Building Tender Process: 10 Steps That Will Guarantee Success

https://youtu.be/JMsPrYr-DP0

Are you looking to undertake a building tender process for your residential development project? or a land subdivision in Melbourne?

Well, stick around because, in this video, I will share the exact building tender process that we here at Little Fish follow on every townhouse development project we manage. And I’ll share all the challenges in the tendering process.

Let’s get into it.

Alrighty, for the article, let’s assume that your project’s planning application is sitting in council waiting to be assessed and approved. And you are development ready.

This is the perfect time to start figuring out who you would like to tender for your project.

1. Compile a List of Builders

Step one is about compiling a list of builders you would be interested in working with.

There are many ways that you can go about this. You could jump on Google, reach out to family and friends.

You could even jump on third-party sites such as homeshelf or ibuildnew that will connect you with relevant builders.

But for us here at Little Fish, something that we have found great success with particularly early in our journey was getting in the car and driving around the immediate area looking for active building sites and reaching out to those townhouse builders.

There are many reasons why this makes sense, such as the efficiencies they should be able to afford your project by building in their backyard.

2. Bulletproof Documentation

Step number two is ensuring that your tender documents are bulletproof. Bulletproof documentation is non-negotiable. You can’t even consider starting your project tendering process until your construction documentation is watertight.

By construction documentation, we are talking about everything that your builder will need to quote your project.

It is crucial that your builder doesn’t need to make any assumptions because trust me when I say assumptions are no good.

The only people that assumptions benefit are the builders.

Having your documentation in order means your builders will be pricing apples against apples which will help you make your selection less complicated when the time comes.

3. Preparing Your Building Tender Package

Step number three is all about preparing your tender package. All builders must receive consistent information.

The bulletproof documentation you provide them is a good start.

Here at Little Fish, we like to take it one step further and give the builders a standard template that itemises the specific items that need to be priced.

The standard template ensures that nothing gets missed and makes it super easy to compare tenders.

4. Sending Your Building Tender Package Out

Step four is when you send the tender package out to your shortlist of builders.

The key here is to only send the package out to builders that have shown motivation to price the job. It will be critical that the list you go out to has committed to pricing the job.

There is nothing worse than getting to the end of a 3–5-week tender process and only getting one build price back.

5. Initial Builder Follow-up

Step fice is about following your builders up. It is good practice to jump on the phone and give each builder a follow-up call approximately 24 hours after sending out the tender package.

We do this for a few reasons. Firstly, to ensure that they received the documentation without issue. Secondly, to confirm that they have every intention of pricing the job.

We want to get confirmation that they are committed to the submission timeline. And lastly, we also want to be able to answer any preliminary questions they might have.

6. Secondary Builder Follow-up

In running a proper tendering process in construction, you would have nominated a tender close date. It is good practice to give your builders another follow-up call during that last week.

You want confirmation that we can expect their tender submission as agreed by the due date.

This shows our intent, it shows that we are waiting on them and that they are every chance of being successful if they submit. 

7. Collating the Building Tender Submissions

Step number seven is about collating the submissions. When reviewing the submissions, you want to be cross-referencing them to ensure nothing has been missed.

You need to be looking at both time and cost.

If the pricing is where you expected and need it to be, then great. You would skip the next step and go straight to step nine.

8. Value Management

If not, then step 8 is all about value management and buildability. The key here is to make intelligent choices.

The goal should be to stay true to the core fabric of your project whilst making thoughtful selections.

Spend money where you think it will add value and avoid spending money in areas you know what yield a return.

It sounds easy, but it can take many years of experience to know where you should and shouldn’t spend money.

A straightforward example to get you heading in the right direction is your stone.

You might have a hero stone in the kitchen and a secondary, cheaper stone that complements the hero stone in the other wet areas.

Builders will be your friend here, particularly if you don’t have that experience.

They will help you achieve this successfully as no one knows the numbers better than these guys, so work closely with them to help value manage your project to achieve a successful outcome.

9. Selecting Your Builder

Step nine is all about selecting your builder. It is essential to note you aren’t looking for the cheapest builder; this is too simplistic. I can almost guarantee that it will get you into trouble.

You need to consider both cost and time and look at things like the builder’s history of delivering new townhouse developments Melbourne investors rely on for quality and consistency.

Talk to past clients and get a feel for what you can expect regarding service and quality.

You want to try and understand how they plan to resource the job. Will the project have a full-time property development manager? Will they be onsite all the time? How many projects will they be running at a time?

These are just some of the things that you need to consider.

And when you are getting close to a decision, a standard good practice is to request a solvency letter from the builder that you are considering’s registered accountant.

This is their accountant confirming that they are a solvent company at that point in time.

It doesn’t matter how, but the goal is to build a detailed narrative of quantitative and qualitative data around each builder until you have enough information to make a decision confidently.

Here are some questions you should be asking each builder.

Once you’ve made your decision, don’t forget to negotiate.

10. Executing the Building Contract

Next up is Step 10, which is all about executing the building contract with your selected builder. In most cases, one industry-standard contract, such as the HIA or Master Builders should be sufficient.

There are rare occasions where a project might require a custom contract, but this would be less likely than more and would require particular circumstances.

The main thing with these contracts is to ensure they cover every detail, fixtures, fittings, finishes etc.

Remember, you want to avoid assumptions. If your contract is cluttered with assumptions, it’s not ready to be executed, because this is where building contract risks can quickly turn into variations, delays, and margin pressure.

You want to ensure you include custom liquidated damages and that the price and terms are listed as agreed.

That’s an overview of how to run a building tender process as a boutique property developer.  And click here to learn more about the process of building a house in Australia. And here, if your considering a builder in Highett Melbourne.

Wrapping Up

If you’re looking for more detailed information, then head over to our property development blog we’ve got plenty more knowledge to share.

From managing your tender process effectively to evaluating the top 10 builders in Melbourne (or your local area!) for your townhouse project, you’ll find everything you need to make confident, informed decisions that protect your margins and set your project up for success.

If you’d prefer more hands-on guidance, an experienced property development consultant can help you assess your options, avoid costly mistakes and make better decisions throughout the development process.

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