Introduction to Economic Theory and Practice of Tendering

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© The College of Estate Management 2011 Paper 1777V2-0

Introduction to economic theory and practice of tendering
Level 1 of this course introduced the topic of tendering and prior to working through the following papers relating to estimating, tendering and bidding strategies, it will be worthwhile for you to refer to one of the following papers included in Level 1:  

Paper 0626, Tendering for construction work; Paper 1794, Tendering for M&E engineering work: An introduction.

These papers are also available on the VLE via the study material search in the ‘Library’. In either of these papers you will learn about:   

the tendering process from both the client’s and the contractor’s viewpoints; the documentation required to obtain lump sum tenders for construction work; the resources and risks that a contractor needs to price, including some of the commercial considerations that the contractor will take into account when finalising the bid to be submitted.

We are now going to look at the economics of the construction market and how this affects a contractor’s tendering policies. In Paper 0467 we will examine the economic theory relating to a perfect market and compare this to what is found in the construction industry. The differences have an impact on how contractors finalise their bids when submitting tenders. Paper 1778 shows how the theory relating to economics within the construction industry has to be considered by the contractor when preparing a tender. Some costs relating to the construction can be fairly accurately calculated, but other aspects require a different approach. The management of the construction firm is responsible for putting together the final tender bid. Bidding strategies can be adopted by contractors in order to improve their success rates when submitting tenders. However, these will not necessarily result in a tender amount which the management will be happy with, and the final tender bid may be decided by a ‘hunch’,...
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