There are a number of methods for inviting bids from prospective building contractors on a competitive basis, although the most appropriate route will depend on a number of factors such as the amount of time available before you need to start the work and the extent of information which is available at the time you invite bids.
You will also need to consider the relative importance of the three principal criteria of design, cost and programme.
Where a project is complex in nature and has considerable time constraints (for example, if it is part of a sequence of projects in an occupied or otherwise complicated building), you may find it to be a benefit to pay a premium to a building contractor who has knowledge and experience of working on similar projects in that building.
Taking the most competitive bid, in this instance, may present a risk which ultimately leads to additional cost.
In an ideal world you will send out specifications and drawings which describe and illustrate the work in detail and appoint the successful candidate on the basis of a lump sum price.
It is likely that the most competitive prices will be obtained where the work to be priced and the basis of the contract are set out clearly and where sufficient time is given to contractors to obtain the best prices from their suppliers and any subcontractors.
On larger contracts, a projected cashflow and programme should be obtained early to compare the spend profiles.
However, circumstances may not always lend themselves to this approach and it may only be possible to make this selection on the basis of the amount of profit they wish to make and their quantifiable direct costs for running the site.
The costs for the work itself will then have to be negotiated, preferably using pre-agreed rates for the different materials and activities.
A combination of these approaches works well where there are a number of similar projects in the capital project programme, only one of which has been defined in any detail; the successful Building Contractor can, therefore, be instructed on the basis of a fixed price for the initial piece of work and then further fixed prices agreed on the same rates for subsequent project as details become available.
There is no ‘right way’ to procure a failsafe construction contract, but if you stick to the basic rule that you don’t commit to something until you know exactly what the work comprises, how much it’s going to cost and when it will be finished, then the risk of misunderstandings and conflict will be reduced.