Delivering projects on programme, to budget, and to the right level of quality are the three fundamental aims of the majority of construction works, and getting the tender process right is a key step in achieving this.
The construction market in the UK has become increasingly active in recent months. Whereas a year ago it was relatively easy to achieve a tender list of suitable contractors hungry for work and keen to tender, many contractors and sub-contractors are now finding themselves with enough opportunities to be able to pick and choose the projects they wish to tender.
Because of this, it is becoming more and more important to make tendering opportunities as attractive to contractors as possible. This includes engaging with the market earlier to make potential bidders aware of the project; reducing the size of tender shortlists (for example tendering a project to five instead of six contractors – although this is obviously dependent upon how desirable the project is to the market); and ensuring that design information is of a high enough quality to make tendering as straightforward as possible.
It is also important to ensure a degree of similarity between tenderers. On a £500,000 construction contract for example, a contractor turning over more than £200 million per year may not be able to compete on price with a much smaller “local” contractor with lower overheads. Given the amount of work in the market, it is important not to waste contractors’ time by asking them to price a tender when they are unlikely to be competitive. A particular contractor should also never be included on a tender list purely to guarantee a certain number of tender returns.
The fundamental principles of scoring tenders are fairness, transparency and equal treatment, and these must be applied to the process regardless of which procurement route is selected.
In the public sector and under the Publics Contracts Regulations 2006 (as amended) (the “Regulations”), tenders for works contracts are generally awarded on the basis of the Most Economically Advantageous Tender (MEAT). This is where the tenders are assessed using a predetermined criteria for quality and price. This is then converted into percentages in accordance with pre-set weightings to create a combined score that identifies a “winning” tenderer.
The cost/quality split is project specific, and the key drivers for the project in terms of time, cost and quality should be carefully considered in determining this split. If the works are relatively straightforward and the project team is confident, the tenderers will be able to successfully deliver the required programme, quality, and approach to the works, the cost becomes a key differential and the price criteria will generally be weighted higher. If the project requirements include a particularly tight programme, difficult site constraints, complex construction, or a particularly high standard of finish, these factors push the balance in favour of quality over cost.
Getting this balance right is key, as is selecting appropriate quality criteria to score against. It is also important to thoroughly test the scoring model. If a tenderer scores nil for a key criteria but high marks for other areas, could they still win the contract despite not being able to deliver an aspect of it? If so, the weightings should be adjusted until this is no longer a possibility, or that element marked as pass/fail.
There are various methods of assessing price score. Most commonly, the lowest priced compliant tender is awarded full marks for price, with the other tenders awarded a lower mark based on the percentage difference from their bid to the lowest tender. Ensuring the tenders are all compliant is obviously particularly important when doing this, so as not to give a particular tenderer an unfair advantage. An abnormally low tender price should also be reviewed in detail, as even if this bid fails to win overall due to the qualitative scoring, it will skew the tender scoring of the other bids. If justifiable, rejection of an abnormally low bid should be considered. In the public sector, the new draft procurement regulations propose making interrogation of abnormally low bids by the contracting authority mandatory.
The above scoring model should make it relatively straightforward to provide feedback to contractors. In public sector procurements, providing feedback is an obligation under the Regulations (contracting authorities should provide to all bidders the reasons for the decision, including the characteristics and relative advantages of the successful tender and the relevant scores), but it is also good practice to offer to do this in the private sector as well, given the tenderer will have put time and money into producing their bid.
Challenges to tender awards are rarely welcomed by clients due to the associated costs and delays this can cause to projects. Given this, and the current upturn in the construction market, it is more important than ever before to demonstrate fairness, transparency and equal treatment in tendering, as well as to foster good relationships with those contractors who are keen to work with you and your clients.
Tom Francis is a senior project surveyor (cost management) at Aecom and can be contacted on Tom.Francis@aecom.com.