24.03.2021

Why two-stage tendering is the way forward; a contractor’s perspective

Neil Conlon, Framework Manager for Framework Partner, Conlon Construction, spoke to us on why two stage tendering is the way forward…

I have recently completed a 2 year stint as the Chair of North West Construction Hub’s Commercial and Procurement Special Interest Group. During this time we have covered many topics but most recently we have been discussing the merits of 2 Stage Procurement.

Here at Conlon we have been actively involved in collaborative framework partnerships since 2000. We have been successfully selected to participate in 16 different frameworks in this time, all of which have utilised 2 stage procurement. We are currently active on the present iterations of NWCH Low, Medium and High Frameworks.

There are pros and cons to the 2 stage approach. We believe, and can demonstrate, that 2 stage has many more benefits for the client, PM, stakeholders, supply chain and contractors.

Let’s get the ‘cons’ out of the way first.

Some Clients and PMs have had bad experiences of the process, claiming inflated pricing and budget deficits. They also claim that the second stage can be prolonged as the budget is agreed and the inevitable ‘Value Engineering’ takes place. If we are to be honest here, not every 2 stage bid has gone according to plan and some clients have had their fingers burnt by the less ‘considerate’ contractors amongst us, experiencing inflated prices and delayed programmes. I think my defence to the above negatives would be that under the same circumstances, using a single stage, competitive route, the same outcomes would occur but with the potential to be magnified.

A competitive tender will always drive the price down, often artificially, with heavily ‘conditioned’ submissions, creating the potential for friction, an environment for claims and a post tender upwards pressure on the price. There is rarely time within a competitive tender period to fully investigate all elements of each work package to give a truly comprehensive price. Our suppliers cannot fully commit resources to a project where they have a 1 in 5 chance of receiving an order. The information during the tender period is often still in flux, anywhere between RIBA 2 and 4, preventing an accurate price from being provided. If the tender is D&B, the contractor and suppliers need to add additional cost to cover the risk of undeveloped elements of the design.

In our experience, over the last 20 years, we have found that the 2 stage process allows us to get involved earlier. The first stage being a Mini Competition with a quick turnaround and limited drain on our resources. Once we are on board we can fully commit our project team, design managers and key suppliers to assist in completing the design, de-risking the project, developing a robust programme and providing a reliable budget that includes client aspirations. I can say with confidence that over those 20 years we have delivered 95% of our partnered, 2 stage projects, on time and within budget.

The key to a successful 2 stage procurement process is a commitment to true collaboration from both parties from the very outset. This is engrained within the NWCH in particular through their use of Collaborative Special Interest Groups where all contractors combine their resources and knowledge of best practice to enhance the Delivery Process and ensure we have a delighted client.

Having said all of the above, we still participate in competitive single stage tenders but we pick our fights and are very selective as to which tenders we chose to participate in. This decision is often based on the quality of the documents, our relationship with the project team & client and an internal assessment of our ability to win based on the competition.

Competitive procurement has its place and this includes 2 stage procurement (we still have to win the first stage!). The difference between ‘single stage’ and ‘two stage’ in my opinion is the collaborative, non-adversarial approach of the 2 stage system which definitely benefits the client.

 

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