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Single-Stage Tendering

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Single-Stage Tendering

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  • September 2010
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The trouble with single-stage tendering is that it does not generate reliable outturn costs. In fact, this method of procurement often produces a fragmented project team with the contractor appointed too late to influence the design, programme or risk management strategy, and braced to claim compensation to make up for errors in its estimates. The result is that there is more conflict between clients and contractors, with variations and claims working up the original tender price. Not a good recipe. Simon says single-stage tendering offers the discipline of completing designs before the contractor is appointed. This ignores evidence, from the Banwell Report in 1964 through to the National Audit Office in 2005, that contractors and subcontractors have more to offer than simply a price for building someone else’s designs. Systems that obtain timely contractor input to buildability and affordability offer real discipline, and a proper two-stage process achieves this. Simon also says single-stage tendering applies commercial pressure to secure cost reductions. In reality, cost savings can be achieved much more effectively through two-stage tendering. Most single-stage bids rely on estimates from subcontractors and suppliers that are invisible to the client and its consultants. There is no opportunity to drill down into what the subcontractors and suppliers have assumed or discover what they can offer to challenge design or risk assumptions. Under a two-stage process, subcontractors bid to a pre-appointed main contractor, with better odds of success and, consequently, greater motivation to give it their best shot. While any contractor may adopt a last-minute negotiating stance, a properly structured two-stage appointment can avoid this. For example, the client can agree main contractor profit and overheads from the outset, plus an incentive for the contractor to reduce other costs. This approach, combined with second-tier competitive processes for all subcontractors,...

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