Every main contractor’s goal when putting out a tender is to secure competitive, timely quotes from a variety of subcontractors. Despite the challenges of the current market environment, there are specific strategies that contractors can utilise to not only enhance their engagement with subcontractors but also to improve the response rates for Invitation to Tenders (ITT). As industry insiders, we have a unique perspective on what subcontractors are looking for from main contractors during the tender stage.
Whilst we are predominantly an M+E estimating service, the following holds good for all trades not just Mechanical and Electrical.
Developing Procurement Strategy
Effective procurement strategy plays a pivotal role in the success of a construction project. This strategy comprises cost analysis, market research, negotiation tactics, risk management, and supply chain optimisation, all contributing to ensuring project completion on time and within budget.
Cost analysis involves assessing the cost of materials and labour to determine the most cost-effective choices. Market research refers to data collection about current market conditions and trends to help identify the best suppliers and subcontractors. Negotiation tactics involve having a clear comprehension of project requirements and the capacity to effectively negotiate with subcontractors for the best value.
Risk management includes analysing potential project risks and devising mitigation strategies. Finally, supply chain optimisation involves ensuring the most efficient delivery of materials and services at the lowest cost without sacrificing quality.
Tender Invitation and Pre-Qualifying Questionnaire
The ITT and Pre-Qualifying Questionnaire are instrumental in ensuring the successful selection of subcontractors. A well-crafted ITT can increase subcontractor tenders and coverage while making it easier for the contractor to understand project requirements.
The Invitation to Tender (ITT) should provide details about the form of subcontract applicable if the tenderer is selected by the primary contractor. The degree of the provided information can range widely. At a minimum, it should include the name of the subcontract form (like JCT Design and Build Sub-Contract 2016) and any necessary amendments. However, in an ideal scenario, the ITT would carry a fully filled-out draft of the subcontract, missing only the subcontractor’s name and the subcontract works’ cost to complete the agreement.
Providing limited information in the ITT about the subcontract form is not recommended. Instead, a completed subcontract draft is much more preferred in the ITT. If completing every part of a draft subcontract is challenging for an ITT, necessary information required by the subcontract should still be included in the ITT, perhaps by referencing the relevant standard subcontract form.
Incorporating a complete draft of the subcontract within the Invitation to Tender (ITT) is a practice that can significantly increase response rates from potential subcontractors. By doing so, subcontractors are given the ability to review the exact contract terms they are expected to adhere to, even before they submit a proposal.
This transparency eliminates ambiguity, gives them the chance to assess their capacity to meet the contract’s demands, and ultimately builds trust. With this clarity, subcontractors are more likely to engage, respond and participate in the tendering process, as they are fully aware of what they are signing up for from the onset. This transparency may lead to more competitive and accurate bids, benefiting both the main contractor and the subcontractor.
Subcontractor Evaluation: Streamlined and Digital
Following the assembly of a list of potential subcontractors, the essential step is to verify their suitability, preparedness, and capability to tender. This confirmation is attained through an evaluation process, also known as the pre-qualification process. The procedure should delineate impartial, fair, accountable, and transparent criteria that will aid in deciding whether a potential subcontractor will be solicited to tender.
Each possible subcontractor should receive a covering letter and a pre-qualification questionnaire or PQQ. It’s important to note that this questionnaire should be straightforward and easily readable.
In the spirit of digital transformation and simplicity, providing the questionnaire on an online platform such as Google Docs or a dedicated portal helps make the process easier and faster for the subcontractors. This digital and simplified approach is crucial because lengthy and complicated processes may likely be ignored, resulting in missed opportunities.
The guidelines provided can be employed to outline the necessities for subcontractor pre-qualification. However, it should also incorporate the specific issues relevant to the subcontract works being considered.
Responses from potential subcontractors should be assessed against the selection criteria. It is important to inform those subcontractors who don’t qualify for tendering.
A significant point of emphasis is that the pre-qualification process should be balanced and suitable. While the main contractor needs details to affirm a potential subcontractor’s competency, they must acknowledge that offering such information might be cost-intensive for the potential subcontractor.
Consequently, the pre-qualification process should be optimised to be both efficient and effective, ensuring a potential subcontractor’s resources are utilised without wastage.
A well-structured tender package can boost the likelihood of successful subcontractor selection. The tender package should contain all necessary bid documents, such as drawings, scope of works, employer’s requirements, and contractor’s proposals.
Overwhelming potential subcontractors with an excess of documents, often referred to as a ‘document dump’, can detrimentally impact response rates during the tender process. This practice may lead to information overload, making it difficult for subcontractors to quickly understand the project’s scope, timeline, and other critical details. Subcontractors may deem the process as excessively complex or time-consuming, which may discourage them from responding or result in a delayed response.
This, in turn, can extend the procurement timeline, increase the likelihood of errors, and potentially exclude qualified subcontractors who might be deterred by the perceived complexity. Therefore, clear, concise, and well-organized documentation is crucial for optimising response rates and ensuring a smooth tendering process.
Marketing strategies can be implemented to increase the response rate. For instance, split testing two different ITTs can help determine which one gets a better response rate. Additionally, using a bid or project management solution with a reputable email provider can help increase the response rate.
Understanding the Subcontractor’s Perspective
The first rule of engagement with subcontractors is understanding their needs and perspective. This is often an overlooked aspect when contractors are seeking quotations.
Communication: Subcontractors appreciate clarity and transparency. They want to know why you have chosen them for a potential project. By engaging in direct and meaningful dialogue, and sharing why they are a good fit for your project, you establish a rapport that enhances their responsiveness to your tender.
Empathy: Remember, subcontractors are often managing multiple projects and priorities. By being considerate of their workload and providing them with ample time to review the tender, make a site visit, and ask questions, you increase your chances of receiving a comprehensive quote. In general, a minimum of two weeks should be offered for tender submission for most projects and more if the project is larger.
Professionalism: Maintaining professionalism and upholding your commitments will set you apart from the competition. By avoiding information overload (or the ‘document dump’), and providing a well-detailed scope of works, your tenders will be more appealing and easier to respond to.
Time Management: An Overlooked Aspect
An average subcontract package takes about 40 hours to move from tender to contract stage. Multiply that by 20 packages, and you’re looking at a substantial time commitment – 780 hours, or nearly 21 weeks of a Quantity Surveyor’s (QS) time each year! Because of this, QS’ often rush to put together tender packs, compromising quality and reducing response rates.
To counter this, it’s crucial to streamline the tendering process. Ensuring the tender packs are comprehensive and of high quality, including a well-articulated scope of work, a measured pricing document, and only the essential documents and drawings can drastically improve response rates. Consistency in doing this is key.
What Are the Best Practices to Follow for Improving Tender Engagement?
In the current competitive market, obtaining four subcontractor prices per package might seem an uphill task. However, with a streamlined and thoughtful approach, you can significantly enhance your chances.
Provide a World-class Tender Experience
Make the subcontractor’s job as easy as possible by reducing friction. This involves crafting a comprehensive yet concise tender that includes a detailed scope, relevant drawings and documents, the program’s details, and key contract terms.
Leverage Technology for Efficiency
In the digital age, technology can be a key ally for enhancing contractor-subcontractor engagement and response rates. Project management software can streamline tendering, ensuring a seamless, efficient process that saves time for both parties.
Electronic document management systems can provide easy access to all relevant documents, eliminating the problems of document dumping. Digital communication tools, such as video conferencing, can allow for virtual site visits and face-to-face discussions even when physical meetings aren’t feasible.
Providing Clear Project Details
Subcontractors need to understand the intricacies of the project to give an accurate quote. Detailed project specifications, comprehensive, detailed designs and drawings and a clear articulation of project goals and objectives can lead to more accurate and competitive quotes.
Similarly, being transparent about project timelines, potential challenges, and expectations can prevent misunderstandings that may lead to subcontractors withdrawing their bids or providing inflated quotes to cover potential risks.
Enhancing Trust and Confidence
Building trust and confidence with your subcontractors is another effective way to improve response rates. This involves transparent communication, honoring agreements, and prompt payment practices. A reputation for reliability and fair dealing will attract high-quality subcontractors and motivate them to prioritize your tenders.
Provide Constructive Feedback
Providing constructive feedback plays a crucial role in maintaining and fostering positive relationships with subcontractors, irrespective of whether they are successful in their bid.
There is nothing more annoying to a subcontractor who has spent time and resources to quote the project for you, only for you to ghost them when they ask for simple feedback on where their price sat amongst competitors and also weather they were successful or not.
For subcontractors who were not selected, clear and helpful feedback can provide valuable insights into the decision-making process. This allows them to understand where they fell short and how they can improve their bids in the future. It encourages them to hone their skills, refine their processes, and adapt their approach, which can enhance their competitiveness and the overall quality of their work.
On the other hand, for the subcontractor that lands the project, providing feedback can serve as a powerful tool for driving project success.
Develop Long-term Relationships
At the end of the day, people like to work with people they like. Make an effort to establish relationships with subcontractors. Pick up the phone and make them feel valued, not just used for price checking.
Creating long-term relationships with a reliable pool of subcontractors can enhance your ability to secure competitive quotes quickly. Subcontractors are more likely to engage thoroughly and promptly when they’re familiar with your work style, expectations, and payment practices. By cultivating these relationships, you can build a reliable supply chain that delivers high-quality work on time and within budget.
By considering these strategies, you can enhance your interaction with subcontractors and improve the quality and quantity of responses to your tenders. Engagement is a two-way street; the more effort you put into understanding and meeting your subcontractors’ needs, the more likely they are to respond positively to your tenders.
To get back four prices, you might need to connect with at least five subcontractors. This may seem laborious, but remember the adage – you only get out of this what you put in.
Tendering and subcontracting for construction projects can be highly successful when executed effectively. Employing precise and unambiguous language in the Invitation to Tender (ITT) and ensuring a well-designed and informative package can make a significant difference. Furthermore, considering the subcontractor’s perspective and using marketing strategies can ensure a broad response rate. By adopting these strategies, main contractors can increase their chances of succeeding in the bidding process.
We boast a team of expert and seasoned estimators who guarantee that your MEP projects are managed proficiently. Whether your needs are for present or upcoming electrical, plumbing, ventilation, insulation or mechanical estimation, we’re always ready to lend a hand.
Connect with us today and get 25% off your first project.