WINNING A TENDER

HOW TO WIN A TENDER

Construction industry is always about winning a tender. There will be no business for contractor if they do not participate in any tender or quotation. However tender or quotation is only the first step for contractor to get their business running. The important point here is winning a quotation or tender.
How to win in a tender or quotation competition? Here we will discuss some of the most important point on how it shall be. Bellow are what really important for contractor to know and do.

1. Completeness of tender document.
   
   Make sure all instruction in the "INSTRUCTION TO TENDERER" being fulfilled such as all pages that need to be sign are already sign and all required supporting document being attached in. In other words completeness of the tender document.
   
    
2. Cash flow of the contractor.
   
   The cash flow normally being defines as how much the capital that a contractor have and ready to be utilised in the event that the contractor being award the project. Normally the available amount shall not less that by 5% of the tender sum. The capital can be combination of the cash in hand (Bank balance) and credit facilities (eg. Overdraft, project financing facilities from the bank, fixed deposit and ect.). How to know wether you have enough or not.
   
    
   Let say;
   Total tender sum = $ 100M.
   Construction period = 12 months
   Average prorated cash flow = $100/12mths = $8.34M
   
    
   Minimum Ready capital needed = $100M X 5% = $5.5M
   ( This minimum is because that in actual fact that normally in the first 3months the expenses for the project will be considerably low due to the reason that the first 3 months expenses could be only the preliminary expenses such as preparation for insurances, Bank guarantee, site office, and all office and accommodation required under the contract by client.)
   
    
   With reference to the above calculation contractor now can compare wether they have enough capital to win the project. For example:
   
    
   Available cash flow = bank balance + Fixed deposit + credit facilities.
   Say:            = $ 3M + $1M + $7M = $11M > $8.34M >$5.5M
   
    

• Contractor already passed the cash flow evaluation.

 

1. Construction period.
   In tendering contractor must never exceed the construction period required by client. One common mistake by contractor is never specified the duration they offered. This condition will cause them to be disqualified.

 

1. Contractor resources
   Resources can be categorised as follows:
   
   1. Plant and equipment.
   2. Machinery
   3. Man power
   All of the resources above must be as relevant as impossible to the nature of the project. For example in road construction, the plants that you will need are premix plant, soil test laboratory, Excavator, Dozer, Engineer, Site Supervisor, labour and ect.

 

1. Contractor current commitment.
   Contractor current commitment is define as current project that still progressing undertake by contractor. The more commitment the contractor have in hand the more slim chances that they have to win a tender. However, if the current commitments that they have are almost completed, there is a chance for them to win a tender. The only thing is that make sure that the current project report is ahead of schedule or on time. This is the factor that will contribute to the reputation of the contractor.

 

1. Previous Experience.
   Previous experience is defined as the project that had been completed by contractor. This Experience shall be as relevant as it be to the nature of tender that the contractor participating. The other factor to this is the size of the project. In this case the value of project is counted. Let say the tender price for this tender is $100M then the contractor experience must reach at least nearly $100M or more. With that, the client will be more comfortable to award the tender to the contractor who have completed the same nature of project and almost the same value or event more value from what he currently tendered for.

 

1. Tender Price.
   This tender price is the one that weighted most in the event that contractor already pas all the evaluation above. When it comes to this Factor there are a few item that will be considered. The Most important item is that the tender price shall not exceed the client budgeting price.
   The next issue is that it is in the range of what the market offer and the last but not least item is value of money.
   
    
   For instant if the client budget is $120M with the construction period of 12 months, the revenue collected when the project completed and in operation is $2M/mths.The recommended contractor have the following offer;
   
    

Tenderor no./Name	Offered tender price	Offered construction period	Ahead completion	Revenue
A	$100M	10 mths	2 Mths	$4M
B	$98M	12 mths	0mth	$0
C	110M	8 mths	4 Mths	$16M

 

Locking into the data above which one will be choose.

Lets do some analysis.

 

Take into account early completion :

Client will make extra 2M with contractor A after deduct $2M extra compare to contractor A and revenue of $4M in choosing Contractor C.

 

If I were the client, I will choose contractor C because after considering the expenses for this project do not exceed the project budget and in return, I will make extra $4M if I can operate this property earlier that planned.

 

This selection is what we called "Value for Money".

 
With the tips mentioned above contractor shall be able to secure another project under their cap.