Appraising tender prices

Overheads and profit may not always be specifically identified in tender submissions. It is important to establish what percentage has been applied to the rates or measured works to compare tenders and to be clear what overhead and profit level is to be applied to any contract variations.

Dayworks percentages are often required to be stated as part of a tender submission. These relate to the percentage of costs required to be applied to published labour and plant rates. Careful analysis needs to be carried out to ensure that competitive percentages have been submitted and consideration given to the potential impact of contract variations valued in this way.

In some cases the tender will not be assessed purely on cost. In these instances the criteria other than cost should be stated within the tender documents. This could include assessing the tender submissions on the quality of their return, interpretation of brief, response to specific questions included in the tender around undertaking the works and programme.

On projects within the public sector, it is increasingly common for additional factors to be evaluated and contribute to the decision of contract award. An agreed split will be defined in the tender documents, for example, the tender evaluation and contract award recommendations will be based on cost / quality split.  The qualitative scoring can be weighted based on factors of importance agreed with the client, and also include scoring of interviews conducted during the tender stage.  How the scoring will be assessed needs to be clearly identified in the tender documents.

Furthermore, an analysis of the programmes (where they are included in submissions) should be conducted. Different submissions may put forward variable programme lengths that may be advantageous to the client. Having taken into account other issues, it must be stated in the tender documents that the client is not bound to accept the lowest tender; therefore a contractor may be given contract award based on their overall submission rather than purely based on price.