The key to the success of many contractors is their tendering performance and the way they act with the bidding invites. It means that many construction companies can both benefit or fail with their tender possibilities in the present-day market.
Each contractor selects the best-matching tendering method to achieve all the required objectives and get desired profit. For example, there are three types of companies’ behavior when it comes to the tender. It is possible to start with the project bidding software or other digital tools to pick sides with correct estimates.
But in general, all these three types of tendering methods are applied the same way. Let’s take a closer look at them to understand which one suits your business goals better. This way, you can also increase the profitability of the project and sign a contract that meets all your objectives.
3 Types of the Tendering Methods in 2024
Most contractors limit the range of available tendering methods to three of the most popular and efficient ones. They are open, selective, and negotiated tender approaches. Some contractor estimating software already obtains algorithms and templates to implement these methods automatically when it comes to estimates and bidding invites.
Open Tendering
What is an open tender? Let’s clarify the terms and requirements for interested contractors. One of the stated conditions is a deposit that is returned upon successful completion of the tender, so just indicate the price, without even calculating your future profits. However, it can be said that this method consumes contractors’ resources, as many people spend time preparing tenders in vain.
When the client usually chooses a lower price, there is a range of risks of not receiving the required quality and successful implementation of the project conditions. It happens because the bidders incorrectly studied the documentation.
Although the customer can check the experience and proper conditions of the participants and, if necessary, reject the tender. This can lead to a worse scenario than they expected.
Selective Tendering
The client arranges selective tenders to choose the best participants. The latter, in turn, have the opportunity to prepare properly, as they are provided with a list of mandatory documents and working conditions. The customer then chooses the best. Although, it becomes very difficult for contractors to offer:
- good terms;
- the lowest prices;
- competitive agreement items.
Additionally, the building company may face a financial crisis or, conversely, its business may go up significantly. The contractor simply does not have enough qualified staff to work with the client further. Therefore, neither the tender procedure nor the declared technical and financial capabilities can guarantee its successful completion.
Negotiated Tendering
The customer receives contract proposals from the tender applicants, inviting the contractor of his/her choice to provide the price of the project. This usually applies to professional work, regardless of whether specific equipment is needed as an extension of existing work or further work after a previous contract. All the offers according to the construction contract are sometimes used when deadlines are short or when urgent work is needed.
It is likely that an agreed proposal will be satisfactory, as it is usually based on the previous joint work of the employer and the contractor. When a building company is invited to bid, it submits the price. If any questions arise between agreement parties, they discuss them and usually resolve them without difficulty.
In this way, pricing errors can be reduced so that both engineers and contractors advising the employer are confident that the work needs to be done on a budget if there are no unforeseen problems. That is why the last tendering method mentioned above is the most risk-free and beneficial for both parties of the contract.
