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Tender advice

Posted on Oct 10, 2013

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CymonDuring recent months a number of people have come to me to gain an insight into the tendering process and how to go about validating the contractor provided to you by your insurance company.

The first thing is to understand the procurement process. You have selected your designer, you have your plans and now you need a builder.

You have two options. You can go down the competitive process or you can undergo a negotiated process – the second of which I recommend every time.

The competitive process allows you to know simply which construction team can complete the job based on a submitted higher price. Usually, there is no disclosure around how they have arrived at the end result; the focus is on end cost only.

Like when selecting your designer, the selection of your builder is a key step in the construction or renovation of your home and one that is essential to get right. You need to be able to communicate openly, clearly and honestly with your builder and establish a relationship that is based on trust.

By selecting a builder on price alone, you may be left in the dark as to whether they are able to deliver the project on time, to the quality you desire and above all, whether they are the right fit.

It is for this reason that we find many homeowners opt for a negotiated process. The first step of this process sees the project opened for registrations of interest. As a homeowner you might have a builder you would like to ask to tender for the project, or you may rely on your designer to ask for expressions of interest from contractors they are familiar with.

Once expressions of interest have been received, we are able to gather information that is essential to the end decision – what is their availability, what qualifications do they have, can they illustrate a proven track record and so forth.

These are questions which allow you to build an understanding of their capabilities, practice and ethics, offering you a sound base from which you can determine whether there will be compatibility when it comes to the relationship.

If at any point there is a bad feeling, don’t work with them! From the pool of registrations we normally select around three for our client to meet with the ultimate goal of selecting a single contractor prior to calling for their price.

Stage two of the process sees steps put in place that drive out a fixed cost from the contractor. Essentially, at this point, the end result is the same as the competitive process being a fixed price, but the way in which we arrive there is more transparent.

We will ask the contractors to present the best tender in their terms, with secondary pricing behind every subcontractor and supplier in the contract – illustrating their ability to show robust, competitive pricing that is underlined with quality and delivery. You are then able to clearly understand how the builder has reached the fixed price.

By having the secondary pricing listed, you are able to select quality and capability based on the price.

What underpins all tender processes however, is that is has to be fair. There are common law obligations when it comes to calling for a price, so set the rules at the beginning and stick to them.

Don’t put yourself at risk by bending the rules, as people will hold you to account! Frequent conditions of tender include:

  • A deadline as to when the tender must be made
  • Defining the format in which the price should be received and to whom it should be submitted
  • A clause which allows the client to appoint a contractor at their discretion
  • An understanding that the cost of preparing the tender falls to the contractor
  • And, most importantly, a provision ensuring you are not bound to accept the tender.

For those facing a rebuild or a repair, in most instances your insurance company is dictating the construction team for your project however, this doesn’t mean you can’t or shouldn’t ask questions and undertake your own pre-qualification.

Ask questions around their quality, competency and timeframes. And again if you get a bad feeling don’t work with them, instead talk to your insurance company and see what other options you have.

With more than 20 years industry experience, Cymon Allfrey holds the Chair of the ADNZ National Board and has won the ADNZ National Supreme Award three times in the past five years.

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