As the construction industry heads into its worst downturn since the 1989 crash, many clients are looking to maximise the element of competition in their tenders by adopting a single-stage strategy. Clients are considering single-stage tendering for the following reasons:
- The need for greater cost certainty during design and construction. Some clients who have had problems agreeing a cost plan with the contractor have had difficulties controlling costs in the second-stage of the tender
- The need for awell-documented, fixed-price contract. The ability to relate a single set of client-sourced documentation to the contractor’s commercial offer is important for increasingly risk-averse funders
- To benefit from the discipline of completing the design before a contractor appointment takes place
- To use commercial pressure to secure cost reductions for projects that might otherwise be unviable.
Changing market conditions have created the opportunity for clients to tender competitively. However, most contractors have a portfolio of work secured on the basis of a mix of frameworks, negotiation and competition, and this shift in emphasis does not mean that all work will be won through lowest-price competition.
The readiness of clients to shift away from two-stage tendering indicates a degree of frustration with some aspects of collaborative working. Although some clients have had sufficient workload in a local market to be able to foster collaborative behaviour from their construction partners, others have found that two-stage tendering is characterised by the adoption of a tough negotiating stance in the later stage of the agreement of the contract sum.
A harsh economic climate could further encourage adversarial behaviour, and it is important to recognise that clients moved away from single-stage tendering for good reasons. The process can be wasteful of resources, it separates design and construction and, when tendered on incomplete information, provides an illusory promise of competitive pricing and cost certainty. It is essential that clients that adopt the single-stage route should do so with their eyes open, and with a team that is capable and managed so as to complete properly a design to the level of detail intended under the contract.