DISCUSSING TWO-STAGE TENDERING IN SA’S CONSTRUCTION SECTOR

This is Part 1 of a two-part series.

Construction projects in South Africa are often concluded in a single stage – designs (usually incomplete) are used by the main contractor to provide tenders for constructing the project. Two-stage contracting is a growing trend, where engineers work in concert with the preferred contractor to finalise the design, typically from an early stage in the project life cycle, according to construction and mining law specialist MDA Attorneys.

“The combined effort upfront allows for quicker finalisation of the design and ultimately results in an improved construction process. Instead of dictating to the contractor, who then must execute the project works, two-stage tendering allows for practical and realistic pre-qualification based on the contractor’s preferred method of working. Any changes can be ironed out early, reducing the likelihood of variations during project execution,” says Euan Massey, MDA Attorneys director.

He unpacks the difference between single and two-stage tendering, their benefits and drawbacks.

Two-stage procurement in South Africa’s public sector

The concept of two-stage procurement has been in place in South Africa for a while. An example is the two-envelope system used in public sector projects. This system involves an initial technical proposal without costs, aimed at establishing that tendering companies have the necessary skills and capacity to undertake the project. Once the bidders have been narrowed down to those with the skills and capacity, the second ‘envelope’ containing costs is considered, providing the ability to rule out contractors who are not proficient.

But two-stage procurement has wider application several broader benefits when used outside of public sector procurement.

Experienced contractors can make suggestions to improve designs to suit constructability, saving money and time, which is always attractive in construction projects.

MDA Attorneys is seeing another benefit particular to South Africa in examples where contractors have developed relationships with local communities and subcontractors. Two-stage procurement can enable the adjudication and negotiation of contracts based on the contractor’s track record in uplifting these local communities. Although engaging contractors upfront may incur initial costs for mining houses procuring the works, this can avert serious delays and costs later on.

Speed, accuracy and price certainty

In single stage contracting, a main contractor bids on the work based on plans which have been drawn up by the client’s team. This traditional method gives clients a quick route to starting their project but all too often these designs are incomplete and require design finalisation.

Any steps that can be taken to firm up the scope of work and allow for accurate pricing before the primary construction contract is awarded is an advantage to clients and they will pay a premium to have that certainty as soon as possible. It also appeals to contractors who want assurances that a simple, well-defined project is going to proceed quickly.

Continued in Part 2…