Should I Tender or Negotiate?

Should I Tender or Negotiate?

We all know the standard approach to awarding contracts can be to identify 3 or 4 contractors to tender against a standard template document. Two contractors that have submitted the lowest cost bids are then asked to forward a detailed breakdown of their tender submissions. A s long as its reasonably accurate, the lowest priced contractor starts work for the client. I know I have simplified what can be a complex process but in reality, and in my experience, is how the majority of contracts are awarded.


This approach is not only time consuming and inefficient for all parties involved but also wrong. It is sensible to ensure that the quotation you have received is not just competitive but meets all terms and conditions required to fulfil the contract. Why can’t the client simply negotiate with a builder direct? Therefore avoiding contractor’s wasting millions of pounds each year in bidding for contracts that they have no real chance of winning? From extensive discussions with many industry professionals including Architects and Quantity Surveyors, they all seem to share a similar opinion. In 1994 the Latham report highlighted best practice as “negotiate with a contractor in the complex world of contracting” (abbreviated for idiots like me).
We have an industry of disputes, adjudications, and arbitrations which highlights why the tendering process does not work. This is frustrating for both the client and the contractor, wasting valuable time and money. Think of the monies that could be saved across the industry by having a simplified process. These costs have to be recovered by the contractor and are normally eventually paid by the client as they are hidden within the tender submission.





With standard costs per sq metre for most works, would it not be simpler for a client to negotiate against a fixed set of fees? A QS recently preparing a Bill of Quantities against architectural drawings for a project circ £5m, estimated the cost as being approximately £25,000. With 4 contractors tendering this would have cost in total circa £100,000. That is £100,000 that needs to be recovered, if not by this client then by others in the future. With little value in my opinion being added to the contract submission, apart from potentially satisfying an internal financial audit purpose.
I met with a QS last week who advised his client to proceed what turned out to be the highest tender. Why, because he believed the other submissions were intending to take every opportunity to exploit variation orders, as their proposed costs, could not deliver against their submitted tenders. Therefore in reality the client ends up losing and often the quality of work is below the required standard, as savings have to be made by the contractor.
In my opinion what a client really wants is a fair and reasonable price, for the delivery of a high quality project. I believe this can be better achieved through a negotiated settlement that meets the needs of the client but also that of the contractor. Therefore saving the industry millions in unproductive time and effort better spent supporting our clients.
Starting a relationship with a realistic contract and pricing, is surely a major step in the right direction for the delivery of a successful project? With both parties committed to working in partnership to deliver a high quality solution at a reasonable cost. After all, the Contractor is in business to make money as well, not just for love?



A motivated contractor in my view would ensure his estimator, planner, project manager look for value engineering opportunities. Therefore utilising their skills to reduce unnecessary cost. During this period, the contractor would update the client on costs on regular occasions and the specifications could be adjusted to suit client’s budgets. The client would get a quicker start on site with negotiations being completed quicker and at less cost for all parties
If this process fails, in my experience, this is due to selecting the wrong contractor, not necessarily because of the process that was followed. I know this is a simplistic argument and obviously there are other elements of the tendering process such as Health & Safety, Risk Management, Financial stability etc that need to be considered as part of this process but I believe all of these can be satisfied at less cost via open negotiation, starting from a position of trust.