Construction bidding is an essential aspect of the construction industry. In a simple sense, construction bidding can be defined as the process of offering the proposal or tender to undertake a construction project. Specifically, construction bidding includes the process in which the tender is submitted by the Contractor to the Client (or the Employer) as an offer to manage and carry out the construction project. The primary objective of the construction bidding is to hire the eligible Contractor by the clients and related firms.
The Contractors in most of the cases get the jobs of construction undertakings by the process of bidding on the construction projects. The bid or the tender refers to the proposal that is offered to complete an undertaking. Construction tenders are generally made based on the bill of quantities and the specifications of the contract. The Client then selects the most suitable bidder for awarding the contract among all the eligible bidders. The generally adopted selection criteria of the most eligible bidder are as shown in figure 1:
figure 1: Selection Criteria
Construction Bidding Process
In general, the construction bidding process includes the following process:
1. Bid Solicitation:
The first step in the construction bidding is the bid solicitation. Bid solicitation refers to the process in which the Employer or the Client seeks bids and makes the construction data available to the interested parties. The construction data mostly include the drawings, specifications and other relevant documents. The interested parties may be Contractors, Construction Managers or even the Public. The bid solicitation process is also referred to as requesting proposal (RFP) or a request to tender (RTT).
After the solicitation of the bid, the Contractors may subcontract certain pieces of work to the Subcontractors. Subcontracting may also be done after awarding of the bid depending upon the method of construction bidding adopted.
3. Bid Submission:
The bidders then submit their bids within the stipulated period.
4. Bid Selection:
The Employer then selects the most eligible bidders depending upon several selection criteria.
5. Contract Formulation:
After the selection of bidder, the contract is formulated i.e. the legal framework of the project is drafted.
6. Project Delivery:
The construction work is then commenced.
Decisions in Construction Bidding Process
The three major decisions in the construction bidding process are as follows:
1. The Project Delivery Method
2. The Procurement Method
3. The Contract Model Method
These three decisions in the construction bidding process have been briefly discussed below.
The Project Delivery Method
The project delivery method includes four major methods that assist the Employers to carry out the construction projects within the projected time frame as well as budget. These methods are Design Tender (Design-Bid-Build), Design-Build (D-B), Construction Management at Risk and Integrated Project Delivery (IPD).
These methods have been further described below.
1. Design Tender (Design-Bid-Build)
Design tender or the design-bid-build method is the traditional method of the project delivery system. This method is commonly used for construction projects such as government-affiliated non-residential buildings and complexes. Basically, in this method, the Employer employs a Designer (or an Architect) for the complete designing of the project. This is done by the contractor who is managing the construction. Once the design is fully completed by the Designer, the bids are solicited from the Contractor by the Employer so that the designs can be executed.
The bid generally covers the following aspects:
a. The total cost of the construction of the structure particularly building construction.
b. The total cost of subcontracting
c. The total cost of the contractors
Advantages and Disadvantages of Design-Bid-Build Method
Some of the advantages of the DBB method can be listed as follows:
a. The Employer can control the entire construction project, its design and execution according to his requirement.
b. The implementation of the project is relatively easy.
c. Since the design of the structure is completed before the awarding of the contract, the approximate cost of the construction can be determined.
Some of the disadvantages of the DBB method can be listed as follows:
a. There may be the risk of design errors.
b. The design errors may lead to difficulty in managing the increase in costs on account of the errors.
c. There must be sufficient availability of the resources.
d. The Employer must be competent and must have proper experience and knowledge.
2. Design-Build Method (DB Method)
The DB method includes the process in which the Employer delivers the contract to a single party. The party is responsible for both the design as well as the execution of works at the site. This single party is commonly referred to as the design-builder or design-build contractor. In this method, the design-builder is solely responsible for all the aspects of the construction project.
3. Construction Management at Risk (CMAR Method)
CMAR method is similar to the DBB method and is often used as an alternative to the DBB method. It is used as an alternative when it is required to reduce the overall cost. This method consists of handling the design and construction separately. The construction manager is employed and involved before the design of the project is even commenced. The construction manager even helps in assisting the selection of the designer or the architect. After the selection of the designer, both the construction manager and the designer work together during the design phase. This method is mainly used for complex projects. The bid of CM to the owner is a guaranteed maximum price (GMP) which mostly includes:
1. Pre-construction service cost
2. Actual construction cost
3. The charges of the Construction manager
4. Cost of contingencies
Once the design has been completed, the bid solicitation is done.
Advantages and Disadvantages of CM at Risk Method
Some of the advantages of this method are as follows:
a. It offers better cost control.
b. This method ensures better management of the project.
c. The risks to the Employer are reduced.
The major disadvantage of this method is that high risk has to be borne by the manager.
4. Integrated Project Delivery (IPD) Method
The integrated project delivery method is also commonly known as the Integrated Team Method. In this method, all the parties involved i.e. the Employer, the designer and the Contractor work together as a team and the risk is borne by each party equally.
2. The Procurement Method
The procurement method includes the method through which the construction services are acquired. The procurement method is generally classified into the following:
1. Best Value Method (BVS)
2. Negotiated Method
3. Sole Source or Direct Select Method
4. Low Bid Method
3. The Contract Model
The contract model includes the process of development of the format of the contract and the type of contract. Some of the important types of contract are:
1. EPC Contract
2. BOOT Contract
3. DB Contract
4. Cost Plus Contract
5. Lump-Sum Contract
6. GMP Contract
Figure 2: Traditional Types of Contract