Planning and Organization - Part 2 | How To Win a Construction Tender

Last Updated on March 22, 2024 by admin

Planning and Organization

Your chances of winning a tender will increase if you plan ahead. I am sure you are aware of that typical contractor who is always complaining about not getting jobs despite bidding for several projects each year. The problem may lie in lack of planning. Planning starts with your construction firm, it should not start with your bid. It involves structuring your organization and organizing your company staff, resources and information to meet the needs of tender preparation. The following are some of the things that you need to plan:

Role Planning

The CEO of a construction firm has to assign clear roles to administrative and professional teams to carry out the goals and objectives of the firm. In this regard, the owner of the company needs to create departments that deal with marketing, lead generation, human resources, purchasing, estimating, tendering and post-tender contract management.

Let us see how these departments contribute towards the objectives of the firm. The objective of a construction firm is to get jobs and secure tenders for the short and long-term survival of the firm:

Department of Marketing

Marketing should promote the company brand name in a positive light but marketing alone will not achieve this purpose. Whatever the company promises to deliver must be delivered. You need to stand out as a professional and people will give you the recognition you deserve. You are not a professional because you say you are or you think you are. People know what a professional is and they don’t need to be told. You will never know if somebody is a professional until you deal with them.

A professional is somebody who is educated and knowledgeable in their field of expertise. He or she knows how to solve problems, listens well to customer issues and above all he or she is very competent in their job. A professional company strives to please its customers with high quality services/products. They will deliver service on time, take blame for any shortcomings, allow for contingency plans and at all times they will deal honestly and transparently with the client. A professional knows that the purpose of his or her firm is to provide value to the client.

Good customer service is the best form of marketing that any company can ever do. What does this mean to a building contractor? Your reputation is derived from the quality of service you provide and how you treat your clients. Do you have a track record of poor workmanship, failing to meet building deadlines, poor credit rating, bankruptcy, problems with suppliers, inflating the contract price, frivolous claims and projects that were abandoned midway? If so then you will gain a bad reputation that is not good for your business.

On the other hand, if you provide quality, if you are reliable and competent, you will have clients tripping over to hire you. You will gain business that is too much to handle, you will grow faster and you may be forced to take selected clients based on a minimum project value.

Every project you take is a form of marketing. Your business markets itself with each client you take. Are you marketing yourself properly and positively? Remember that it’s the client who decides whether you are a doing a good job or not. Ultimately, your track record will be evaluated when you compete for a significant tender that is managed by a Professional Quantity Surveyor/ Estimator.

Department of Purchasing

The department of purchasing in your construction company is responsible for procuring machines, tools, plant and equipment. They are also responsible for getting quotes and buying building materials from suppliers. Historical purchase records from this department will be crucial in building a material price index over the past years and months. It is important to track price fluctuations as this information is needed in pricing a Tender Bill of Quantities and preparing bid documents. The purchasing department must maintain an updated database of prices and quotes, which will be needed by the Estimator to build new rates for tender submission.

Record keeping should be taken seriously. A lot of contractors don’t compile a database of historical purchases, they will discard the receipts as soon as they are done. When your new company begins operations, you should start keeping records, beginning with your first contract. Assuming the company has undertaken a lot of projects over the past five years, you will have sufficient in-house data to work out price adjustments and build your own price index, which is more reliable than external surveys.

I have seen contractors who have a hard time pricing their tender bills and filling in bid documents. Some of them have no idea what a BOQ rate entails. They will run around looking for somebody to price their Bills and often this person is an outsider who doesn’t have access to company information. These contractors don’t have any data to talk of. They don’t have a Professional Estimator in their employ and in most cases, they are not organized. Disorganized people don’t plan, and they get into problems when specific details are required from them. When you are filling in tender forms and pricing a BOQ, you should provide accurate and up-to-date information that is reflective of your company. This will allow you to get a profit margin that you planned. Outsiders don’t know about your company balance sheet and financial standing. They don’t know about your debts and liabilities. Any capital cost associated with securing and completing a building contract such as supplier credit, plant hire and bank loan interest rates, should be factored in your bid. Pricing a Bill just to clinch a contract or get the lowest price may put your company in financial problems and bankruptcy. You are tied by the contract to finish the building project at your tendered price even if you are making a loss.

Department of Lead Generation and Sales

Lead generation falls under the Department of Sales and Promotion. It focuses on strategies to convert a prospect into a client. Converting a prospect into a client depends on how your company is perceived. It depends on a number of things such as your marketing, reputation and sales strategy. If these three are bad, it will be very hard to get a client. You must work on your reputation and customer service before you think of generating millions of dollars in contracts.

In the case of tendering for a building project, you are trying to convince the owner (Tender Evaluator) to choose you among other bidders. Construction tenders can receive up to 20 bidders. A majority of them are eliminated through basic-level filtering. The most convincing bidders manage to pass through secondary filters. If you are eliminated at the basic level, it means you failed to grab the attention of the Tender Evaluator. It means your bid failed to meet the minimum requirements. The cause may be attributed to major issues such as an out-of-range tender value, poor bank rating, poor supplier credit rating, lack of experience, failure to submit compliance certificates for tax registration, business registration, social security, bank guarantee, collateral and other documentation.

Minor issues include poor presentation, incomplete details, a lot of arithmetic errors in your BOQ, wrong writing instruments, missing pages, incorrect copy, unoriginal copy, late submission, failure to attend preliminary site visit and unacceptable tender submission (i.e.fax, telex or email attachment).

If you wish to convince the Tender Evaluator, you must avoid the mistakes above. Find a qualified individual, someone who pays attention to detail – to proof-read your documents, bind your papers and present them in an orderly manner.

Department of Human Resources, Labor and Manpower

A construction company has permanent employees and contract workers who are hired during the course of a new project. Provided that the company has a record of labor costs of previous projects for the past years, it is possible for a Project Manager to determine the size of labor required for a specific project. In the absence of this information, it is difficult to work out the labor requirements, the Project Manager will have to rely on estimates derived from a program of work and project duration.

As a requirement for bidding preparedness, it is wise for a building contractor to keep a record of labor costs and man-hours for each project. This will be useful for future reference. The man-hours for all building trades including major works such as excavations, brickwork, concrete, steelwork, carpentry, flooring, tiling, plastering, painting, plumbing and drainage should be recorded.

Labor rates are required when pricing a Tender Bill of Quantities. You have to incorporate them in your overall bid rate, which includes the cost of material, supervision and profit. The all-in labor rate is assumed to cover all costs and overheads related to the administration and execution of the project. Who is on the payroll for your current projects? Who are your permanent workers and who have been hired for the duration of a project? The HR department, recruitment office, payroll office or whoever is responsible for hiring and paying people should be able to furnish this information including wage rates.

Using information from your company to build rates and price Tender Bills is a good practice that some contractors don’t realize. I have been approached by contractors who don’t know anything about their costs or internal rates just because they don’t keep data or simply because they are not aware of the importance of such data. I explain to them that you can’t just put any rate when pricing a Bill, you have to work out your costs and profit margin. You know your company better than anybody.

Department of Estimating and Tendering

This is a crucial department in any construction company. It is where cost estimates of new projects are made and sent to the client. These are clients who approach the firm directly for a building quotation. Unlike government and commercial projects, and depending on regional laws, private projects for residential building under a specific value can employ a contractor without going through the tender process. This is how most contractors get their first jobs, through direct clients. It is difficult to produce an accurate cost estimate if you don’t have a Quantity Surveyor or Estimator in your company.

Besides producing estimates for clients, this department is also responsible for the purchase, preparation and submission of tender documents. One of the Estimator’s major roles is pricing Tender Bills where multiple contractors are invited to place bids for proposed projects. It should be a company practice to keep a database of past projects and estimates for future reference. If the estimates are less than a year old, the rates can be used provided that the construction index has remained stable over that period. The first step is to use rates from the latest projects which are almost similar in nature, design and location.

Rates from the previous one or two years can be used but they have to be adjusted for price increases if any. Keeping a record of past project rates and estimates should not stop the Estimator from building up new rates based on inputs from the Purchasing and Human Resources departments.

The ideal set up is when these three departments (Estimating, Purchasing and HR) are integrated through a computer system which auto-updates a database of material costs, labor rates, plant/equipment hiring rates and other items. In order to update the values in the rate-build up system, the Estimator will simply need to connect to the database. That is one problem solved but since measurements, design, specifications and other situations will vary for each project, the Estimator will need to work on adjusting the formulas in the rate-build up.

Contract Management

When a tender is won, the selected contractor is required to attend a site handover meeting with the client’s representatives and other parties involved in the project. The client’s representatives are usually the project Architect or Engineer. The contractor’s Quantity Surveyor often acts as the representative of the construction firm in his or her role as the Project Manager. In projects that go through the tendering process, a Quantity Surveyor who works on behalf of the client is appointed. This QS will be in charge of tender evaluation and selection of contractors. The same consulting quantity surveyor ideally works with the client from the early stages of the project, producing cost estimates, doing plan takeoffs and preparing Bills of Quantities for tendering. The final Bill of Quantities is based on working drawings issued by the Architect in the pre-tender period. It contains a contract price based on market conditions and thus it is used as a basis for evaluating bids.

The client’s QS will manage the contractual, financial and cost aspects of the project until construction is finished. On each phase of the building project, the QS measures the work done for preparation of valuations and payment certificates. Payment is released when the Architect and QS are satisfied with the work done. If work is not done according to specifications, no payment is released.

It is the duty of a contractor’s QS to work with the client’s QS throughout the construction period. The contractor’s QS has to liaise and negotiate with the client’s QS in solving disputes related to measurements, Bills of Quantities,valuations,payments,claims, the final account and contract clauses. The contractor’s QS has the interests of the construction firm, and the client’s QS has the interests of the project owner.

Explaining the roles of various parties in a construction project is important because sometimes misunderstandings arise, people don’t understand their roles, they overstep their duties or assume responsibilities that are none of their business. When all is said and done, the client’s representatives (Architect, QS or Engineer) have authority over the project. They are the official and authorized Project Managers.