Cut throat tender pricing

So another year begins and listening to all the pundits this is going to be tougher than the last one.

But what of tender prices? Inflation is allegedly running at near 4% (although it feels a lot higher to me) so tender prices on the up? No, not a bit.

So what’s happening?

Well I wonder how many tender bids are going in at lunchtime today that have been priced below net cost? I’d never be able to prove it but I suspect nearly all of them.

So why is that?

Well as we know there isn’t a lot of work around, and there’s probably still too many of us chasing that amount of work too…and clients know that. So more of you are being asked to tender…and do you consider you are pricing against like for like competition? No, is the most likely answer.

So what to do?

Go in as cheap as you can, beat the opposition, keep your team intact, gain a contribution to your overhead, pray the job goes well, there are lots of variations and changes to claw some money back, over value the job on interim valuations, screw the supply chain further (after all they never put in a sensible bid at tender stage, and if they did you ask them to knock it by 15-20% anyway), and oh that the client still has the funds from his finances to pay you!

But consultants you’re not helping either.

Don’t stuff your tenders with huge provisional sums because designs haven’t been resolved or you haven’t made your mind up, or the client hasn’t. Don’t include provisional quantities or items, keep your specifications tight and detailed to what you want. Don’t send out vague, confusing, incomplete, conflicting designs, drawings and information as the contractor will see this as a great opportunity. And please stop issuing tender addendums when you’ve only just sent out the documents, send it all out once and be done with it!

And finally don’t burn everything you can possibly think of and put it on a cd, as all the contractors do is the same, but pass it on to the supply chain. And what happens? The man in a van gets it, doesn’t understand it, either doesn’t bother with it, puts in a price because he thinks he understands it, only to find he’s committed to something he doesn’t understand.

Then he doesn’t do the job and leaves everyone with a problem.

By way of an side, but on the same vein, we’ve got a project in the office that we are doing the bills of quantities for the contractor. Tucked away in part of the tender documents there’s a clause that states if your bid is above £7.2m don’t bother sending it in! (The job has already been tendered last year at around £8M, sent out again with no design changes, what do they expect I ask?)

So clients don’t expect the impossible, but if you do ask for it be warned as if you step out of line, dither over a decision, play with the contractors cash flow expect the worst as it will come back and bite you!

Thanks to John Langford for his tweet@ConstructionMM for being the inspiration for this.

Derek Mynott is the managing director of quantity surveyor GF Partnership and a regular blogger

Derek also Tweets at http://www.twitter.com/gfpartnership