![]() ![]() He can make losses on other contracts which affect his financial stability or may be so successful at tendering that he does not have enough skilled staff or men to deal with all the work he wins. However, since contractors have all pre-qualified it is difficult to reject the lowest bid, even if it appears dubiously low – unless that is due to some obvious mistake.Ī problem with both open and selective tendering is that a contractor’s circumstances can change after he has submitted his tender. Also, since only half a dozen or so contractors are selected, each contractor knows he has a reasonable chance of gaining the contract and therefore has an incentive to study the tender documents thoroughly and put forward his keenest price. ![]() The advantage to the employer is that he can select only those contractors, who have adequate experience, are financially sound, and have the resources and skills to do the work. Contractors applying are given a list of information they should supply about themselves in order to ‘pre-qualify’. Under selective tendering the employer advertises his project and invites contractors to apply to be placed on a selected list of contractors who will be invited to bid for the project. The engineer advising the employer may think there is a risk that all such low bids could prove unsatisfactory, but he cannot advise the employer what other bid to accept because he has no certainty of information. ![]() It is true that the employer can check the resources and experience of the lowest bidder and reject his tender if the enquiry proves unsatisfactory but several bids may be below the estimated cost of the job and, if such tenderers appear satisfactory and their bids are not far apart in value, it is difficult for the employer to choose other than the lowest. If he chooses the lowest tender he runs the risk the tenderer has not studied the contract sufficiently to appraise the risks involved or the tenderer might not have the technical or financial resources to undertake the work successfully. Thus the employer may be offered only ‘a lottery of prices’ and not necessarily the lowest price for which his project could be constructed. Also, knowing their chances of gaining the contract are small, contractors may not study the contract in detail to work out their minimum price, but simply quote a price that will be certain to bring them a profit if they win the contract. However, this method can be said to be wasteful of contractors’ resources since many may spend time preparing tenders to no effect. Sometimes he calls for a deposit from applicants, the deposit being returned ‘on receipt of a bona fide tender’. Under open tendering the employer advertises his proposed project, and permits as many contractors as are interested to apply for tender documents. Types of Tendering Methods in Construction 1.
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