- +91 9511117684
- sales@datamannet.com
Table of Contents
In the Union Budget 2024, the government has allocated 11.11 lakh crores to the infrastructure sector, 10 lakh crores to PM Awas Yojana 2.0 and 26000 crores to road connectivity projects. It clearly underlines the government’s focus towards the construction and infrastructure industry.
Infact, India is the third largest construction market in the world with an impressive 7–8% growth rate annually.
The projects in the construction industry are awarded through a transparent system that offers equal and fair opportunities to all contractors, real estate developers and construction companies. This system is well-known as tendering and a formal offer to submit bids for a specific project is called a tender.
There are various types of tender and choice of tender type significantly impacts the project’s outcome, affecting factors like cost, quality, and project timeline.
Let’s dive deeper into the tenders and different types of tender in construction. It will provide key insights for real estate developers, construction managers, project managers, and Real estate companies.
What is a Tender?
A tender is a formal offer or invitation from the eligible contractors or suppliers to submit bids in response to a request for proposal (RFP) issued by an government or any organization seeking to procure goods, services, or works. These bids are to be submitted within the given deadline. It is a written document that outlines the scope of work, specifications, and the proposed price for the project.
After careful evaluation of all the bids, the organization awards the project to deserving contractors. Generally, this process is put forward for large and complex projects.
What is Request for Proposal (RFT)
RFT and tender may seem similar and even sometimes it may get a little bit confusing to differentiate between them. However, if you understand both terms separately, it will be easier to understand.
A request for proposal (RFT) is a formal request or invitation from the contractors, suppliers or real estate developers to submit bids for the completion of a specific project. RFTs are issued by the governments or private organizations who have some work to be done, bidders are interested players to complete the work. In private firms, RFT is known as request for proposal (RFP).
The RFT comprises several key documents:
- Outlines the rules and procedures governing the tendering process and response submission.
- Specifies the format and content requirements for supplier responses, including schedules and necessary details.
- Clearly defines the goods and services required by the buyer.
- Establishes the methodology for assessing and comparing supplier responses.
- Details the legal terms and conditions of the contract to be awarded to the successful supplier.
Types of Tender in Construction Industry
Tenders can be classified based on various criteria, such as the number of bidders, the tendering process, and the contract type. Let’s explore the different types of tender in detail.
Open Tender
It is a principal tendering procedure which is accepted by both government as well as private sectors. The client or customer advertises the tender openly in newspapers, websites, digital media or on e-tendering platforms. The eligibility criteria is provided in the advertisement with some other important information like tender open date, closing date, how to apply etc.
Key Highlights of Open Tender
- An open invitation is extended to all eligible contractors to submit bids.
- Provides maximum competition and transparency.
- Suitable for standard projects with clear specifications.
- Can be time-consuming due to the evaluation of multiple bids.
Selective Tender
This type of tender was introduced to overcome the limitations of open tender. It is also seen as an alternative to open tender. The purpose of introducing selective tender is to increase the quality bids.
Key Highlights of Selective Tender
- A limited number of pre-qualified contractors are invited to bid.
- Ensures a higher level of expertise and reduces evaluation time.
- Ideal for complex or specialized projects.
- May limit competition and potentially increase costs.
Negotiated Tender
Negotiated tendering is prevalent in the engineering and construction industry due to the complex nature of projects that often require extensive pre- and post-contract collaboration.
Unlike traditional competitive bidding, negotiated tendering involves direct negotiations between the buyer and a selected supplier. This approach is particularly suited for intricate projects where close cooperation is essential to define project scope, terms, and deliverables.
Key Highlights of Negotiated Tender
- Direct negotiation with a selected contractor for complex or specialized projects.
- Faster process but less competitive.
Serial Tender
Serial tendering involves breaking down a project into distinct phases or packages. Contractors then submit bids for individual components, allowing for more manageable and phased project execution.
Turnkey Tender
A turnkey tender is a comprehensive contract where the supplier assumes full responsibility for a project, from initial design through construction and final commissioning. The client receives a fully operational project ready for immediate use.
E-Procurement
E-procurement is the digitalization of the procurement process, utilizing online platforms to manage all tender stages. This includes publishing tender notices, collecting bids, evaluating proposals, and awarding contracts. E-procurement can be applied to various tender types, including turnkey projects.
Single-Stage & Multi-Stage Tender
In single stage tender, all of the project information is provided upfront to the contractors and they submit a single bid. The process is faster but there is less flexibility for negotiations. This type of tender is suitable for projects with well-defined requirements.
In multi-stage tendering, initial pre-qualification is followed by a detailed tendering process for shortlisted contractors. The evaluation of proposals is better done as well as potential negotiations. This type of tender is ideal for complex projects with significant uncertainties.
Why Are Tenders Important?
Tenders are essential for several reasons:
- Fairness and Transparency: Tenders ensure a level playing field for contractors and other bidders. Furthermore, they also promote competition and prevent favouritism.
- Cost Control: Having bidding of multiple contractors, project owners can compare prices and select the most cost-effective option.
- Quality Assurance: Tenders allow for the evaluation of contractor capabilities, ensuring the selection of qualified contractors or real estate developers.
- Risk Management: By outlining project requirements clearly, tenders help mitigate risks for both the owner and the contractor.
Factors Affecting Tender Type Selection
The selection of a suitable tender type is a crucial decision influenced by several factors. Project complexity, for instance, necessitates selective or two-stage tenders for intricate undertakings.
Time constraints often favour expedited options like design and build or single-stage tenders. Budgetary limitations may lean towards open tenders or framework agreements. For high-risk projects, management contracts can be considered.
Finally, the owner’s level of construction expertise plays a role, with those less familiar with the process potentially opting for design and build contracts.
Also Read: Top 10 Construction Companies in India
Final Thoughts
Understanding the different types of tenders is crucial for successful project delivery in the construction industry. By carefully considering project requirements and selecting the appropriate tender type, real estate developers, construction managers, and project managers can optimize cost, quality, and project timeline.
25/16 Karachi Khana, Kanpur