Two key points to note in compiling winning tenders from Rick Hughes, Blulevel Estimating
Winning a construction tender is about more than just offering the lowest price.
Many factors contribute to a successful tender bid. Here are a few key considerations:
- How transparent are you with your client about your building process?
- Are your inclusions and exclusions clearly defined?
- Do you provide clients with options to deduct or add items to or from the contract price?
- Are your company’s core values and branding clear, and do they align with your clients’ values?
At the end of the day, some clients may be willing to spend a little more to work with the right builder. This means that even if an estimate is highly competitive, a lack of flexibility or transparency can result in a lost opportunity.
Below are two issues a builder needs to address to form a competitive construction price.
Issue #1
One option to achieve a more competitive construction cost is a builder can supply all materials and directly engage labour for installation. However, a common practice in today’s construction industry is for builders to request supply-and-install quotations from trades and suppliers. While this approach shifts the risk of material procurement away from the builder, it also comes with a downside: trades typically apply a markup to the materials, increasing overall costs.
For example, if a trade purchases concrete at $300/m³ and adds their markup, the rate might increase to $380/m³. When the builder then applies their own margin, the client could end up paying $450/m³. However, if the builder orders the concrete directly, the client may only pay $350/m³.
Now, consider this on a larger scale across the full build: if the builder supplies all materials for a project, a client could potentially save $100,000 on a $2 million build.
By optimising procurement and maintaining transparency, builders can not only offer more competitive pricing but also enhance their chances of winning tenders.
Issue #2
Another issue presents when all builders request quotations from trades and suppliers. It creates a problem in that trades and suppliers become overwhelmed with requests and often lack the time to provide detailed and accurate quotes. Since trades and suppliers do not charge builders for quotations, they must find cost-effective ways to prepare them.
Local external estimators can be expensive, especially since there is no guarantee that the builder will win the job. As a result, some businesses turn to offshore estimating services to prepare trade or supplier quotes. However, the downside of offshore estimators is their lack of knowledge about local costs and construction methods, which often leads to overpriced quotations.
There is no definitive solution to securing an accurate quote from trades and suppliers, but steps can be taken to prevent them from overestimating.
A builder should always complete or obtain a detailed estimate to cross-check supplier and trade budgets. If a cost comparison reveals discrepancies, the builder must investigate further. If the estimation and quotation align, the trade or supplier should be rewarded for their accuracy.
Overall, there is no perfect formula for winning a tender, but several steps can be taken to improve the chances of success. We believe builders should take greater responsibility in verifying construction budgets before seeking formal quotations from trades and suppliers. This approach can reduce the workload associated with preparing quotes and lead to more accurate cost estimations for all parties involved.
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