What Are The Main Types Of Construction Bids?
The bidding process for construction projects, sometimes referred to as tendering, involves contractors presenting their proposals to bag the job for their company. But what are the main types of construction bids?
There are three main contract bidding methods: open tendering, selective tendering, and negotiated tendering. Each has its own unique elements, benefits, and drawbacks, which we’re going to break down in this article.
Now, let’s proceed with the main types of construction tenders.
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Open tendering is when a project owner allows all qualified contractors to bid on the job, hence why it has the word “open” because it’s open for all parties.
The bid package is made public to all interested parties through various advertising forms, and any interested contractor can place an offer before the deadline once they have submitted a Request For Qualification.
Open tenders are more of a competitive form of contractor bidding since it’s so easy to apply, usually benefiting the project owner because of the volume of bids submitted; they can pick the most affordable option.
Benefits Of Open Tendering
- Cheap for the project owner.
- Better chance of finding the right contractor for the job.
- Healthy competition that wants to bid for contract work.
- Minimizes the potential for bias.
Drawbacks Of Open Tendering
- It takes time to go through all the applications.
- Involves a lot of resources.
Selective Tendering, on the other hand, is more of a hand-picked model that some project owners prefer to use. It’s where only a select number of contractors are asked to submit their bids rather than opening it up to everyone. This method is mainly used for private projects.
Usually, only a small number of contractors will be invited for construction bidding based on their experience and qualifications, and the process is done in confidentiality to avoid information spreading to other bidders and potential competitors.
The downside to Selective Tendering is that it can get pretty expensive because the pool of bids usually isn’t as big as it would be for Open Tendering.
Benefits Of Selective Tendering
- Guaranteed bids from highly qualified contractors.
- It saves time because there aren’t as many bids.
- Reduced chance of disputes.
Drawbacks Of Selective Tendering
- It can be expensive because there’s less competition bidding for a tender.
- Risk of excluding valuable contractors.
The negotiated tender process is when the job owner engages with one select contractor rather than opening the project up for multiple parties to get involved in.
You’ll often see this method being adopted for more complicated jobs that require contractors with specific skills and tick the box for a range of specifications.
The negotiated tendering construction bidding process can be hugely beneficial for project owners who are very particular about how they want the job carried out. They can iron out every aspect with the contractor and negotiate all of the fine details rather than spending time choosing from a massive pool of candidates and rushing the procedure.
Benefits Of Negotiated Tendering
- Suited towards job owners with complex projects.
- The procurement process is sped up compared to other complex bidding methods.
- There’s more room for negotiating a cheaper price.
Drawbacks Of Negotiated Tendering
- The negotiations can cause delays.
- Risk of becoming dependent on a small number of suppliers.
Which Tender And Bidding Types Are Right For Your Project?
Every project is different and requires different types of bidding from contractors.
You should ask yourself the following questions before requesting a tender for your construction job.
- How complex is your project?
- What’s the turnaround time for the project?
- What’s your budget?
- Are there any risks associated with the job?
- Do you prefer affordability or quality?
- What are your goals for this project?
After you’ve established your answers to these questions, you should have a better idea of the different types of construction bids you’ll need to use for the project to succeed.
A Final Note On Tender Types For Construction Projects
Selecting the right form of bidding is crucial for a job owner’s success. If the right method isn’t chosen, the end result might not turn out how they wanted it to.
Before you take the next step, have a good look at the examples of construction tenders and bids we have listed, analyze them, and ask yourself the questions mentioned above to guarantee the right outcome.
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