In the UK construction sector, project owners or buyers need a tendering process in order to identify and choose suitable suppliers to carry out and deliver to an outlined scope of work.
Tendering for construction projects is generally standard practice across the public sector, but is also commonplace on large private sector projects too. But regardless of the sector it’s important to note that, like with any tendering process, it’s crucial that the selection criteria is the same for every supplier wanting to bid on the work.
There are several different types of tendering in construction that are used in the UK, and in this guide, we explore the most common of these and their various pros and cons - all to help buyers make an informed decision about their tender process for their next construction project.
Jump to:
- Why are there different types of tendering in construction in the UK?
- Open tendering
- Selective tendering
- Negotiated tendering
- How Procurement Hub can transform your tendering process
Why are there different types of tendering in construction in the UK?
Tendering is just one part of the process of procurement in construction. There are so many options when it comes to construction tendering in the UK because one process doesn’t fit all projects. When you’re embarking on a construction project, it’s often the nature of the specific contract that helps to determine the best tendering route.
For example, a public sector project that involves construction development in a specific geographical area and community can often benefit from a tendering process that invites bids from local contractors, making it a great opportunity for emerging local businesses and those branching out into offering more works and services.
The other side of the coin is that a construction project requiring a very specialist approach, due to complexities in design, location or type, will need a different tendering route to ensure that the supplier awarded the contract has the capability and experience to deliver on it.
We’ve outlined the UK’s three most common types of tendering in construction below.
Open tendering
The name is a big clue, but essentially anyone can submit a tender in response to the buyer’s invitation when using the open tendering model.
The project opportunity details are advertised publicly, and any interested contractors can submit a bid. In some circumstances, contractors may need to be pre-qualified before they can respond to an open tender, to make sure that they meet the basic requirements of the project before they can enter the fray.
The advantages of open tendering
● Accessibility and Diversity – Open tendering enables interested contractors to enter a bid even if they are fairly new to the market, giving businesses of all sizes and backgrounds the chance to compete for the contracted work.
● Transparency – Open tendering is a process that is mainly carried out in public, with the documents being available to anyone. This helps to reduce the chances of any unfair practices and promotes fairness.
The disadvantages of open tendering
● Time-consuming – Open tendering can be very time consuming for buyers, especially if a large number of bids are returned, as they often are for high-value or high-profile projects. This can sometimes even delay the whole project timeline.
● High admin burden – Open tendering can often attract numerous bids, which can add administrative strain for the buyers to effectively manage and evaluate them all.
● Attracting unsuitable bids – Open tendering can sometimes attract unrealistic bids from contractors who don’t have the experience, skills or expertise to actually fulfil the contract.
● Focus on low cost – Open tendering can sometimes focus on the contractors offering the lowest costs to deliver the project. If this means the appointed contractor has to cut corners to deliver or cannot stay within the budget and still deliver the quality of work needed, the project as a whole can suffer.
Selective tendering
Selective tendering is where the buyer will choose a shortlist of contractors to respond to the tender in full. This means that suppliers need an invitation before they can bid on the work. This type of tendering is most often used for specialist or very complex projects when only a limited number of contractors would be suitable to take on the work.
The advantages of selective tendering
● Contractors are pre-qualified – Selective tendering means that only contractors that meet specific criteria and have been pre-selected can submit a bid for the work, so this helps ensure that all contractors on the shortlist have the skills and capabilities needed for the specific project.
● Quicker evaluation process – Selective tendering means a smaller number of participating contractors than with open tendering, so the evaluation process as a whole is usually much quicker and carries a lower administrative burden.
● Greater buyer control – Selective tendering gives the buyer enhanced control over the contractors bidding, based on things like their previous performance, financial stability and expertise in the particular niche required for this project.
The disadvantages of selective tendering
● Less competition – Selective tendering means that the potential bidding contractors are limited in number, which reduces the level of competition and can mean higher costs and fewer award options for the buyer.
● Less transparency – Selective tendering can be considered less transparent than open tendering, as the process isn’t as public as open tendering.
Negotiated tendering
Negotiated tendering is where just one supplier or contractor is pre-selected to bid for the work, and the two parties negotiate to reach an agreement about the project. This kind of process is most often used for highly complex construction projects, where a specialist approach by suppliers is needed.
Advantages of negotiated tendering
● Quicker decision-making – Negotiated tendering involves just one supplier, rather than several or many, so while some time is needed for negotiations to happen, it tends to be much quicker as a process than many other types of tendering.
● Expertise is predetermined – Negotiated tendering is often the chosen path when specific expertise is needed for the project to be successfully delivered. By pre-selecting the supplier, based on qualities such as their qualifications, past project delivery, specialisms etc, the buyer can guarantee that they are working with a capable contractor.
Disadvantages of negotiated tendering
● Lack of transparency – Negotiated tendering means that there is no competitive bidding process at all, with just one supplier being involved. This can leave the tendering process open to claims of favouritism or bias in the selection of that one supplier.
● Potentially higher costs – Without multiple suppliers competing for the contract, while there is room for negotiation on costs by design, this tendering route can mean higher costs for the buyer than if it were an open tender.
How Procurement Hub can transform your tendering process
We’ve established that there isn’t a one-size-fits-all solution for construction tendering, it can sometimes be challenging for public bodies to decide on the best route for a given project. This is where Procurement Hub can help. Our procurement solutions are designed to be flexible to the specific needs of the buyer and project, but also have a proven approach that delivers access to excellent suppliers and a high degree of transparency throughout the process.
Our experienced team can offer a range of tender support services to help you decide on the right path for your project and your bespoke requirements to deliver the best possible outcomes.
Let us help you find a procurement solution for your construction project.