Bid Solicitation and Contractual Formation
– Bid solicitation is the process of making construction data available to interested parties.
– It allows project owners to release project details to solicit contractor bids.
– Government entities and private plan rooms provide services for releasing project information.
– These services act as a gateway for project owners to reach a large group of contractors.
– Many of these services charge a subscription fee or a flat rate for project data.
– A subcontracting construction company can make its bid final and create a legally enforceable contract.
– Once the general contractor accepts the bid, the subcontractor cannot revoke its offer.
– The language in the bid or offer can impact the determination of whether further negotiations are intended.
– The bid can be seen as an option or unilateral agreement to enter into a contract upon acceptance.
– Courts consider the intent of the subcontractor when determining the enforceability of the bid.
Types of Project Delivery (Procurement Methods)
– Construction procurement methods can be divided into two categories.
– The traditional procurement route is the most common method.
– Lump-sum contracts, re-measurable contracts, and cost reimbursement are types of traditional procurement.
– The process involves an owner selecting an architect to prepare construction documents.
– General contractors place bids on the project, including subcontractor bids for each trade.
– Design & build and management contracting are popular alternative procurement routes.
– Design & build involves selecting contractors to submit design and commercial proposals together.
– Management contracting allows for greater collaboration and flexibility in the construction process.
– These alternative routes offer different approaches to project management and delivery.
– They can be chosen based on project requirements and owner preferences.
Methods of Tendering (Bidding)
– There are six types of tendering methods in the construction industry.
– Open tendering involves inviting tenders from any contractor interested in quoting.
– Single-stage selective tendering selects a few contractors based on experience or qualifications.
– Two-stage selective tendering involves pricing parameters and subsequent creation of drawings.
– Selective tendering for design and builds selects one or few contractors for design and commercial proposals.
– Negotiation is used for specialized works, with contractors submitting costs and negotiating prices before awarding.
Alternative Procurement Routes
– Design & build and management contracting are popular alternative procurement routes.
– Design & build involves selecting contractors to submit design and commercial proposals together.
– Management contracting allows for greater collaboration and flexibility in the construction process.
– These alternative routes offer different approaches to project management and delivery.
– They can be chosen based on project requirements and owner preferences.
Digital Procurement
– Digital procurement is an emerging method in the construction industry.
– Various websites and applications provide electronic bidding and tendering services.
– It allows for easier access to project information and streamlined communication.
– Digital procurement can enhance efficiency and transparency in the bidding process.
– It is becoming increasingly popular due to advancements in technology. Source: https://en.wikipedia.org/wiki/Construction_bidding
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Construction bidding is the process of submitting a proposal (tender) to undertake, or manage the undertaking of a construction project. The process starts with a cost estimate from blueprints and material take offs.
The tender is treated as an offer to do the work for a certain amount of money (firm price), or a certain amount of profit (cost reimbursement or cost plus). The tender, which is submitted by the competing firms, is generally based on a bill of quantities, a bill of approximate quantities or other specifications which enable the tenders to attain higher levels of accuracy, the statement of work.
For instance, a bill of quantities is a list of all the materials (and other work such as amount of excavation) of a project which have sufficient detail to obtain a realistic cost, or rate per described item of work/material. The tenders should not only show the unit cost per material/work, but should also if possible, break it down to labour, plant and material costs. In this way the individual who is selecting the tender will be quite confident that the tender is feasible. Bids are not only chosen on cost alone. Sometimes contractors submit lower tenders to win the contract and win the work. Either the costs that the contractor incurs are greater than the price he is charging the client (as a consequence of a lower tender determining the contract sum), and thus is likely to go insolvent, or he will claim for "loss and/or expense" due to discrepancies in the contract documents (this can be done deliberately). The lowest tender is not always a feasible tender. In addition to the bid number, the contractor must be technically qualified and carry liability insurance. The lowest tender is the most likely to increase the contract sum the most throughout the course of the project.
