Single-stage Vs Two-stage Procurement

By Author: TenderTiger
Total Articles: 14
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In critical situations in procurement, it is easy to understand why construction contractors often quote lower prices to win a tender. However, recent research figures within the civil works sector have been questioning the sustainability of such low rates, and whether the method of procurement is responsible for the same.

So let’s take a deep dive into the 2 main procurement routes; single-stage and two-stage tendering.

Single-stage tendering
Single-stage tendering, also known as traditional tendering, is when a client issues a tender for the entire project, with all the relevant information provided at the point of issue. The process aims to ensure that the client/buyer is able to secure various competitive price bids - due to which the contractor/bidder may decide to price aggressively/low in order to bag the project/contract.

It can be an efficient route to obtaining a contractor. However, if elements from the project specification are missing or are unclear, it can lead to adjustments being made later in the contract, and the final account may be very different as unforeseen costs mount ...
... up.

Advantages:
1. A single-stage tender is advantageous to a bidder, no matter what resources they currently have.
2. It’s a quick conventional tendering process.
3. The client can look forward to price-competitive bids, making it a value-for-money project.

Disadvantages:
1. The contractor at times may not understand the project design while he is preparing his bid document.
2. Competitive price pressure may make the contractor bid lower than the actual.
3. The risk factor is not accounted for as the price is quoted on the basis of the tender document information shared by the client.
4. The contractor will not be able to adjust to changes in the project once the tender is awarded.

Two-stage tendering
Two-stage tendering involves an initial information stage, facilitating early collaboration between client and contractor. For most projects, and especially for those that are more complex, it is useful to obtain input before there is sufficient information available for the main contract. This enables early input between the main contractor and client, helping to ensure design and cost certainty. This method of procurement accelerates timelines as it's a pre-known factor discussed between the buyer and the service giver.

This initial phase allows the contractor to submit details under a pre-construction agreement and includes aspects regarding project preliminaries, method statements, design, overheads, and profit.

Advantages:
1. Greater cost certainty is achieved as the scope of work is well defined and communicated.
2. Contractor involvement helps them identify potential risks making them ready for the same.
3. Project implementation has achievable deadlines avoiding damages towards delay of project completion.

Disadvantages::
1. The bid price is higher as it involves pre-tender discussions.
2. The two-stage tendering process may be more time-consuming and this may not be appealing to employers with a tight development programme.
3. Increased contractor involvement in the initial project planning stage can play a negative role in the design plan if the contractor has hidden agendas.

Let’s have a look at a distinguishing table for the 2 stages for more concept clarity:

There is no right and wrong when it comes to choosing which stage of tendering you must go for. Both have their own set of pros and cons where the client/buyer needs to take a thoughtful call on which type of stage will work best as per his requirements. E-tender portals nowadays allow not only clients to source contractors but also contractors to source active tenders on their websites. Housing 2 million+ tenders annual, TenderTiger (https://www.tendertiger.com/) ensures you will never miss a tender.

You may also be keen to know about the procurement process involved in a tendering process.