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What is Procurement and Tendering in Construction?

Last Updated on March 6, 2024 by Admin

Procurement and tendering are fundamental aspects of the construction industry, forming the backbone of how projects are conceptualized, planned, and executed. This article delves into the intricate world of procurement and tendering in construction, unraveling their definitions, importance, and the nuanced processes that underpin them. Procurement encompasses the comprehensive process of acquiring the necessary goods and services essential for a construction project, ranging from raw materials to skilled labor.

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Tendering, a subset of this broad spectrum, involves the critical step of inviting and evaluating bids from potential contractors to carry out specific parts of the project. Together, these processes not only dictate the operational efficiency and economic feasibility of construction projects but also ensure adherence to quality, legal standards, and fair trade practices. As we explore these pivotal components of construction project management, we uncover the strategies, challenges, and best practices that guide successful project outcomes in the ever-evolving construction landscape.

What is Procurement?

Procurement is acquiring the materials, equipment, and services needed to operate a construction business or complete a project. In construction, this refers to the goods and services required to complete a building from inception to finish. Procurement needs to be approached in a decisive way for construction companies to maximize their efficiency on each project.

Image: What is Procurement? 

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A construction firm must take a carefully planned approach to procurement by purchasing the supplies required most cost-effectively. The procurement strategy needs to consider multiple factors, like the timeline, budget, and project quality.

Read more about what are the types of procurement and procurement methods.

“In a simple form, the procurement process is how we go about obtaining the goods and services we need.”  

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What is Tendering?

Tender means to invite bids for a project or to accept a formal offer such as a takeover bid. Tender usually refers to how government companies invite bids for large projects that must be submitted within a restricted deadline.

Image: What is Tendering? 

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Tendering is when the client invites contractors to place a bid for work on a construction project. Contractors’ bids are based on the tender documents issued by the client.

The successful tenderer becomes the ‘contractor’ and a ‘party’ to a ‘client’ contract. The tender documents are legally binding and are signed by all parties involved. The completed tender documents become part of the contract documents.

Tender request documents also referred to as invitations to tender, Requests for Tender (RTF), Requests for Proposal (RFP), etc., outline what is required, that is, what the requesting organization’s needs are. These documents also outline the particular requirements, criteria, and instructions to be followed.

Future tenders are generally publicly advertised to offer opportunities to several suppliers, encourage competition, and provide a more excellent pool of offers to select from.

“In construction, tendering is a process for getting a contractor and agreeing on a price.”

Online Course on Procurement Strategies and Tendering In Construction

Explore procurement strategies and the procurement process in the construction industry context.

  • Course Offered by Coventry University
  • Duration2 weeks
  • Weekly study3 hours
  • 100% Free online Course (Extra Benefits From $74)

JOIN NOW

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Understanding the procurement process in construction

What is procurement? How does the procurement process work? What procurement strategies are available? Find answers with this course that aims to develop your understanding of procurement in the construction industry context.

You’ll have the chance to examine the factors that affect the choice of procurement strategy and work to develop an understanding of tendering and its application in the construction industry.

You will also have the opportunity to evaluate depreciation principles and the methods for calculating depreciation in a construction context.

What topics will you cover?

  • What is procurement?
  • The need for different procurement routes and the variables between them
  • Procurement strategies
  • Examples of procurement strategies within projects
  • Recent UK procurement strategy
  • E-Procurement
  • Tendering
  • Partnering
  • Principal phases in tendering
  • Bidding strategies
  • Bidding models

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When would you like to start?

Start straight away and learn at your own pace. If the course hasn’t started yet, you’ll see the future date listed here.

Read About What is the difference between an EPC and a Turnkey project?

What will you achieve?

By the end of the course, you‘ll be able to;

  • Develop an understanding of what procurement is in the context of the construction industry
  • Explore the purpose and requirement for procurement in the construction industry
  • Explore the factors that affect the choice of procurement strategy
  • Develop an understanding of the tendering and its application in the construction industry
  • Develop an understanding of the principles of depreciation and the methods for calculating depreciation in a construction context

JOIN NOW

Who is the course for?

This course is for anyone looking to understand procurement strategies and the procurement process in construction management.

JOIN NOW

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Final Thoughts

The process of tendering in construction is a crucial aspect of project management, involving the solicitation of bids from contractors to complete a specific project. Comprehensive insights into this process can be found in various tendering in construction pdf documents. These documents detail the procedures, strategies, and legal considerations involved in the tendering process. The types of tendering in construction are diverse, each suited to different project requirements and client preferences. Common types include open tendering, selective tendering, and negotiated tendering.

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Selective tendering in construction is a method where the invitation to tender is sent to a pre-selected list of contractors. This approach is often used for specialized projects or when the client wishes to ensure a certain level of quality and capability from the bidders. The types of tendering in construction pdf resources further explain these methods, providing detailed comparisons and use cases for each type.

What is tendering? In its simplest form, tendering refers to the process of inviting bids for large projects, where contractors submit proposals to complete the work specified. This process is fundamental to achieving transparency and competitiveness in construction projects.

Procurement in construction pdf documents delve into the broader aspect of acquiring goods and services necessary for completing a construction project. This includes not only tendering but also the selection of suppliers, contract negotiations, and management of supply chain relationships.

Open tendering in construction is another common approach where the tender invitation is made public, allowing any qualified contractor to submit a bid. This method promotes fairness and competition but can result in a large number of bids to evaluate.

Procurement and tendering RICS (Royal Institution of Chartered Surveyors) guidelines provide industry-standard practices for these processes, ensuring fairness, transparency, and efficiency. These guidelines are particularly important for professionals in the field to understand and adhere to.

Procurement and tendering in construction pdf resources provide a comprehensive overview of how procurement and tendering processes are conducted in the construction industry, outlining best practices, legal frameworks, and effective strategies.

Understanding the difference between procurement and tendering in construction is key for those in the industry. While procurement encompasses the overall process of acquiring goods and services needed for a project, tendering is specifically related to the process of inviting and evaluating bids for construction work.

In summary, tendering and procurement are critical components of construction project management. They involve complex processes that require a thorough understanding of industry practices, legal considerations, and strategic planning to ensure successful project execution.

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FAQs

What do procurement and tendering entail in the construction industry?

Procurement in the construction industry involves the process of acquiring all the necessary goods, services, and works required to complete a construction project. This includes everything from sourcing materials to hiring subcontractors. Tendering, a key part of procurement, is the process where bids are invited from contractors to carry out specific parts of the construction work. It ensures that the work is awarded in a competitive and fair manner.

How is procurement executed in construction projects?

Procurement in construction typically involves identifying project needs, finding and evaluating potential suppliers or contractors, and negotiating contracts for the supply of services and materials. It’s a strategic process aimed at obtaining the best possible resources at the most favorable terms.

Can you explain the tendering process in construction?

The tendering process in construction starts with the preparation of tender documents, which includes project specifications and requirements. Contractors interested in the project then submit their bids. These bids are evaluated based on criteria like cost, experience, and capability to determine the best fit for the project.

What are the main types of tendering processes used in construction?

The 4 main types of tendering processes in construction are:
1. Open Tendering: Any qualified contractor can submit a bid.
2, Selective Tendering: Only pre-selected contractors are invited to submit bids.
3. Negotiated Tendering: The client negotiates terms directly with a chosen contractor.
4. Single-stage and Two-stage Tendering: Bids are either evaluated in one stage for both technical and financial aspects or in two separate stages.

What factors influence the choice of procurement method in construction?

The choice of procurement method in construction is influenced by factors such as project complexity, time constraints, risk levels, and the client’s specific objectives and preferences.

How does effective procurement benefit a construction project?

Effective procurement benefits a construction project by ensuring timely delivery of resources, cost-effectiveness, quality assurance, and risk mitigation. It contributes to the overall success and efficiency of the project.

What legal considerations are involved in the tendering process?

The tendering process involves legal considerations such as contract laws, compliance with local and international regulations, fair competition practices, and ensuring transparency and ethical standards in the bidding process.

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