use or take the advice of a specialist negotiator who may provide a neutral view as well as being experienced in the particular area or use a third person as an intermediary.

Clearly, before entering into any negotiation the Project Manager should discuss the matter with the client to clarify the limits of his negotiating powers.

Contract

The final contract will cover many areas requiring agreement.
Some of those may well include:

  • Technical specifications of the product
  • The programme and schedule (including start and finish times)
  • Legal and statutory requirements
  • Standards
  • Quality assurance
  • Finance
  • Insurance
  • Liabilities
  • Procedures to be used
  • Reporting requirements

Before the contract starts the Project Manager will need to make sure that certain information is in place, for example, specifications, contact points, access and security requirements, statutory and regulatory requirements, nominated contractors and suppliers, and contract administration and information.

The Project Manager should also be aware of the potential for breach of contract and have a suitable procedure in place.
You might need to try to recover losses due to poor contractor performance.

Non - PRINCE2 information