With time, the construction industry is also evolving. Many construction projects these days require more than just an L1 quotation to win. For some projects, the weightage is also given to quality, timeline, risk management and complexity of design. To consider these factors, a single stage tendering process is not very effective. For this reason, the two stage bidding process is being utilized increasingly, especially in big, complex projects.
What happens in Stage 1?
To understand this stage, let’s assume that the design of a building is still in the works. The entire design is not completed but the client (government/private) wants an experienced contractor to join them from the beginning and help in translating the designs to ground reality.
That is why in stage 1 of the two stage bidding:
1. A technical proposal is asked from the contractor
2. Past projects experience are evaluated
3. Team members, resources, and time management techniques are examined
4. The suggestions on the design are marked.
In this stage of two stage bidding, the cost might be mentioned but it is not an agenda. The focus is on teamwork, problem solving and talent.
What is a Pre-Construction Service Agreement?
In stage one of the 2 stage tender process, the client and the shortlisted contractors sign a PCSA (pre-construction service agreement). Under this agreement, the contractors have to provide a few services like:
1. Creation of bill of quantity (BOQ)
2. Checking the technical feasibility of the design
3. Provide value addition suggestions
4. Site visit and planning
With this practice, the contractor gets to understand the ground reality and design team in the first stage of the two stage bidding process.
What Happens in Stage 2?
Now that the design is complete and the scope is locked, the contractors are asked for final price quotation. In this stage:
1. The contractor provides the final bid
2. Discussions on timelines, workflows and terms and conditions take place.
3. If everything falls in place, the contract is signed and construction is started
In this stage of the two stage bidding, the decision cost + capability, both are considered.
What is Value Engineering?
Value Engineering is a method of reducing the cost of the construction while maintaining the quality. In this process every aspect of the construction is carefully analyzed. It is not necessary that expensive material is always better. With accurate planning, design, and function costs can be reduced without hurting the quality of the overall project. This method helps government entities and companies in building efficient infrastructure.
Also Read: A Guide to Understanding Technical & Financial Requirements
What is the Contribution of Value Engineering?
In the second stage of the 2 stage tender process, the contractors are expected to play a crucial role in value engineering.
1. Suggesting cost-cutting where it is needed.
2. Suggestion better alternatives without compromising the quality
3. Help in making the design constructible
It is common to optimize material, manpower and method based on contractor’s feedback.
Example of Value Engineering in Stage 2
Let’s assume that a metro station has to be constructed. At the start of the project, the client is running short on time but does not have the complete design. They want the construction to be started as soon as the design is completed. In this case, the client (government/ private) chooses experienced contractors or a contractor to make a feasibility and execution plan with the designer in the first stage of the two stage bidding process. As soon as the design is completed, cost negotiations happen and the contract is awarded in the second stage.
Why is Strategic Thinking Important in the Two Stage Bidding Process?
Infrastructure construction is not just about brick and mortar; it is about long-term strategy, in which time management is the main driver. Especially in multi-core projects, where time, money, and reputation are all at stake, two stage bidding is the solution.
Two stage bidding process model comes from the mindset that is not all about lowest price. The client sees, which;
1. Contractor can become a partner in the vision of the project
2. Contractor can manage risk better
3. Contractor has practical experience in handling design challenges
In two stage bidding, a contractor is not just understood as a vendor but as a strategic ally. For example, a smart city project rapidly evolves, if the contractor is involved at an early stage they can give their suggestions in real-time which will make the execution more practical and efficient. With this approach, the project is not only completed in time but also goes through fewer disputes and yields relatively more satisfaction for the client and end users.
Things to Take Care in 2 Stage Tender Process
1. The contractor’s and client’s roles should be defined from the start.
2. In stage one, the coordination between the design and construction team should be strong.
3. The evaluation of the contractor should not only depend on experience but also their solution based thinking skills.
4. It is highly recommended to map the risks from the start via a risk register.
In Which Sectors Two Stage Bidding is Used?
1. Infrastructure Tenders: Projects like highways, Fly-over bridges and ports. In these projects, design, environmental impact and execution take place in parallel, that’s why the contractor’s early involvement is crucial.
2. Public Transport Projects: In metro or BRT projects rapid planning and customization is the name of the game. It is important to control the time constraints and cost, which is only possible in two stages.
3. Healthcare Facilities: In Hospitals and medical colleges, parameters like hygiene, safety, HVAC, and emergency compliance are vital. Involving contractors at an early stage makes compliance easier.
4. Defense and Aerospace Units: In constructions where safety standards are paramount. Secrecy and execution plan is the key. Thus, two stage bidding is usually utilized in such requirements.
5. Smart Buildings and Green Projects: For Projects in which sustainability, IoT systems and LEED certification are required, contractors’ understanding of technical details is important at an early stage.
Conclusion
If you want those kinds of tender projects where L1 is not the only deciding factor, but factors like the longevity of the infrastructure, stability, and expertise are involved in winning the projects, then two stage bidding projects are ideal for you. The 2 stage tender process might seem long but for smart buyers and experienced contractors, it creates long-term value. If you want to focus on building great infrastructures then you could leave the time-consuming process of identifying the right projects, matching eligibility criteria and keeping track of the timeline of tenders to BidAssist. It is a pan India tender aggregation platform that notifies you whenever a project meets your offerings and criteria.