7 Challenges in Tendering Process & How to Overcome Them

https://www.youtube.com/watch?v=hCdo1w6Ee78&t=1s

Are you considering undertaking a build tendering process for your dual occupancy project but aren’t sure of what challenges in the tendering process you might run into?

Well, stick around because, in this article, I will share the challenges you can expect to face and how you can manage them. We’ll also touch on the project tendering process.

Before we jump in, unlock your property’s potential with Little Fish, specialists in knockdown rebuilds and dual occupancy projects. Contact us today to get the best price and value on the market.

Let’s get into it.

1. Hitting Budget Without Affecting Quality

In the current climate – or any fluid market this isn’t as simple as it might sound. There can be significant differences between original estimates or expectations set 1-2 years ago and current market realities. 

This is all part of the game; it highlights how critical it is to know where you can ‘down-spec’ or delete items from a build or development. 

Understanding and learning how to value manage a project takes time and experience. You need to think about what can be removed that won’t affect the quality or value of the product. 

Think stone you can have a hero stone in the kitchen and then pull back to a complimentary secondary stone in the other wet areas. Intelligent decisions like this make all the difference when building to a budget.

2. How do you Review and Compare Tender Submissions

This comparison and review process is a super important step – you need to ensure you are comparing ‘apples with apples.

There is no point in automatically selecting the cheapest option even if they appear to be one of the cheap house builders Melbourne (or beyond) has to offer without fully understanding their tender submission, price inclusions, and, more importantly, their exclusions.

After comparing submissions and going through the ‘post tender clarification’ process, you often find the builder that was the cheapest at submission time isn’t actually the cheapest.

Other factors apart from cost need to be considered.

I’m talking about the program timeline, start time, current workload capability, previous experience for this type of project, delay damages, fixed price or cost plus, etc. 

This can be quite a tricky part of the tender process if you have never done it before – it’s hard to know what you’re looking at if you have never reviewed builder’s submissions.

Whatever you do don’t accept the lowest price until you are confident you have compared apples with apples.

It will take more time and effort. Still, it is a non-negotiable to avoid potential surprises later.

3. Tendering Process Timeline

Currently, we are experiencing delays in this process given how busy the industry is now – townhouse builders in Melbourne are taking longer than usual to complete their submissions (get prices etc.).

Prices are also returning higher. This means a lot more time is spent during the ‘post tender’ review period valuing, managing, and reviewing the buildability and design to try to save money where possible and still achieve the outcome everyone wants.

The key here is to get everything to your builders as soon as possible.

Ensure you follow up regularly and see progress. You need to communicate closely with your builders throughout the entire process.

4. Value Manage Your Project to the Right Price

I touched on the importance of value managing your project earlier. Knowing whether to delete an item or’ down-spec’ can be difficult. 

Understanding the value of specific elements or materials within development and their impact on the end sale is essential to complete the value management process correctly. 

Will people actually pay more for X vs Y, or am I overcapitalising on my development?

These are the things you need to think about and the decisions you need to make confidently.

5. Ensuring Everything is Included

Some builders don’t provide a complete schedule for review. So it can be hard to know what has been included and what hasn’t. 

If you are working on a new building, it is essential to ensure that the builder has reviewed and captured all plans, reports, permit conditions, schedules, etc.

Using a document transmittal is an excellent way to ensure this is done. The goal is to avoid variations by minimising and eliminating any gaps in the scope.

6. Managing Your Expectations

This is probably one of the hardest thingsfor us we manage projects for our clients, so we need to address their expectations.

It is not uncommon for clients to expect products or services today at 2020 market prices. If only that were possible! 

So, it would be best if you kept your expectations tight. You must understand that the market is fluid, so you must plan for it.

It’s also important to understand the development’s purpose. Is it for a dream home or investment? To sell or rent? Once you have clarity around the end goal, you need to plan and make decisions based on that.

7. Selecting the Right Builder for the Project

One of the biggest challenges in the tendering process is selecting the right builder.

Have they worked in the area, done this type of build before, have a good reputation in the industry, and been recommended by others?

Selecting the right builders to add to your tender pool is probably the most crucial aspect of any build. This will save significant time, effort, and headaches.

There is no point in getting to the end of the 4–5-week process only to realise that you haven’t selected a competent builder.

So, those are seven challenges in the tendering process. Finally, here are some techniques to help in the tender negotiation process.

I’ve covered the best way to select your builder on the channel, so hit the construction playlist for more information.

Filled under: All Building Developer Insights