Partnering or negotiated work is increasingly seen as a way for contractors to help clients save money while enabling them to improve margins. But is it always the best procurement method?
This week we ask: Is an element of competitive tendering essential for efficient contracting?
Adam Tuke, contracts director, Jackson Civil Engineering
I am fully in favour of competitive work. One hundred per cent negotiated work would certainly not be good for our company. Contracting is a risk business and to thrive we must be prepared to assess the risks and accept those we feel confident to manage effectively, having priced them accordingly.
It is important for staff to be exposed to competitive work at both tendering and construction phases. There is nothing like a keenly priced competitively-won contract to bring out the best innovations and ideas.
Jackson Civil Engineering likes to maintain a balance in its workload between negotiated and competitive work, realising that we need to serve our clients' interests. There will always be many clients whose flow of new schemes may be irregular and who do not have the resources and knowledge to enter a partnering relationship.
For them a competitive single project tender may still be the most appropriate method of procuring their project. By selecting their contractors carefully they can still be assured of obtaining good value. If we were to lose the skills to flourish in this sector we would wither as a truly efficient contractor.
Moreover, as a contracting industry we must retain those same skills unless we all wish to describe ourselves as service providers.
There is absolutely no reason why competitively tendered work should be confrontational, as many of the advocates of partnering would have us believe. The most important element of any contractual relationship is the attitude of both parties. We, along with other like-minded contractors, have demonstrated that it is perfectly possible to establish working relationships with our clients and provide them with a first-class service, regardless of the form of procurement used.
I am convinced, therefore, that competitive tendering will remain a vital form of procurement in civil engineering.
Gordon Morrison, director Morrison Construction
In the experience of Morrison Construction, competitive tendering focuses attention on lowest price as opposed to best value, whereas a negotiated tender focuses far more on serving the customer's needs and giving full recognition to value for money. Efficiencies are achieved with effective cost management systems that anticipate costs over the whole life cycle of the project and assist the client with his wider financial decision making strategies.
The UK marketplace shows evidence which clearly demonstrates that companies focusing on the acquisition of best value and excellent customer service lead the way. Those that focus on lowest price and disregard their suppliers' previous achievements are left behind.
We have seen evidence in recent months where our clients have been put under pressure to reduce cost because of pressures on their margins. Previous gains achieved through negotiation and close co-operation with their suppliers have been thrown away in preference for lowest priced tenders and perceived savings. One of our clients recently threw away a 30% real on site saving in favour of a perceived tender benefit of just 5%.
Morrison has no objection to bidding on a competitive basis if clients feel that this is the best way to start a bidding process. However, if real long-term cost savings are to be achieved, negotiation with the preferred bidder on how projects are to be delivered and how best value can be achieved is essential.
Therefore, negotiated tenders are ultimately in the client's best interest. Costs on paper may appear greater, but project management needs are focused and commercial staff costs are lowered, as disputes are eliminated. The risk element is greatly reduced on both sides and a long-term working relationship can be achieved.