Construction is one of the biggest business out there, and to understand the impact that it has in the economy, we just need to look at the United States, where it accounts for a whopping 4.3% of the annual GDP. But, whenever you see the many types of buildings crop up everywhere, do you ever wonder how construction companies get these projects? Are these projects just given them or do they have to do something special to get these? The answer to these questions is that construction companies most of the time get their project by bidding.
A construction bid is a process of submitting a proposal ( or tender) to undertake or manager the undertaking of a construction project. A construction bid can either by the public ( open for all), or private ( where the owner invites chosen contractors). The process usually starts off with a cost estimate from blueprints, and material takeoffs which are now typically done by using a construction bid estimating software. After all the bids are in, the client will select the best tender by looking either by looking at the price, contractor qualification or a combination of both. After a winner is selected, contract negotiations which include the payment method preferred, then construction will start.
From the outside, it looks like a pretty straightforward process- makes a quotation using a construction bid estimating software, and then wait until the owner chooses. But in reality, it’s not a straightforward process, before the bid, there is the construction bid clarification, and before the owner or client makes the choice, contract negotiations might take place. Let’s discuss these two things so we can understand what they are, and what effect they have on the construction bidding process.
Construction Bid Clarification
After the tender has been made using a commercial construction cost estimating software and submitted for evaluation, there might be instances that questions can come up regarding certain submitted bids that require clarification before the evaluation process can continue. This is where construction bid clarification comes into play. In a nutshell, it’s basically asking questions to make sure that all the parties involved are clear to what the project is asking for, so no misunderstanding will happen when the bidding process begins.
Depending on the nature of the question, the clarification may take place by telephone, email, in writing, or a face-to-face meeting. Whichever way the communication will take place, the clarification should be confirmed by writing and agreed on by both parties.
Usually, there are two instances when there is a need for bid clarification. The EU Procurement Regulations stipulate the following:
- Where the information submitted by the bidders appears to be incomplete or wrong, or where specific documents are missing contracting authorities may request the bidders concerned to submit, supplement, clarify or complete the relevant information or documentation within an appropriate time-limited, provided that such requests are made in full compliance with the principles of equal treatment and transparency.
- When an abnormally low bid is received, it should be checked and the background to the submission clarified before its rejected.
A bid clarification is not about improving one bidder’s submission against another. A bid clarification is about making sure everybody is on the same page and understand what the bidder is offering.
Construction Bid Negotiation
After all the bids have been submitted, the owner might choose one or two bids for contract bid negotiation.
Construction bid negotiation is defined as : “Negotiation after receipt of formal bids or tenders and before the letting of contract(s) with those companies submitting tender(s) offering the best value for money with a view to obtaining an improvement in content in circumstances which do not put the other tenderers at a disadvantage, distort competition or affect adversely trust in the competitive tendering process.”
The Office of Government Office has the following set of rules that should be followed when conducting a post-bid negotiation.
- Contract Bid Negotiation should not be used to conduct a ‘Dutch Action’ ( a method in which the price is reduced until a buyer is found) between bidders or to distort competition. It should be used only in moderation and only where there is an opportunity to lower prices and improve the other areas of the submissions.
- Contract Bid Negotiations should only be undertaken by one or at the most two bidders that are most qualified under the stated award criteria set
- Contract Bid Negotiation should include the Head of Procurement or a nominee and detailed preparations should take place before negotiations take place.
- In every contract bid negotiations, a detailed record should be meticulously kept of the whole contract bid negotiation process. This record will include the purpose of the contract bid negotiation as well as the details of the negotiations, and as well as the final outcome. These record will become part of the audit trail can be examined by an external and Internal Audit. These records can be made public if there is an official complaint from a disgruntled bidder.
Things to Remember In Bid Clarification and Negotiation Meetings
Whichever meeting you and your team find yourselves in, there are ways that you can thoroughly prepare so that you can come out of these meetings successfully.
- Read the agenda and make sure you know where the meeting is. These meetings will typically come with an agenda to make sure that all parties involved are aware of what will happen at these meetings. Read through the agenda, do your research and make sure that you are thoroughly prepared on whatever will happen.
It sounds very simple, but make sure that you know the date, the time, and the place of the meeting, as well as the relevant contact person and their details. Find out everything that you can about the venue as well as the name of the meeting room ( or room number ). You can never be too over prepared.
- Review your bid. Pull up your bid from the commercial construction estimating software that you are using and refresh yourself on the details of the tender that you submitted. Of course, this will not be the only project that your company will be bidding on, and it’s perfectly natural that you might have forgotten some of the details.
- If you are not the only one attending the meeting, make sure that everybody who is going is familiar with the project and the details. Also, make sure that they can add value to the discussion. If you are with people who are unfamiliar with the project ( like senior executives, higher-ups ) make sure that they understand the risks and restrictions of the project so that they can refrain from making comments and promises that can compromise the project.
- If you are using a construction bidding software, print out a copy of the tender submission which is filed has calculations, includes post-tender correspondence, and numbered correctly because nothing makes you more unprofessional than being asked a question and having to page look thru file after file.