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The tender process is a tricky game to play, and the end result is that no one – not the consumers and not the participants – win.

Aside from the specific response detail, the biggest inclusion in the tender is the punt, be it a properly constructed bid by an experienced construction estimator (with circa 10 years of experience in the industry), or a ‘qualified offer’ put together by a bunch of inexperienced cost clerks (based on a collection of subbie prices, often without any guidance from the construction team or reference to the construction program).

Let’s look at what is often being sought in a typical ‘conforming bid’:

  1. Firm lump sum price
  2. Detailed trade breakdowns (an absolutely essential element required for analysis purposes, but not always feasible at close of tender, therefore should only be requested from the two or three lowest bidders)
  3. A ‘guaranteed’ completion date
  4. Contract conditions (which are often unreasonable)
  5. Schedule of rates
  6. Delay costs
  7. Management plans
  8. Details regarding trade contractors
  9. Names and experience of site personnel
  10. Financial details
  11. Insurance details
  12. References
  13. Previous projects
  14. OH&S Plans

It is recognised that items 1 to 4 are essential elements required to “play the game” (with contract conditions permitted to be qualified in initial bid, and then to be negotiated in the final contract agreement). The remaining items will undoubtedly have already been submitted as part of the pre-tender qualifications or expression of interest (EoI).

Typically as a totally free unpaid contribution to the principal’s feasibility, the tenderer is burdened with assessing and valuing many unidentified risks that any normal punter would not be required or expected to attempt in such a blind manner. These risks include - but are not limited to - assessing and allowing for all of the constructional risks, identifying sub-contractor insolvency, exclusions and qualifications often included within supply and trade contractor small print, latent conditions and site specific impediments, effects of the weather, the impost of industrial risks, the cost associated with securities/bank guarantees and above all complying with a maze of statutory compliance issues in  order to get a return out of a ‘successfully’ negotiated project. Hence the title of punter!

Imagine you are in a six-way competition committed to a three (maybe four) week bid period for a typical school project. The internal costs (excluding the cost of a shared BoQ) will be $12,000 to $15,000, and that’s not taking into consideration all the ‘freebies’ from the trade contractors. The total capital cost of such a tender will be as near as to damn $30,000, or one per cent of the actual construction cost. It's a lot of money to spend on what essentially amounts to a bet, but at least at the track you know the odds. In the construction industry, where you are often competing against someone’s ‘mistake’ and where there is no guarantee of winning the bid, we have become mute to this type of stupidity.

The second part of a tender is the compliance detail, which in today’s busy environment has largely been templated. However, it is rarely relevant to the specific tender, and therefore should effectively be deferred to the post-tender phase in order to make these accord more with realities associated with the actual bid, which can well strengthen the hand of the negotiator.

The purported value in the intellectual property component of the bid that usually comes in the form of trade breakdowns, technical data and names and experience of site personnel and trade contractors, will be far more accurate and therefore meaningful if sought as post-tender or pre-contract information. The current obligation (especially where there can only be one winner), will invariably be more relevant when it can be applied to a specific project, removing the contemptuous nature of this information which has been based on historical or past experience which does not apply to the bid in hand.

Inadequate pre-tender information can result in the wrong contractor being invited in the first instance, and too much or irrelevant information required with the actual bid can compromise the focus on the commercial response in addition to causing confusion for the assessment team. Insufficient scope for accurate information in the post-tender phase forces the tenderer to provide too much generic data, consequentially weakening the negotiators hand in reaching a fair and equitable outcome for all parties.

As the bid itself generally is only the instrument in getting to the award and has no formal contractual status, being only an offer to treat, the requirement for too much information with the actual bid has led both parties into the current serial abuse of the tender process.

This has resulted in the acceptance of sub-standard tender documents, which are then be exploited under Rule 345 of the builder's tender, as are many of the inequitable conditions foisted on the principal by bid managers seeking a single contract sum from a very complex process (which later opens the doors to variations, involving time and cost claims, and thereon unnecessary legal imposts). Equally, the practice of a heavily qualified bid and a reluctance of the builder to provide adequate assessable information has contributed to the abuse of the tender process.

When a builder is invited or is requested to provide a firm lump sum tender price for a project (generally from a project manager or professional consultant) he only appears to be undertaking a huge commitment in terms of intellectual property, his own resources, those of his trade contractors and suppliers, time and a perceived a monetary investment. In the end, no matter who wins the tender, there are numerous issues to be resolved prior to being accepted and then signed into a contractual agreement which can be enforceable in law.

Our interpretation of the Tender Process is so misunderstood (cruelly by both parties), that the majority of the players have for a long time referred to the process as a game. However, it is a game that has no captain, no coach, and ad hoc rules or guidelines, The ineffectiveness of this game is now so far out of control and the waste of time and money no longer represents value for the consumer, nor are there many positive benefits or advantages for the participants, be them the head contractor, sub-contractor, suppliers, consultants or the industry in general.

 
  • Indeed tendering has become a game. Game A – win the contract, and Game B – milk as much as possible from both sides of the equation, client and subbies. In the early 90's we had the "No Disputes" travelling circus that was to address intransigence in the industry, identifying the poor level of documentation and horrendous special contracts. Whatever advances were made following that have long regressed back into the quagmire.
    Many developers, including some institutional developers, are not particularly sophisticated in their understanding of procurement relying on onerous contracts to make up the shortfall in understanding. It is not at all surprising that contractor's estimators make mistakes that 'win' projects, some of these mistakes are starting to manifest themselves in today's market with the increasing number of contractor insolvencies. After all, the estimator is competing against a 'lawyered' up contract, poorly constructed tendering documents, and a restricted time period to submit a bid.
    Developers need to recognise that properly constituted tender documentation and 'pre-qualified' tenderer process sets up the mood of the construction. Chasing the lowest price at all costs does not engender a happy relationship through construction and often heightens the level of conflict from the get go. Select a well experienced project manager to help set up the required bespoke systems and procure the right level of documentation to achieve balanced outcomes.

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