Tendering in Construction: Definition, Importance, Types, and Procedures

What is a Tender?

A tender is a formal invitation issued by a client (or their consultant) to contractors to make a priced offer (bid) to complete specified construction works in accordance with the drawings, specifications, scope, time, and contractual terms.

Why Tendering is Important?

Tendering is essential in construction because it provides fair competition by allowing multiple qualified contractors to bid under the same conditions, so eliminating favouritism and bias. Tendering assists the client in obtaining the best value for money while maintaining acceptable quality and performance criteria. The structured tender process also encourages openness, as all bidders adhere to well specified rules, paperwork, and evaluation criteria. Tendering also decreases risk for the client by allowing for the assessment of contractors' financial competence, technical expertise, and past performance prior to contract award, resulting in improved project outcomes and contractual certainty.

Key points 

• Ensures fair competition

• Achieves best value for money

• Maintains transparency

• Reduces risk to the client

Types of Tendering

1. Open Tender

An open tender is a procurement approach in which the client publicly announces the project and invites any interested and qualified contractor to submit a bid. The advertisement is typically placed in newspapers, official websites, or procurement portals. This strategy encourages maximum competitiveness and openness, making it ideal for public-sector and government-funded projects. All bidders are given the identical tender paperwork and information. However, open tendering might attract a large number of bids, including unskilled contractors, extending the time required for tender evaluation. Despite this disadvantage, open tendering is frequently utilised to assure fairness and value for money.

Key points

• All interested contractors may submit a bid.

• Advantages: Wide competition; fair and transparent.

• Disadvantages: Time-consuming; may attract unqualified contractors. 

2. Selective Tender

Selective tendering involves inviting a small number of contractors who have been pre-qualified based on their technical expertise, financial stability, and applicable experience. Prior to sending tender documents, the client or consultant creates a shortlist of suitable contractors. This strategy lowers the risk of unqualified bidders and raises the quality of tender submissions. Selective tendering reduces time in tender evaluation when compared to open tendering. However, it restricts competition and may lower price competitiveness. This strategy is widely utilised in private sector projects, large-scale developments, and projects that require specialised building expertise.

Key points 

• Only pre-qualified contractors (based on experience, financial stability, and technical capability) are invited.

• Advantages: Ensures quality bidders; faster than open tender.

• Disadvantages: Limited competition may reduce cost competitiveness.

3. Negotiated Tender 

In a negotiated tender, the client engages in direct negotiations with a single contractor to determine the contract price and terms. This strategy is commonly utilised when time restrictions, specialised knowledge, or job continuity are required. Negotiated tendering provides for early contractor involvement and greater pricing and construction approach flexibility. However, the absence of competitive bidding raises the possibility of greater costs and reduced transparency. Strong cost control and professional oversight are required to ensure good value for money. This strategy is typically used for emergency labour, specialised projects, and contract extensions.

Key points 

• Client negotiates directly with one or more contractors.

• Advantages: Faster; allows early contractor involvement.

• Disadvantages: Less competitive; may lead to higher costs if not carefully managed. 

4. Two-Stage Tender

Two-stage tendering is a procurement strategy in which the contractor is appointed in two phases. In the first stage, contractors submit bids based on preliminary costs, overheads, profit, and technical capabilities rather than a fixed construction price. The favoured contractor then participates in design development, value engineering, and risk management. Once the design has been adequately developed, the second stage involves agreeing on a final contract value. This strategy enhances buildability and risk management, but offers less cost certainty in the early phases. Twostage tendering is commonly utilised for complex and time-sensitive projects.

Key points :

• Stage 1: Contractor is selected based on preliminary prices or capability.

• Stage 2: Final contract sum is negotiated after design is developed.

• Advantages: Allows early start of construction on parts of the project; flexible design changes.

• Disadvantages: Cost certainty only after stage 2; potential disputes if not managed properly.

Tender procedures

1. Pre-Tender Stage (Preparation) 

This stage is handled by the client and consultants.

• Define project scope and objectives

• Prepare design drawings and specifications

• Prepare Bill of Quantities (BOQ) or cost schedules

• Decide procurement route (Traditional, Design & Build, Management, etc.)

• Decide type of tender (Open, Selective, Negotiated)

• Prepare tender documents

2. Invitation to Tender (ITT) 

• Contractors are invited to submit bids

• Invitation issued through:

o Public advertisement (open tender)

o Shortlisted contractors (selective tender)

o Direct negotiation (negotiated tender)

Key documents issued:

• Invitation to Tender

• Instructions to Tenderers

• Drawings & specifications

• BOQ / pricing document

• Contract conditions

3. Tender Period 

During this time, contractors:

• Study tender documents

• Visit site (site visit / pre-bid meeting)

• Raise queries (RFIs)

• Receive clarifications or addenda

• Price the works and prepare submissions

Client’s role: Issue clarifications fairly to all bidders

4. Tender Submission

• Contractors submit tenders before the deadline

• Submissions may include:

o Priced BOQ

o Method statement

o Programme

o Company profile

o Bid bond / tender security

Late submissions are usually rejected

5. Tender Opening

• Tenders opened at a fixed time

• Prices recorded (especially in public projects)

• Confidentiality maintained

No negotiation at this stage (for competitive tenders)

6. Tender Evaluation

Evaluation is usually done in two stages:

a) Technical Evaluation

• Experience and past projects

• Method statement

• Programme and resources

• Financial capacity

• Compliance with specifications

b) Financial Evaluation

• Arithmetic checks

• Comparison of prices

• Identification of lowest or most economically advantageous tender (MEAT)

Abnormally low tenders may be investigated

7. Post-Tender Clarification / Negotiation

• Clarify qualifications, exclusions, or errors

• Negotiate price or scope (if allowed)

• Finalize contract sum and conditions

Common in private projects 

8. Tender Recommendation & Approval

• Consultant prepares Tender Evaluation Report

• Recommends preferred contractor

• Client reviews and approves

9. Award of Contract

• Issue Letter of Acceptance (LOA) or Letter of Award

• Contractor submits:

o Performance bond

o Insurance

o Programme 

Contract becomes legally binding

10. Contract Signing & Mobilization 

• Formal contract signed

• Site possession given

• Contractor mobilizes resources

• Construction begins