procurement guide - two stage tendering
This process route can also form the basis for Competitive Dialogue.
In the case of a two-stage process, the selection of a contractor is made by means of a first-stage tender early in the project programme before the design is well advanced. With the exception of partnering this process can be used in connection with most of the routes listed above.
Normally, the first-stage of a two-stage process is by means of a competitive tender based on limited elements of the work, for example:
- a schedule of unitary rates provisionally prepared from the design drawings as prepared at the time of the stage-one tender; *
- preliminaries costs (site staffing, plant, site setup, scaffolding, craneage, insurances, etc);
- the percentage required for overheads and profit;
- the percentages required on Dayworks;
- additions required on the sub-contract work which is to be sub-let;
- submission of CV’s for proposed site and head office staff; and
- method statements - so that the contractor’s understanding of the project can be assessed by the design team and the client.
* If time and design information is available, measurements might be made of selected major work elements (for example demolitions) and Bills of Approximate Quantities (or a Schedule of Works) can then be included for fuller pricing in the first-stage documents.
At stage-one a Contractor is selected from bids made on the basis of the limited information available at the time and will often include, but is not limited to:
- proposed preliminary costs
- proposed overheads and profit level(s)
- labour costs
- principle plant costs
- sub-contract works cost, where these can be defined to a level that can be priced
- interviews and assessments of the contractor’s proposed staff
- project understanding and proposed method statements
- the contractor’s willingness to enter into the second-stage negotiations
- and the like
The second-stage, a Bill of Quantities/Schedule of Work or a more fully detailed Schedule of Rates or a mixture of both, is generally prepared, priced by the contractor chosen as the output from stage one and the final price agreed through ‘open book’ negotiation in order to calculate the contract sum.
As referred to above, a two-stage tender process can overlay any of the ‘traditional’ procurement routes and can bring an additional set of advantages and disadvantages to the chosen means of tendering. Set alone, two-stage procurement can provide:
- Early appointment of contractor and access to his experience of programming and buildability.
- An earlier start on site than with a single stage process, because the works can proceed, if required, before a contract sum has been negotiated and fixed.
However, two-stage procurement does not establish a firm contract sum at the time when the contractor is initially appointed (Stage 1 appointment); this is calculated later (following a successful Stage 2).
It is therefore most appropriate for projects where an early start on site is required and where a project is reasonably well defined, in terms of the scope of work; and for which management or construction management are not considered appropriate.