project tender process

In this article, a residential property developer will explain the project tendering process from start to finish.

Here at Little Fish, we tender out projects all the time. As expert property developers, it’s our job to manage residential development projects. 

Every one of these requires construction to occur, so we’ve usually got a few tenders out for builders to bid on.

It’s essential to nail the tender process. This will usually determine the cost of your build, which is a significant factor.

Construction is the most expensive step of subdivision development. Other aspects cost too, but the big build is the considerable cost.

In this informative blog, we’ll share everything about the project tendering process from a property developer’s perspective.

We’ll cover an explanation of what the tendering process is, the objective of the tender process, and then the steps of the tendering process in construction.

By the end, you’ll be an armchair expert on residential property development tendering.

So, without further introductions, let’s get into it.

What is Tendering Process in Construction?

Put simply, tendering (in this context) is the process where a company or individual invites building companies to bid for a construction project.

what is tendering

The townhouse builders will either be big volume players or smaller independent outfits and will put together a written pitch or bid document.

This document is also called a tender or a tender submission. Check out this video that shares a list of tender documents required for townhouse development tenders.

Now, there are a few steps to this process, which we’ll explain below.

The takeaway is that a tender is the process of builders pitching their services to you. They are essentially competing for the opportunity to build your project for you. 

The property developer then decides which builder will get the job based on reviewing the tenders submitted. 

Objective of the Tendering Process

The tendering process aims to determine which duplex home builder offers the best value for money. 

But there’s a bit more to it than that.

tendering process objective 2

It’s also about determining whether or not the builder matches your vision for the project.

As real estate developers, we have certain expectations about running our projects. We have an end goal: building exceptional homes that we sell for profit. 

We need to ensure that our builder can provide this vision.

Other elements are also to consider, such as the builder’s solvency or capacity to stay afloat. There’s no point in awarding a contract to a builder that will go bust halfway through.

We’ll get into that a bit further along in this article. 

So, let’s get into the tendering process steps.

Steps of the Tendering Process

This process has multiple steps, like most aspects of a development project. 

Step 1 – Create a List of Builders

loan lender list

The first thing to do is create a list of different builders that you may want to work with. 

There are various ways you can create this list. A Google search is one of them, as is reaching out to your personal networks. 

You could even hit up the comparison sites that find builders for you.

A good tip that doesn’t get shared often is that it is worth driving around your nearby areas and looking for construction sites. Jump out of the car and ask to chat to the boss. 

Sometimes, a local can offer cost efficiencies that a further away builder cannot.

Step 2 – Airtight Construction Documentation

There is no skipping this step. There’s no point going out to tender without airtight construction documentation.

construction documents

These are all the bits of paper that your builder will need to provide a quote.

You don’t want the builder guessing or making assumptions. The only person who benefits in development is the builder because they can throw extra costs to their hearts’ content. 

Solid documentation means the builder needs to cost against what’s in the paperwork, so there is no room for sneaky assumptions. 

Step 3 – Prepare the Tender Package

builder tender package

The next step is to prepare your tender package. The builder will use this to quote your job and submit their bid.

This will include all documentation, designs, and the other things a builder needs to submit their proposal. 

Do you want to know what we do at Little Fish? We have a standard template with an itemised list of everything a builder needs to estimate a cost.

This way we are prepared and know our cost. In this game, guesswork and estimations of figures are a hard no. You need to check, double-check and even triple check your figures every step of the way. 

Rushing and guessing costs serious money.

Step 4 – Send out Your Tender Package

real estate email marketing

The next step is to bundle up and send out the tender package to your shortlist of builders, you know, the ones you researched in step one.

An essential tip here is to only send this out to builders who have shown some motivation and initiative to get involved. If someone hasn’t returned calls or has left you waiting for days – they miss out on the opportunity to earn your money.

This way, you don’t waste time on builders that won’t give you the time of day. Trust me, you don’t want to spend over a month on a tender process and only receive one build estimate back.

So, pick the best and send them the package.

Step 5 – Initial Follow Up

About a day after your send your tender package, get on the phone. Call and follow up each builder that you sent the package to. There are a few reasons you want to do this. 

The first is to ensure they received everything and there were no glitches or hiccups. 

But there’s also another reason. You want to make sure they intend to price the job and get back to you.

Also, you want to ensure they are committed to your timelines. Every day has a dollar value attached, and a builder wasting your time costs you money.

Finally, they may have some initial questions to ask about the project before they quote, and you need to be available to answer these. 

Step 6 – Follow Up the Follow Up

Your tender process will have a deadline for submissions. This is a date that the builders need to submit their estimates by. I’ve found that calling the builders during this week is a good idea.

You want to ensure that they are on track to submit their pricing to you by the agreed date. 

This shows that we are involved and keen on reading their submissions and keeping them accountable to submit by the date you’ve specified. 

Step 7 – Collate the Submissions

collate tender submissions

This next step is about collating all of your submissions together. Depending on how many builders you’ve approached who are bidding on the job, you may have anywhere between three to ten submissions.

This is a long process, but don’t rush it. You want to go over them with an eagle eye. Compare them against each other for each item to make sure the builder hasn’t missed anything. 

The key elements to investigate here are the build time and cost. 

The timeline is important because delays cost money, and if you’re selling off the plan, you won’t see your profits until the homes are sold and settled. 

If the pricing is on point to what you are prepared to spend and matches your budget, you can skip the next step. 

Step 8 – Value Management

If the submissions don’t meet your cost outlay, you need to undertake some value management processes.

The goal is to stay on target with the vision and core of your project while making considered decisions about spending.

You need to spend money, for sure, but only spend where the money will add value. 

An example here is your stone elements. 

value management in construction 3

For instance, you might have a premium stone benchtop material in the kitchen and opt for cheaper stone in other wet areas such as the laundry or the bathroom.

The builders can help with cost estimations here if you need. They know costings in and out, so don’t be afraid to ask questions and find out what will get you the best value for money. 

Step 9 – Select Your Builder

meet the builder

This step is about choosing the builder for your project. 

Here, an important tip is that you don’t always want to choose the cheapest option. This is because you may get into trouble with a cheap bid. And you need to be well-tooled to negotiate.

A cheap quote may mean the builder subcontracts out elements of the job to the Dodgy Brothers Incorporated, who will cut corners, use cheap material, and do a job that won’t pass inspection.

When selecting your builder, you need to consider the timelines they’ve provided and the cost they’ve quoted. 

But you also want to investigate their history of delivering townhouse builds. Ask them for the contact details of previous clients and speak to them. If they have nothing to hide and have done good work, they’ll happily do this. 

Next, ask some questions about how they intend to resource the project. Will they employ a full-time development manager, for instance? Someone who will oversee the build and keep it on time and to budget. 

Will the boss be onsite, or will they have multiple jobs going at once? If so, how many. 

If a builder seems they will struggle to squeeze your project in amongst their other work, you may want to choose a builder who seems more available.

Once you are close to making that final call, it is worth requesting a solvency letter from their accountant. A registered accountant can provide this, letting you know that they are trading while solvent. If they refuse this, pass on them.

You cannot afford to have a builder go under during your project construction. It will cost a massive amount and cause spiraling delays that will cost even more. 

Once you’ve locked in your builder, it’s time for step ten.

For more information around questions to ask your builders click here.

Step 10 – The Contract

townhouse contract

The next step is to execute a contract with your chosen builder. In most situations, an industry-standard contract such as those provided by HIA or Master Builders should do the job. 

In some rare situations, a development project might require a custom contract. This would not occur in most cases, so don’t worry too much about it.

The main element to consider is that the contract covers every detail of the construction process. You need all details, fittings, fixtures and finishes included.

Remember, avoid assumptions. Assumptions result in variations, and builders love variations because they can charge for them. Get everything on paper with both your signatures on it. 

The last thing to include is a liquidated damages clause. This basically means that if the builder is responsible for delays, they will pay you damages to cover your loss of income/profit due to the delays. We put this clause in all our contracts. 

Summing Up

In this helpful blog article, we’ve shared everything you need to know about the project tendering process and steps, as explained by a property developer. 

little fish properties

By now, you know most of what you need to put your project out for tender. As always, if you have any questions, don’t hesitate to get in touch with us here. 

We’re always happy to consult and answer questions.