Appointing the right contractor
By Damien Finnegan
Finding a contractor with the right skills to carry out a major works project can seem like a difficult task. The good news is that it’s not, providing you adopt the right approach.
By following the same robust strategy used in preparing and budgeting for major works – keeping in mind that all important mantra of ‘fail to plan, plan to fail’ – landlords and property managers can avoid any pitfalls when hiring contractors.
The first step is to put the works out to competitive tender. This not only provides the maximum opportunity to achieve value for money, it also ensures that the contractor with the most appropriate skills for the job is appointed. In addition, it reduces the risk of incurring extra costs through disputes and over-running of programmes and budgets.
It’s important to remember that the tender process should run in parallel with the requirements of Section 20 of the Landlord & Tenant Act 1985. This requires landlords to consult with tenants before committing to spending money on the building, a process that can take four to six months. They must also invite leaseholders to nominate possible contractors.
Whether as part of a programme of planned maintenance, reactive repairs, or an extension, the format and processes for tendering a construction contract remains the same. The following provides a basic overview of each of the stages involved.
Developing the specification
The specification is the control document. It defines the extent of the works and the client’s expectations of the contractor. A Chartered Building Surveyor is generally accepted as the best-placed consultant to prepare a comprehensive specification due to their qualifications, experience and day-to-day involvement in all areas of construction.
As well as providing guidance to the contractor on how the work should be undertaken, this is also the document that they will be expected to provide their tender price(s) against. Ambiguous or, even worse, non-existent specifications are the single most common cause of disputes between clients and contractors. With no common document to provide prices against, each contractor is pricing against their own understanding of the client’s expectations, which is obviously subjective. In short, a poorly constructed specification leaves the client at significant risk should a dispute arise, and considerably reduces the effectiveness of the tendering process.
Following preparation of the document, it should be signed off by the client before proceeding to tender.
Creating a tender list
It is the responsibility of the appointed consultant to prepare a list of suitable contractors to approach and invite to tender. Having prepared the specification they will have a good understanding of the expertise required, and they will apply this in order to gather a list of between four and six contractors (depending on the size of the project) who have the capacity and capability to deliver a competitive tender for the client.
When compiling the list the following criteria will be considered:
- Scope of work – the consultant will select contractors appropriate to the scope of work, meaning that the contractors will have similar previous experience and they will be in a position to provide a competitive price.
- Specialisms required – if the scope of works contains aspects that require specialist skills then contractors with capabilities to fulfil the contract must be identified. The consultant will do this through desktop research or liaising with industry contacts.
- Location of project – The client should not expect to pay for the transportation of a construction team across a large distance each day, therefore the consultant will choose contractors based within a reasonable geographic area. This will ensure all contractors on the list are able to provide a competitive price.
- Knowledge of appropriate contractors – the consultant will work with contractors on a day-to-day basis and therefore have knowledge of those that regularly and successfully deliver similar projects and meet the specified criteria.
- Consultation with the client – clients often have contractors already in mind which they may nominate, for example, contractors that have worked on the building before. The consultant should qualify these nominations and add these to the tender list at the client’s request.
The contractors must be approached and an agreement sought that they have capacity to tender within the parameters and timescales required. If the opportunity to tender is declined, an alternative contractor should be identified. This will ensure that the process is as competitive as possible.
Contractors who are unknown to the consultants or the client will be asked to provide evidence to prove their capability. This can include accounting information to prove that the company is financially sound, references for the successful delivery of similar projects and providing relevant and up-to-date insurance for the scale of the project. Contractors failing to satisfy these may be removed from the tender process.
Finally, tender selection may include interviews with potential contractors, and appropriately supporting communication with referees.
Producing the tender documents
The consultant will prepare the tender documents and compile them into a ‘tender pack’ for the contractors interested in bidding for the works. It will comprise:
- A specification of the works, including any drawings, design references and the form of contract
- Pre-construction details, such as health & safety, risk assessments and any information relevant to the works, the site and the client
- Instructions for tendering, along with any further preliminary information
It is recommended that contractors are allowed a minimum of three to four weeks to submit their tenders, depending on the extent of the works/project.
Assessing the tenders
A detailed tender analysis is essential and one of the most important stages of the tender process. Using their own internal tender analysis software and process, together with their construction experience, the consultant will identify the most suitable contractor.
Because the consultant will have a reasonable idea of the market rate for each element of the work, they can review each contractor’s proposed pricing schedule. Should any of the figures be extraordinarily high or low the consultant will clarify with the contractor that they have interpreted the scope of work correctly. They may then give the contractor the opportunity to reconfirm their price(s).
The consultant will review pricing schedules for any obvious errors and, again, they may ask the contractor to confirm in writing whether they wish to leave their submitted price as it stands, or make a change to their tender offer.
This process is designed to minimise the risk of any misunderstandings which could cause a potentially costly dispute further down the line for the client.
Following analysis of the contractors’ pricing, the consultant will rank submissions in ascending order, with the lowest-priced contractor at the top.
Formulating recommendations to the client
It is the consultant’s role to balance the quality and price information provided by the contractors in order to recommend those most likely to be able to complete the project on time, on budget, as well as deliver value for money to the client.
The consultant will use their experience to assess any risks involved in using each contractor, starting with the lowest priced and working up to the highest, and formulate a list of recommendations in ascending order. For example, if tendering a residential refurbishment and the lowest-priced contractor had only provided experience in the education sector (but was suited to completing the works tendered for) with mixed feedback from referees, the consultant may consider that the risk of them failing to deliver the project in line with expectations is high. The consultant would then look at the second lowest-priced contractor who may have topped the list in terms of quality, with a strong track record of similar projects, and excellent references; in this case the consultant would most likely recommended the second lowest priced contractor, rather than the lowest.
A summary of the information gathered, along with the comments and recommendations would then be presented to the client in the form of a Tender Analysis Report. The conclusion will then give their recommended first, second, and third choice contractor to undertake the contract.
Following these key steps – developing the specifications, creating a tender list, producing the tender documents, assessing the tenders and formulating recommendations – will help to ensure that the contractor with the right skills for the job is appointed, provide maximum opportunity to achieve value for money and cut the risks of extra costs.
Posted on 31 May, 2016