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National Construction Contracts and Law Survey 2013

National Construction Contracts and Law Survey 2013

 

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Contracts and Law

Tendering for construction projects
 

Tendering is the process by which bids are invited from interested contractors to carry out specific packages of construction work. It should adopt and observe the key values of fairness, clarity, simplicity and accountability, as well as reinforce the idea that the apportionment of risk to the party best placed to assess and manage it is fundamental to the success of a project.

When organisations or individuals wish to have a new facility, or carry out refurbishment or maintenance of an existing facility, they will be involved in some form of procurement. There are a variety of different methods for procuring this new facility, not all of which involve construction as a solution. A complete new building may be purchased, for example, or existing space may be leased. It is assumed, therefore, that later parts of this article will only apply once the decision has been taken – and recorded – to proceed with the construction option.

The two most commonly used methods of tendering are single-stage selective tendering or two-stage selective tendering. Both involve the invitation of tenders from firms on a pre-approved or ad hoc list, chosen because they meet certain minimum standards in general criteria such as financial standing, experience, capability and competence. The competition element of the tender is provided on the basis of price and quality. The main difference between the two is that in the two-stage process, the contractor becomes involved in the planning of the project at an earlier stage, so the tenders are submitted on the basis of minimal information, and in the second stage the employer's team will develop the precise specification in conjunction with the preferred tenderer. This method is favoured in more complex projects, where the contractor may have significant design input.

This article is concerned with the activities involved in single-stage selective tendering in the UK, although there are also other methodologies. The processes concentrate mainly on the use of hard-copy documents, but can be used with electronic or online methods, where they are compatible with legislative requirements. Indeed, some of the timescales prescribed by European procurement legislation may be shortened if electronic communications are used. While it is specifically directed at the activities associated with the management of stages F, G and H (Preconstruction) in the RIBA architects' plan of work, it is expected that the principles will extend beyond that scope.

It is worth remembering that every activity in the tendering process has a time and cost implication. It makes economic sense, therefore, not to overburden the participants with unnecessary information requirements, and to concentrate on those which are relevant to the work which is to be undertaken. Faced with competing financial pressures, most contractors will carry out their own assessment of the jobs they wish to tender for, and will be less inclined to bid for those where the procedures involved are perceived as overly complicated or onerous. Also, since preparation costs are included in their overheads, these will ultimately be passed on, in the form of higher prices. Preparation of this information will also be reflected in higher consultancy costs for the employer's team.

The principle of tendering is to ensure that true competition is achieved, as it is evaluated by applying certain criteria. These criteria may be expressed in terms of financial matters, comprising a simple assessment relating to tender sums, or more complex financial evaluation, including consideration of projected costs over the life cycle of the completed project. It could also address other non-financial factors such as time and proposed methods or levels of capability; or sometimes a mixture of both – collectively referred to as a 'quality/price balance' or 'matrix'.

European legislation describes this concept as the assessment of the most 'economically advantageous' option. In order for this to be achieved, however, each tenderer should be able to bid on an equal basis, meaning that they must receive the same information – and most importantly that this information should be sufficient in content and accuracy to allow them to properly assess the implications and bid accordingly.

In the public sector, failure to follow fair and transparent procedures can lead to automatic challenges to a subsequent contract. This may result in damages, or the contract being set aside, or both. While this may not apply equally in the private sector, it is sensible to adhere to these principles, if only to make the process itself easier to follow.

It is important to ensure in any event that any discussions which take place are conducted fairly and recorded accurately. The Fraud Act 2006 defines a number of activities which can be described as fraud, while the Bribery Act 2010 can penalise a company whose employees engage in bribery, if the company does not have adequate procedures in place to prevent it.

Adapted from NBS Guide to Tendering: for construction projects by Roland Finch, RIBA Publishing, February 2011

This much-needed short guide replaces the withdrawn NJCC codes of procedure. It sets down a procedure for managing tenders for construction work based on up-to-date legislation.

Written in a plain-English style, it explains the transparent procedures that will allow you to avoid problems down the line. Based on the Public Contracts Regulations, it incorporates guidance from the market-leading NBS Building software and includes a worked example.

Relevant to all projects and aimed at clients, architects, surveyors, designers, engineers, project managers, this important guide will allow you to adopt the key values of fairness, clarity, simplicity and accountability. It also aligns with the principles of sustainable development which require the fair, ethical and transparent treatment of suppliers and the supply chain.

To order a copy of this book, please visit RIBA Bookshops.

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March 2011

 

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