Bidding on Tender- confused

Discussion in 'Growing and Managing a Business' started by kingsnake, Sep 7, 2010.

  1. kingsnake

    kingsnake
    uix_expand uix_collapse
    New Member

    Joined:
    Sep 7, 2010
    Messages:
    3
    Likes Received:
    0
    I'm going to be bidding on my first large scale job that came to me as an open tender.
    I need advice on a specific area of the tender where the client is asking for the rates of the tradesman who will be doing the work. This is fine, no problem. 75$ an hour.

    Here's where Im lost...They then go on to require I list the "material discount" I will be offering them. This is where I'm confused because they show an exampleof a previous tender, and the example shows a material discount of -3.50% .
    Now, in most business practices to me, usually a company will "markup" any materials and sell them back to the client at the marked up rate, usually 10-40% or whatever.

    Does this client expect to get money taken off of retail prices? Is this what they mean by "material discount", or is it fair to assume that everyone will be marking up the rate?
    Does the negative(in this example) mean that the reatil price is actually -3.50%, is the company taking a loss? How do I proceed, do I take a loss on material or what?

    Thanks very much!
     
  2. PaulPinnacle

    PaulPinnacle
    uix_expand uix_collapse
    Member

    Joined:
    Aug 24, 2010
    Messages:
    275
    Likes Received:
    59
    If the tender documents don't make it clear (explicitly so), you're best bet is to submit a RFI (request for information, or whatever the local term used for 'further information requests' is depending on your area) in line with the guidelines set out in the tender documents.

    There is no point in trying to second guess it, it's much safer to be 100% sure exactly how the client wants the information. Despite someone's best intentions (be it me or anyone else), it's possible that anyone giving advice here, without having access to the tender documents, could advise you incorrectly. (I've known plenty of tender documents to be produced in total disagreement with common/best practise. So 'standard' tender advice wouldn't hold up in those cases. Every project is unique, even tender documents for multiple elements of a single project can differ greatly.)

    Do the tender documents make any reference to when or how the discount rate will be used?
     
  3. kingsnake

    kingsnake
    uix_expand uix_collapse
    New Member

    Joined:
    Sep 7, 2010
    Messages:
    3
    Likes Received:
    0
    This is all it says anywhere in the tender on the issue:

    "Note that the Material Discount represents the % reduction tendered by the bidder from local prevailing retail rates. The discount submitted shall include delivery and offloading at site. Any special shipping charges will be billed seperately at actual cost. Bidders who do not wish to tender a material discount shall enter a zero (0). If a material discount rate is not provided, we will assume that no discount is being offered and use (0) as the unit rate."

    I don't have the time to submit an RFI because it closes soon and all RFI's must be submitted in writing.
    Therefore, I feel I'm competitive on the hourly rates however, this material discount could now make or break me.
     
  4. PaulPinnacle

    PaulPinnacle
    uix_expand uix_collapse
    Member

    Joined:
    Aug 24, 2010
    Messages:
    275
    Likes Received:
    59
    If you don't receive a discount from the local retail rates (often given if you send large orders the way of the retailers), then I'd simply give a '(0)' and not risk bidding below cost.

    Does the tender require a rate to be provided for each item on the BOQ? (both material and labour)

    Any discounts are normally applied behind the scenes and not given as an 'upfront' figure. Often, a BOQ will request rates on various 'null' items so that the rate is known upfront even though it isn't invisiged for this item to be a part of the project at this stage, but it might become relevant down the line as the project develops.

    A common step in a tender evaluation is to compare the compliant tenders (having weeded out the non compliant submissions) on each item of the BOQ. Where there is a large discrepancy in figures, it's common to query the leading tender on how they can price so far below prevailing rates.

    Hopefully the labour element of the work is enough to offset any potential issues here.

    Probably also worth checking, if only for your own peace of mind, how the scoring of tenders is completed. It's common for sections such as relevant experience to carry quite a heavy weighting (most tenders I've dealt with cost was only 60% of the total score).

    Best of luck with the tender. Be sure to put a lot of time into ensuring you meet the compliance requirements (I'd always suggest doing up a clear checklist of exactly what is required - it's what I've always done on the other end of assessing tenders). Regardless of your experience, suitability or your quote, if you slip up on the compliance your submission will get rejected.
     
  5. Fergal

    Fergal
    uix_expand uix_collapse
    Premium Member
    Premium Member

    Joined:
    Nov 18, 2007
    Messages:
    10,578
    Likes Received:
    1,163
    Is this tender for a construction project?

    I'd agree 100% with PaulPinnacle, all projects are different and what one person understands a "material discount" to mean, could be different to another person's understanding, so if at all possible you should ask.

    However, from my reading of the paragraph you copied above, it does look as if they are referring to a discount below retail rates. I'm surprised that they talk about "local prevailing retail rates" in that way, because obviously different retailers will have different prices. In my experience of replying to tender requests (in Ireland), we priced materials from our suppliers and then included these costs in our tender. We never had to specify a discount in that manner.

    Are you required to give material costs in any other section of your tender submission?

    Good luck with it!
     
  6. kingsnake

    kingsnake
    uix_expand uix_collapse
    New Member

    Joined:
    Sep 7, 2010
    Messages:
    3
    Likes Received:
    0
    In this tender, they basically tell you flat out whoever has the lowest bid gets the contract. So it's an equation of the labour rates and the material discount combined that will be going to the lowest bidder. They set forth no other deciding factors.
    Each category is assigned a "weight factor" with the electricans rates plus the helpers rates each have a different number thats assigned to the dollar value. Like electrician has a weight factor of 10, and the material discount has a weight factor of 5. Then, they take the numbers and divide or multiply by the weight factors and whoever the compliant bidder with the lowest score, wins the contract.

    Thanks, again.
     
  7. Fergal

    Fergal
    uix_expand uix_collapse
    Premium Member
    Premium Member

    Joined:
    Nov 18, 2007
    Messages:
    10,578
    Likes Received:
    1,163
    kingsnake the situation sounds very similar to what Ireland is experiencing at the moment. The pricing on construction projects is being pushed downwards and contractors are under increasing pressure to submit ever lower quotations, if they are to have any chance of getting the work.

    Good luck with it and please post back to let us know how it works out for you.
     

Share This Page