This guide outlines what a construction tender is, the types of tenders that are readily available and where to find them. Also included is how you can register to be considered for tenders in your area, the systems used to send out tenders and return your quotes, and finally, best practices for preparing a quote/bid.
What is a construction tender?
For the purpose of construction, a tender is where a client or construction business will send out a project to a number of contractors and suppliers so as to receive bids on a construction project. This can be done privately and sent to a preferred list of contractors or it can be an open tender where any contractor who meets the tender criteria can submit a bid as well. Tenders come in all shapes and sizes, they can range from the trillion dollar government projects right down to a renovation of a house. The one thing they have in common is that the head contractor is looking to get the best company at the best price to undertake the task.
Types of construction tenders
Construction tenders take many forms and vary from government infrastructure projects to a renovation on a house. Here are the key differentiators:
The criteria for being able to apply for government tenders varies depending on where you are but in most cases if a project exceeds a certain dollar value it will need to go out to the public and ensure a fair and transparent process is adhered to. Public tenders awarded by government bodies such as local councils or state governments will vary in project size, they can range from billion dollar transport networks right down to thousand dollar pavement fix ups. Companies will need to register with the government body sending out the tender in order to be in with an opportunity to win the bid. The criteria at this level can be quite strict and the process for registering is long, however once you are registered and approved for these tenders it can be a lucrative and steady flow of work so it is worth the effort.
Tier 1 & 2 construction tenders
Construction tenders for Tier 1 & 2 contractors are generally granted based on two main criteria, the most cost effective and the most suitable contractor for the job. Price is often a deciding factor as commercial construction is mainly about profiting for the stakeholder. In order to get the best price available in the market, builders will often put their projects on open tender platforms such as Estimate one, Procore, Building Connected or Bidcontender. It is equally important to make sure that you have the capabilities to complete a job that you are tendering for. Be sure that you have the manpower and the financial reserve to complete the job while still paying all of your workers and maintaining your business. Top tier contractors will often ask for proof of this before awarding contracts to new contractors.
Tenders for small to medium contractors
The most abundant type of tenders are in the SME construction contractor sector. This can be residential buildings, commercial fit-outs and even small renovations. The tendering process is less rigorous at this level and can be awarded based on long standing relationships. Some architects work with certain builders as they are sure of the quality of work and same for builders and their own subcontractors. You can check in with a couple of places online to see if there are trade packages in your area. ConX has a B2B tender marketplace as well as HiPages where Trades can engage directly with the homeowner.
What is included in a tender package
Included in the tender package will be every available piece of information about the project. It is vital that the head contractor sends out all of the most relevant and up to date information for the project, as the tender will ultimately form a legal agreement. To avoid mistakes in the early stages from any stakeholders the most relevant information is required. In order to ensure everyone has the most relevant and up to date documents most builders will work with a tender management system which will reduce errors in the early stages of a project. Documents included in a tender can include:
- Architectural drawing
- Engineering drawings
- Legal Documents
- Town Planning Reports
- Soil Reports
Responding to a tender request
It is up to the contractor bidding on the tender to review carefully all documentation and submit a quote based on this. Having a good estimating system will benefit contracts as it will save time and allow you to complete and present your quote in a systematised way so you don't miss anything. When the tender documents are sent out to the market it is on the bidding companies to review the documents, compile a list of questions and submit a bid for the project. Writing a good bid/tender response is vital as it will determine whether or not you progress to the next round and ultimately be in with a chance to be awarded the contract. Things to include in
- Cover letter
- Company details including tax registration certificates and any other relevant information
- Itemised breakdown of costs
- Scheduled program of works.
Every construction tender will have a “quote-due-by date” and it is up to the individual contractors who are interested to submit their final bid by this date or run the risk of not being accepted. Once the head contractor has all of the bids from the subcontractors they can choose which is the best bid and award the contract based on this. Contracts typically are not awarded based on price alone and usually take into consideration a multitude of factors including past performance on projects, size of company and if they meet certain government standards, depending on what type of tender you are applying for.
Factors taken into consideration when awarding contracts -
- Relevant Experience
- Past Performance
- Team Capabilities
- Management Systems
Tenders are posted daily and whether you are looking for companies to do the job or looking to win additional work it is important to go through the appropriate channels and ensure you are set up correctly. By posting Projects in appropriate places and ensuring documentation is up to date you can connect and establish relationships with contractors.
Do your research and use a software that suits the needs of your company. In this digital age there is something for every company and by investing time to upskill, it will save you money in the long run.