Tendering: 24 January 2024

Recently I have been asked about my tendering process…

To answer the question privately will take quite a bit of time so I am putting a generalized post up here. The topic is very very large so this is going to be very very surface scrape.

I am also noting that I am not ‘best’ at this at all that is why I engage professionals. Some may comment on this post and correct me, or add extra value.

Tendering can be done in two ways:

Informal or formally. If it is for a main contractor, I would choose formally and encourage a professional approach for any tender. If it is for my Contractor Management model, then I mix the approach — some trades are so small they are one-person operations often with English as a second language so can get so swamped with details e.g. my shower installations were done via messenger and on-site pre-start discussions.

Even small informal ‘contracts’ are law-bound and both sides are protected under the Construction Contracts Act. A good trade does good work, a good principal pays on time, and the work is recorded etc.

A tender process seeks the best group for a defined task. The process is covered under law (Fair Trading Act and the resulting contracts under the Construction Contracts Act). With a formal contract in place (for the big trades), this provides a good set of operational rules and avoids unpleasant disputes.

How do I find my trades?

Word of mouth (most important) but not just anyone’s word of mouth, I ask in my trusted network.

Note: this whole industry is based off relationships and you have to trust people — due diligence first though.

Looking around the local area and seeing who has sign boards up (trades waste a lot of time driving between suburbs so good if they are in one area).

What do I send out and can I provide a template?

Can’t/won’t provide a template as this is IP (mostly the analysis template though).

So send out a polite request and include the consenting information: RC, BC, EPA, etc (via a link).

Is it easy?

NO AND YOU CAN BE EASILY TRICKED!

The tender review and recommendation stage is hard. Need to understand what has been quoted for what are PC sums (estimates subject to variation etc).

I got caught out on my steel quote (I wasn’t tricked just didn’t look at it properly and they didn’t present it obviously) for Nield Rd. Better diligence on my part would have prevented this.

How to handle tendering?

Do what I did and get a formal education. People tell me, the best way is to learn on the job — yeah right! This industry is cowboy and many practices that don’t follow the law are used. If I hadn’t picked up residential papers via the Open Polytechnic I would have been none-the-wiser and may not have been able to stand my ground as I have. My other tertiary qualifications and corporate experience have helped a lot e.g. selecting a factory to manufacture a toddler milk-powder (in the ‘90s) is similar to selecting a head contractor to build a house… both are heavily regulated and require expertise.

What do I do that might be a bit different?

I have a database of build costs (self accumulated and confidential). I separate each build into parts and by build type & style. This means I can see what the rates applied are and who is trying to pull a fast one. This intellectual property saved my last project.

What do I recommend you do?

If you want to drive your own developments and want to be a developer then get a professional in to do your first tender. At the same time get yourself an endorsement or qualification in the area (polytechnic or university depending on your processing band-width and future plans).

If you don’t want to get caught in the detail — contract it out. Quantity surveyors will do it and so will Project Management companies. Not all are created equal. I had an independent QS do a tender for me — when I drilled down into the numbers (that weren’t what they seemed) it I threw it away and it was started again (using a different support team).

This is a VERY tricky industry. A small first time developer is like a little fish being circled by sharks. You need to insulate yourself from sharks.

Due diligence, care with tenders, and fair contracts are the way to go.

PLEASE DO NOT ASSUME YOU CAN LEARN ON THE JOB — you might get lucky or you might not and the damage could be rather significant.

I think it was Charlie Munger who said something like: find out what can go wrong and then do your best to avoid it.