September 16, 2024
Understanding procurement and tendering processes is essential for head contractors and subcontractors in the construction industry. This article series will explore what procurement and tendering is, the procurement processes typically adopted by the Queensland Government and how to manage the risks of tendering. This article will provide a brief overview of procurement and tendering.
What is procurement?
Procurement broadly encompasses the whole process of obtaining goods and services. In construction, this refers to the goods and services required to complete a project from its inception to completion. The procurement process can involve identifying project needs, planning, design, determining standards, selecting suppliers, financing, contract management, construction, maintenance, and other related functions. The steps in a procurement process can often vary depending on the type of project or the delivery method employed.
Procurement and tendering are two intertwined processes, but tendering is often seen as a potential step in the procurement process.
What is tendering?
Tendering is a process used to seek competitive offers for the supply of works, services or goods from potential contractors (for example, builders, suppliers or consultants).
Tendering allows parties to:
1. control the contract terms and other documents that tenderers are to account for (and rely upon);
2. regulate the conduct of everyone involved in the process; and
3. get tender responses in similar forms to allow for ease of comparison and assessment.
It is noted that a request for a quote or an invitation to negotiate are not tendering processes. This is because the parties may ultimately end up adopting a contract which has not been developed or put forward by the upstream party.
Further, parties should be aware of the use of online and electronic mediums to carry out tender processes. Sometimes referred to as “e-tendering”, tenders are released and lodged electronically, rather than being lodged by putting hard copy tenders in a tender box or delivering them to a street address. The physical delivery of tendering is largely obsolete, though prospective tenders should confirm such as part of its tender review, in case any documents need to be physically lodged or submitted.
Types of Tender Processes
There are three common types of tender processes. They are request for tender (RFT), request for proposal (RFP) and expression of interest (EOI).
A RFT is used when the scope of the required supply is known; the price is the most important selection criteria; documentation and contract conditions have been finalised; and little or no negotiation is needed.
A RFP is often used when there are elements of uncertainty in a project. These elements may be that technology or procedures are new; documentation has been developed but not finalised; the scope of the market is not fully known; or the principal is looking for innovative options. Here, negotiations usually take place with one or more potential contractors before a contract is entered into.
An EOI can be used when the scope or identity of the potential market is unknown; feasibility is still being confirmed; documents have not been fully developed and market input is needed; or there may be useful technologies in the market that the principal does not know of. The most common reason why EOIs are used is so the principal can identify a small number of superior suppliers early to save the cost of assessing many tenders.
Usual Steps in the Tender Process
Government tendering, in comparison to private sector tendering, is usually more complex and may include additional steps (this will be discussed in the next instalment of this article series). For now, set out below is an overview of the usual steps in a tender process that can apply to both government and private sector tendering.
1. Define the scope of the service or supply and specify the principal’s requirements and objectives.
2. Prepare the tender documents, including the terms of contract.
3. Issue invitations to tender or advertise for tenders.
4. Supply the tenderers with the tender documents and background information on the project.
5. Hold meetings with potential tenderers to give background information and answer questions from potential tenderers.
6. Receive tender submissions for assessment.
7. Clarify aspects of the tenders.
8. Assess and evaluate tenders and select a tender for acceptance.
9. Issue a letter of acceptance or finalise and sign a contract with the successful tenderer.
Tender Documents
Tender documents are utilised to provide information to all prospective tenders on a fair and transparent basis. Parties should identify which tender documents are intended to form part of the contract, as this will need to be clearly defined and evidence to the parties to allow for informed tender responses. Tender documents that usually form part of the contract are the conditions of contract, specifications, drawings and other documents that set out or explain the scope the supply. It is also important to identify what information the prospective tenderers will be entitled to rely upon in preparing their response, and what documents are provided “for information” only.
The next instalment of this series looks at the procurement process of the Queensland Government.
Lamont Project & Construction Lawyers
The Lamont Project & Construction Lawyers team has extensive knowledge and experience assisting parties in preparing tenders and submitting responses. With this knowledge and expertise, Lamont Project & Construction Lawyers can provide the required support and advice to assist at any stage in the tender process.
If you would like to discuss any matters raised in this article as it relates to your specific circumstances, please contact Lamont Project & Construction Lawyers.
The content of this article is for information purposes only and does not discuss every important topic or matter of law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.
Contact: Peter Lamont or Ashleigh van Meurs
Email: [email protected] or [email protected]
Phone: (07) 3248 8500
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Postal Address: PO Box 1133, Milton Qld 4064