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Selling Property By Tender – Pros & Cons. There are many potential advantages to selling by tender. The disadvantages of selling by tender. There are numerous potential benefits to choosing the tender process. Yet there is also a certain degree of risk involved. To minimise this risk, it’s helpful to choose a real estate agent who. The advantage of serial tendering is that the client knows that the. However, the disadvantage is that the pitfalls of negotiation still apply.
Tender2.1 AboutA tender is a bidding process that is open to all qualified bidders and where the sealed bids areopened in public for scrutiny and are chosen on the basis of price and quality. Tender is used inmany areas other than construction and may differ depending on what kind of tender. In this casethe tender document is submitted by contractors or also known as tenderers that wish toparticipate in a tender invitation. The tender process is also taken into account the procurementmethod which is selected by the employer after discussion with the consultants. The tenderingmethods chosen can affect the outcome of the project even if by a small degree. There are 3common categories people look into which are cost,quality and time.
There 3 categories will bethe main factors of which tendering method is best suited for the situation.The three more common tendering methods are open tendering, selective tendering andnegotiated tendering.2.2 Open TenderingOpen tendering is the most common amongst the three methods as it is basically a free-for-allmethod for any contractors interested to tender for the job. It starts with an advertisement beingpublished publicly via newspapers,websites and various other mediums. The advertisementcontains information such as type of job, location of site, location of collection, closing date oftender, document fee and tender deposit. The tender documents are then printed to suit thenumber of participants which can be quite difficult to predict as it tends to vary from project toproject.
Sometimes the number of participants may vary from 10 up to 25 participants. Uponcollection of the tender document the contractor will have to fill up the rates of all the materialsrequired for the construction project. After the price has been determined, the completed tenderdocument shall be submitted to the employer at the appointed location together with a tenderdeposit stated in the advert. The employer together with 1 or 2 consultants will open and recordall the tender documents submitted. Out of all the tender documents submitted only onecontractor will get the job, so the employers has to make a decision on which contractor shouldget the job. It is the consultants’ job to evaluate each individual tender and come out with a reportwhich shows the recommended choice of tender.
The employer usually follows therecommendations given by the consultants however he is not obliged to follow therecommendations. When the decision is made, the successfultender will meet the employer andconsultants for further negotiation of price. Once the price has been set, the contract document isproduced by the consultants and distributed to all the parties involved in the project including thenewly appointed contractor. At this point construction can commence.2.2.1 Advantages of Open TenderOpen to all qualified biddersHaving a project available to all contractors has a higher tendency to find new promisingcontractors which can satisfy the cost to quality to time ratio of the employer. Open tenders alsoprovide a larger variety of options to choose from which doesn’t limit the composition of theproject.No favouritismEvery participant has an equal chance of getting the project and is not bias to any single tenderer.This not only allows new firms to enter the market but also promotes professional etiquette.Highly competitiveForces the contractors to submit competitive prices to obtain the project. This can prove to beadvantageous for the employer in getting value for money.2.2.2 Disadvantages of Open TenderHigh cost oftenderingThe number of copies of tender will have to depend on the number of participants tendering.Open tendering being the method with usually the most tenderers,cost of tendering is generallyhigher.Novice contractorsOne of the risks of possibly selecting a new and unknown contractor is higher with opentendering method. The contractor may also potentially not have the sufficient experience for thejob at hand.Underpriced tendersSince all the contractors are trying to beat each others’ prices for the tender, employers need to becarefulof underpriced tenders.
Underpriced tenders may include low quality materials, poorquality of works and other factors to cut corners.Long tender processOpen tender is generally longer since it calls all possible contractors to tender and uponsubmission of tender it requires the consultants to go through every single one of the tenderswhich is very time consuming.2.3 Selective TenderingSingle stage selective tenderingSingle stage selective tendering starts off where the employer invites a few known and reputablecontracts to tender for the job. The contractors are not obliged to accept this invitation but will beblacklisted if they do so by the employer.
The number of contractors involved ranges from 5-10participants. Upon accepting the invitation, the contractors will purchase a copy of the tenderdocument and fill in the rates of all the materials like in an opening tendering method. Thecompleted tender documents are sent back to the employer to be opened and recorded togetherwith the consultants.
The consultants will then evaluate each of the tender documents and comeout with a report of the recommended choice of contractor. The employer again is not obliged tofollow the recommendation but in most cases employers usually do follow them. Beforeaccepting the offers, the employer will usually call the severalpotential contracts to furthernegotiate the price. This is without the contractors knowing where they stand in the list. Afternegotiation, the employer will make his decision and the contract documents will be made andsent out to all parties involved including the newly appointed contractor.
At this point theconstruction can begin.Two stage selective tenderingTwo stage selective tendering starts off where the employer chooses a few contractors by pre-qualification. The prospective contractors are chosen based on their experience and financialcapabilities. Other criterions also include management of projects at hand, quality ofworkmanship, type of company and reputation.
After a hand-full of qualified contractors arepicked, they are invited to participate in the tender. Similar to single stage selective tendering,they are not forced to accept this invitation but are blacklisted by the employer if they do so.
Thenumber of contractors involved in the pre-qualification can reach up to 20 participants that willthen be knocked down to the default 5-10 tendering participants. The interested contractors willthen purchase a copy of the tender document and fill in the rates of the project.
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Upon completion,the completed tender document will be sent back to the employer to be opened and recordedtogether with the consultants. The consultants will evaluate each one of the tender documentssubmitted and come up with a report of recommendations for the employer. Usually the employerwill abide to the recommendation. Once the contractor is selected, the contract document is madeand sent out to all parties involved.
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