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Competitive tender versus negotiated contract

The main motivation for people opting for competitive tender is to get a comparison price from more than one person, but the procedure fails to do an awful lot else. We have all got used to the paradigm where everything is over-budget and over-time, when the truth is the contract was likely not priced and programmed properly in the first place. The cost is being driven by the competitive tender, by people claiming to be able to do things they cannot do and making up for it later. This has a massively negative impact and serves to sow seeds of distrust in procurement as a process.

In the private sector, competitive tender can often mean clients to try to do more than they can afford, sometimes with disastrous consequences. If you choose to go down that route – where somebody tells you can have something and then through the building task you discover you cannot, not to mention it is going to cost more – then fine, but it may not be the best way. Instead, it is about negotiating the right tender, at the right price for the job and then getting the job done.

At Beam, if we learn a job is to be decided through the competitive process and is based on cost alone, we walk away. It is too costly in terms of resources, and for the potential client who just ends up with a big spreadsheet of bloated numbers to compare and with prices that bear no relation to reality. It is not about who can pretend to be cheapest and then win the work because this will inevitably mean prices are driven up one way or another.

Instead, we believe a negotiated contract – where a client invites a contractor of their choice to submit a quote for a project – is the better option. Unlike competitive tender, the undertaking is a transparent collaboration between a specialist builder, an architect, and the client. The builder is selected at the start of the design process for their reputation and experience based on the specific type of project. It is still competitive – even if we do negotiate tender we are still up against other contractors and other project management companies out there that the clients will be looking at –and we must still win the client, but it is done on merit, on track record, on recommendations and the proposed cost.