In Part 2 of our series on the tendering process, we take a deeper dive into how an effective solicitation is developed.
Establishing Clear Goals for the Tender Process
To get the most out of construction procurement, the owner must first understand what its objectives are both of the overall project and of the tender process itself. Issues to be addressed at this initial stage include:
- whether there is an output specification-based project or one where the contractor is building to a fixed design;
- project complexity and price sensitivity, and as a result, assessment of the need for best value or lowest price bids;
- acceptable price ranges, if applicable, and, as a result, an assessment of the need for best value or lowest price beds;
- determining the appropriate Canadian Construction Documents Committee (CCDC) standard form contract or developing a project specific contract;
- selection of consultants, architects, or engineers;
- site procurement and licenses and approvals;
- environmental due diligence; and
- other project-specific decisions.
Often, consideration of these issues will be an iterative process, and, as consultants are retained and the procurement process proceed, early decisions may change and evolve. To assist in clarifying project objectives, even in advance of a formal process for soliciting expressions of interest from prospective contractors, the owner or project developer may wish to consult with potential bidders.
As a variation on this process, some owners retain a construction manager who assists in defining the scope of the project, setting a price range, identifying appropriate subcontractors and who then manages the construction process. In these contracts, however, the owner will generally assume more risk than in a standard design build and stipulated price contract.
Informal Consultation with Prospective Bidders
Early consultation by the owner can accomplish several objectives, including:
- confirming that there will be a sufficient number of qualified bidders for a competitive procurement;
- ensuring that bidders have sufficient information to make a reliable proposal;
- minimizing the amount of a risk premium or the number of conditional bids from bidders due to a lack of clarity in the RFP; and
- ensuring a real and perceived fairness in the procurement process
Timely and full consultation with prospective bidders will eliminate confusion between what an owner wants and what bidders perceive. As a result, the bidders will better understand the owner’s requirements, which will reduce any risk premium in a bid or any delays or costs associated with the submission of conditional bids and result in better bids and a shortened contract negotiation process.
The owner typically has several options for consulting prospective bidders. In complex procurements, as a first step, it may be useful for the owner to release a general information document as part of its consultation with the marketplace. The main purpose of such a preliminary consultation is to give information to assist bidders in providing constructive feedback to the owner’s project team. As a result, any document will contain general information and key objectives, outline the possible scope of the project, and may seek input on key questions from potentially interested participants. Generally, these solicitations do not obligate the owner or the potential bidder to take any further steps and will generally also provide for protection of confidential information.
Request for Expression of Interest
As a variation on this canvas of the market, the owner may prepare a Request for Expression of Interest (RFEI) to provide prospective bidders with somewhat more detailed information on the procurement opportunity and to ascertain potential market interest. The RFEI can serve as a means to exchange information with prospective bidders in order to assist the owner im finalizing its business analysis. An RFEI I is typically issued with the warning that it does not contain all of the information a prospective bidder needs to provide a full response and that it is not to be construed as an RFP. Furthermore, responses to an RFEI are not usually used by the owner to qualify or evaluate potential bidders in any way or with respect to any potential subsequent procurement process. Equally, information provided by the owner or the bidder is not considered to constitute an implied or expressed commitment.
As with the initial informal consultation, the benefit of a clear RFEI is that it helps the owner to obtain further feedback directly from prospective bidders on the procurement opportunity, and it enables the potential bidders to determine whether they have a serious interest in preparing a proposal in response. It also allows the owner to assess the range and quality of potential bidders and ensure that its objectives will be met through the tender process.
Request for Qualification
In many larger procurements, issuing a request for qualification (RFQ) is the first step. It is usually issued together with background papers that broadly outline the scope of the project and may include an outline of the proposed business Arrangements. The RFQ will likely address proposed bidder qualifications, due diligence requirements, and evaluation criteria. In this way, the RFQ helps potential bidders to understand fully the nature of the business opportunity presented by the owner and assist the owner in determining whether the market will produce a sufficient number of qualified bidders to produce a competitive tender process. The specific qualifications of prospective bidders will be determined primarily by the business and technical members of the owner’s procurement team and relevant factors are likely to include:
- company experience with a project of similar scope and scale;
- identification of key members of the proposed project team and their relevant experience;
- financial strength and capability,
- claims history including any that could adversely impact the proponent’s ability to complete the project and any findings of fraud
- workplace safety compliance;
- applicable union status;
- general corporate and other relevant information.
Responses to RFQs may require further follow-up with one or more proponents, or the RFQ may generate questions. In order to avoid the risk of appearing influenced by one particular bidder, the owner May conduct bidders’ meetings to obtain ideas collectively from prospective bidders. Alternatively, the owner may consider conducting one-on-one consultations with prospective bidders before issuing the final RFP. Such consultations may be preferred since group meetings run the risk of getting less valuable comments because individual bidders may be reluctant to share ideas with competitors.
The draft pro forma contract if provided, or the summary of key business elements of the procurement, should indicate which terms and conditions the owner proposes to make mandatory and which will be subject to clarification or negotiation with the preferred better.
Next week, we will take a look at the Request for Proposal, a multi-faceted and complex process that warrants its very own article.
Written by Jeremy Power, a lawyer in our Toronto office