Competitive tendering - Revision history

Tkokotas at 13:36, 19 November 2018

2018-11-19T13:36:35Z

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			''Developed by Nikolaj Hansen''


	This article is about competitive tendering which is the most commonly way for a client to procure construction services. Procurement is important because of the principal/agent problem where the client has to choose those who are appropriate, competent and trustworthy. This leads to the lemon problem which attends the problem regarding asymmetry of information.		This article is about competitive tendering which is the most commonly way for a client to procure construction services. Procurement is important because of the principal/agent problem where the client has to choose those who are appropriate, competent and trustworthy. This leads to the lemon problem which attends the problem regarding asymmetry of information.

S123388: /* Pre-qualification */

2017-06-22T08:21:46Z

Pre-qualification

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	These selection criteria can be set as the client fits best, but it is important that the client has stated which criteria the tenders have been chosen by in the contract notice.		These selection criteria can be set as the client fits best, but it is important that the client has stated which criteria the tenders have been chosen by in the contract notice.

	Some recommendations for securing an effective pre-qualification is:		Some recommendations for securing an effective pre-qualification are:

	* to describe the content of the project as detailed as possible.		* to describe the content of the project as detailed as possible.

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2017-06-22T08:21:08Z

Annotated bibliography

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	* https://www.designingbuildings.co.uk/wiki/Tender_processes_for_construction_contracts		* https://www.designingbuildings.co.uk/wiki/Tender_processes_for_construction_contracts

	This ~~webside~~ with its links gives an overview and explanation on the different tender processes for construction contracts.		This website with its links gives an overview and explanation on the different tender processes for construction contracts.

	* '''The business case for lowest price tendering?''', (Construction excellence, 2011)		* '''The business case for lowest price tendering?''', (Construction excellence, 2011)
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	* https://www.danskbyggeri.dk/for-medlemmer/jura/byggeriets-love-og-regler/		* https://www.danskbyggeri.dk/for-medlemmer/jura/byggeriets-love-og-regler/

	This ~~webside~~ with its links gives an overview and explanation on which laws and regulations ~~their~~ is for construction ~~servises~~ in Denmark.		This website with its links gives an overview and explanation on which laws and regulations there is for construction services in Denmark.

	* http://europa.eu/youreurope/business/public-tenders/rules-procedures/index_en.htm		* http://europa.eu/youreurope/business/public-tenders/rules-procedures/index_en.htm

	This ~~webside~~ is the EU tendering rules and procedures, which also includes the thresholds triggering EU‑wide rules.		This website is the EU tendering rules and procedures, which also includes the thresholds triggering EU‑wide rules.

S123388: /* Rules and laws */

2017-06-22T08:19:55Z

Rules and laws

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	* Equal treatment secures through the entire tendering process that the client treats the tenders equal. This counts in all aspects and not only on the background of nationality.		* Equal treatment secures through the entire tendering process that the client treats the tenders equal. This counts in all aspects and not only on the background of nationality.
	* Transparency secures that there is public knowledge about the tendering, so every interested supplier can express their interest for supplying their services. This gives also more complete tender documents from the client.		* Transparency secures that there is public knowledge about the tendering, so every interested supplier can express their interest for supplying their services. This gives also more complete tender documents from the client.
	* Proportionality secures that the demands from the client to the tenders is fair. The demands may not exceed what is necessary to comply with the concrete needs for ~~client's~~ .		* Proportionality secures that the demands from the client to the tenders is fair. The demands may not exceed what is necessary to comply with the concrete needs for clients.

	In Denmark the client is subjected to "Udbudsloven" if the value is above the current threshold from the directives.		In Denmark the client is subjected to "Udbudsloven" if the value is above the current threshold from the directives.

S123388: /* Big idea */

2017-06-22T08:18:19Z

Big idea

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	Competitive tendering is the most commonly used way for the clients to procure construction services.		Competitive tendering is the most commonly used way for the clients to procure construction services.

	The procuring phase is important to attend because of the principal/agent problem where the problem is asymmetry of information. The asymmetry together with self-interest for each participants of the contract, generates two main problems which are the moral hazard and the adverse selection. Here is the problem of the adverse selection, also called “the lemon problem”.		The procuring phase is important to attend because of the principal/agent problem where the problem is asymmetry of information. The asymmetry together with self-interest for each participants of the contract generates two main problems which are the moral hazard and the adverse selection. Here is the problem of the adverse selection, also called “the lemon problem”.
	The lemon problem for the client that wishes to procure construction services is that he/she maybe does not know everything about the supplier. In the procurement face the client dos maybe not know if the supplier supplies poor quality work.		The lemon problem for the client that wishes to procure construction services is that he/she maybe does not know everything about the supplier. In the procurement face the client dos maybe not know if the supplier supplies poor quality work.
	The lemon problem is engaged to insure that the client hires competent suppliers of construction services. When asymmetry in information is high the poor-quality goods will drive out the better-quality goods in the market. This is especially the case in construction due to the high levels of uncertainty and it is highest in the early stages of the project. Another purpose of competitive tendering is for the client to get a lower price and the competition in the building market is kept sharp and motivated to the project.		The lemon problem is engaged to insure that the client hires competent suppliers of construction services. When asymmetry in information is high the poor-quality goods will drive out the better-quality goods in the market. This is especially the case in construction due to the high levels of uncertainty and it is highest in the early stages of the project. Another purpose of competitive tendering is for the client to get a lower price and the competition in the building market is kept sharp and motivated to the project.

S123388: /* Big idea */

2017-06-22T08:17:54Z

Big idea

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	The procuring phase is important to attend because of the principal/agent problem where the problem is asymmetry of information. The asymmetry together with self-interest for each participants of the contract, generates two main problems which are the moral hazard and the adverse selection. Here is the problem of the adverse selection, also called “the lemon problem”.		The procuring phase is important to attend because of the principal/agent problem where the problem is asymmetry of information. The asymmetry together with self-interest for each participants of the contract, generates two main problems which are the moral hazard and the adverse selection. Here is the problem of the adverse selection, also called “the lemon problem”.
	The lemon problem for the client that wishes to procure construction services is that he/she maybe do not know everything about the supplier. In the procurement face the client dos maybe not know if the supplier supplies poor quality work.		The lemon problem for the client that wishes to procure construction services is that he/she maybe does not know everything about the supplier. In the procurement face the client dos maybe not know if the supplier supplies poor quality work.
	The lemon problem is engaged to insure that the client hires competent suppliers of construction services. When asymmetry in information is high the poor-quality goods will drive out the better-quality goods in the market. This is especially the case in construction due to the high levels of uncertainty and it is highest in the early stages of the project. Another purpose of competitive tendering is for the client to get a lower price and the competition in the building market is kept sharp and motivated to the project.		The lemon problem is engaged to insure that the client hires competent suppliers of construction services. When asymmetry in information is high the poor-quality goods will drive out the better-quality goods in the market. This is especially the case in construction due to the high levels of uncertainty and it is highest in the early stages of the project. Another purpose of competitive tendering is for the client to get a lower price and the competition in the building market is kept sharp and motivated to the project.

S123388: /* Tendering criteria */

2017-06-22T08:15:51Z

Tendering criteria

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	It is an option to only base the tendering criteria on lowest price though it might not be the best solution. This is because when the criteria are only based upon price it can lead to unrealistic low prices from the tenders which will then have an influence on the quality of the work. The contractors will also become more eager to engage in legal action to recover their losses. It is also more likely to result in a higher cost because of overrun in cost and time, and the end result will then have a higher maintenance and operation cost. In the long run this will result in higher cost for the project and no client is interested in that.		It is an option to only base the tendering criteria on lowest price though it might not be the best solution. This is because when the criteria are only based upon price it can lead to unrealistic low prices from the tenders which will then have an influence on the quality of the work. The contractors will also become more eager to engage in legal action to recover their losses. It is also more likely to result in a higher cost because of overrun in cost and time, and the end result will then have a higher maintenance and operation cost. In the long run this will result in higher cost for the project and no client is interested in that.

	Another way to procure tenders ~~are~~ by the best value procurement. This is a combination of quality and price criteria. The quality is often assessed on a scoring principle which asses specific areas the client finds important. The criteria can e.g. be price, past performance, relevant experience, technical ability, sustainability, health and safety, innovation, resource availability, management skills and systems, proposed methodology and so on. The score of the different criteria along with the price is then used to determine the value of the proposal. The quality to price ratio is important and varies with the level of uncertainty of the project. This is illustrated in Fig. 1.		Another way to procure tenders is by the best value procurement. This is a combination of quality and price criteria. The quality is often assessed on a scoring principle which asses specific areas the client finds important. The criteria can e.g. be price, past performance, relevant experience, technical ability, sustainability, health and safety, innovation, resource availability, management skills and systems, proposed methodology and so on. The score of the different criteria along with the price is then used to determine the value of the proposal. The quality to price ratio is important and varies with the level of uncertainty of the project. This is illustrated in Fig. 1.

	For clients in the private sector an alternative is just to obtain prices from a number of contractors who are chosen by the client.		For clients in the private sector an alternative is just to obtain prices from a number of contractors who are chosen by the client.

S123388: /* Tender documents */

2017-06-22T08:13:46Z

Tender documents

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	* Specifications		* Specifications

	The presented documents allow the suppliers to calculate a price and proposal for supply of the services. On basis of the respond from the suppliers the client can then choose the most ~~favorable~~.		The presented documents allow the suppliers to calculate a price and proposal for supply of the services. On basis of the respond from the suppliers the client can then choose the most favourable.

	===Open tendering===		===Open tendering===

S123388: /* Big idea */

2017-06-22T08:13:15Z

Big idea

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	Competitive tendering is the most commonly used way for the clients to procure construction services.		Competitive tendering is the most commonly used way for the clients to procure construction services.

	The procuring phase is important to attend because of the principal/agent problem where the problem is asymmetry of information. The asymmetry ~~togetaher~~ with self interest for each ~~partitioner~~ of the contract, generates two main problems which are the moral hazard and the adverse selection. Here is the problem of the adverse selection, also called “the lemon problem”.		The procuring phase is important to attend because of the principal/agent problem where the problem is asymmetry of information. The asymmetry together with self-interest for each participants of the contract, generates two main problems which are the moral hazard and the adverse selection. Here is the problem of the adverse selection, also called “the lemon problem”.
	The lemon problem for the client that wishes to procure construction services is that he/she maybe do not know everything about the supplier. In the procurement face the client dos maybe not know if the supplier supplies poor quality work.		The lemon problem for the client that wishes to procure construction services is that he/she maybe do not know everything about the supplier. In the procurement face the client dos maybe not know if the supplier supplies poor quality work.
	The lemon problem is engaged to insure that the client hires competent suppliers of construction services. When asymmetry in information is high the poor-quality goods will drive out the better-quality goods in the market. This is especially the case in construction due to the high levels of uncertainty and it is highest in the early stages of the project. Another purpose of competitive tendering is for the client to get a lower price and the competition in the building market is kept sharp and motivated to the project.		The lemon problem is engaged to insure that the client hires competent suppliers of construction services. When asymmetry in information is high the poor-quality goods will drive out the better-quality goods in the market. This is especially the case in construction due to the high levels of uncertainty and it is highest in the early stages of the project. Another purpose of competitive tendering is for the client to get a lower price and the competition in the building market is kept sharp and motivated to the project.

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2017-06-22T07:48:17Z

Annotated bibliography

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	==Annotated bibliography==		==Annotated bibliography==
	~~===Books and articles===~~
	* '''Professionel udvælgelse i byggeriet: Afdækning af mulighederne for at nedbringe ressourceforbruget i udvælgelsesprocessen – herunder gennemførelse af prækvalifikation''', (S. Mortensen, 2012)		* '''Professionel udvælgelse i byggeriet: Afdækning af mulighederne for at nedbringe ressourceforbruget i udvælgelsesprocessen – herunder gennemførelse af prækvalifikation''', (S. Mortensen, 2012)

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	This guide gives the different parties in the construction business simple recommendations and descriptions in best practice for a pre-qualification.		This guide gives the different parties in the construction business simple recommendations and descriptions in best practice for a pre-qualification.

			* https://www.designingbuildings.co.uk/wiki/Tender_processes_for_construction_contracts

			This webside with its links gives an overview and explanation on the different tender processes for construction contracts.

	* '''The business case for lowest price tendering?''', (Construction excellence, 2011)		* '''The business case for lowest price tendering?''', (Construction excellence, 2011)

	This is a document which assists the client by identifying the key issues that they need to consider before deciding to appoint on the basis of lowest tender price alone.		This is a document which assists the client by identifying the key issues that they need to consider before deciding to appoint on the basis of lowest tender price alone.

	~~===Links===~~
	* https://www.designingbuildings.co.uk/wiki/Tender_processes_for_construction_contracts

	~~This webside with its links gives an overview and explanation on the different tender processes for construction contracts.~~

	* https://www.danskbyggeri.dk/for-medlemmer/jura/byggeriets-love-og-regler/		* https://www.danskbyggeri.dk/for-medlemmer/jura/byggeriets-love-og-regler/