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Warning: these figures may shock you - the cost of tendering
As a young graduate working in the construction industry for main contractors, I became involved in the tender process. I was really suprised at the amount of money being spent distributing tender documents to subcontractors and suppliers. I was even more suprised that none of my colleagues seemed concerned or even aware of the amount of cash being, in my opinion, wasted.
The process was one that many in the industry are probably aware of, a tender package would arrive from a client or architect, usually in the post in paper format, occasionally on disc or, if a small tender, via email. However the tender arrived, the process would be the same. Reams of paper would come streaming out the photocopier as document after document, bills, schedules, reports, specifications, would all be copied numerous times for each subcontractor. A1 drawings would be sent down to the printers, multiple copies of each to send out with the tender packages. I am sure the downfall of a tree was the ultimate outcome each time a single tender project came through the door.
The time impact this process was having was obvious - time spent copying each tender document, time spend taking and collecting drawings from the printers, time spend putting tender packages together. The number of subcontractors and suppliers tenders would be sent out to could be 30 or more - groundworkers, demolition, steelworks, roofers, electricians, plumbers, plasterers, decorators, flooring, joinery manufacturers etc. Sending documents out to at least 3 of each trade meant that documents had to be distributed to at least 30 subcontractors and suppliers on each project, and it was taking at least a full day for one person to copy each project document and drawings 30 times and get the tender packages together. With often very tight deadlines to meet to get the quotation together, we were also losing around 2 days on postage - a day to send out and a day to receive quotes back. On a three week tender period, 15 working days, losing 3 days meant losing 20% of the time available.
I decided to do some calculations on the cost impact of this process. I knew it must be significant purely based on the observation of the amount of time and resources going in to distributing these documents. Please note: this is not the cost of the full tender process - estimators pricing etc, this is purely based on the cost of sending out documents to subcontractors and suppliers. I first got the figures for copying the documents (printing, paper etc): for each A1 drawing - £3; for each document - £2.50 (taken from an average size of 50 pages and each sheet of A4 costing 5p to produce). Then I added in postage at £1.90 and £3 of admin time - based on each tender package taking 16 minutes to put together (8 hours for 30 tender packages). On an average tender package consisting of 10 drawings (existing x 3, proposed x 3, demolition x 1, site x 1, electrical x 1, mechanical x 1) and 5 documents (specification, survey, bill of quantities, schedule of works, contract etc) the cost per tender package sent out was £47.40. Send this out to 30 contractors and suppliers and the cost soon mounts up - £1422.
The process was one that many in the industry are probably aware of, a tender package would arrive from a client or architect, usually in the post in paper format, occasionally on disc or, if a small tender, via email. However the tender arrived, the process would be the same. Reams of paper would come streaming out the photocopier as document after document, bills, schedules, reports, specifications, would all be copied numerous times for each subcontractor. A1 drawings would be sent down to the printers, multiple copies of each to send out with the tender packages. I am sure the downfall of a tree was the ultimate outcome each time a single tender project came through the door.
The time impact this process was having was obvious - time spent copying each tender document, time spend taking and collecting drawings from the printers, time spend putting tender packages together. The number of subcontractors and suppliers tenders would be sent out to could be 30 or more - groundworkers, demolition, steelworks, roofers, electricians, plumbers, plasterers, decorators, flooring, joinery manufacturers etc. Sending documents out to at least 3 of each trade meant that documents had to be distributed to at least 30 subcontractors and suppliers on each project, and it was taking at least a full day for one person to copy each project document and drawings 30 times and get the tender packages together. With often very tight deadlines to meet to get the quotation together, we were also losing around 2 days on postage - a day to send out and a day to receive quotes back. On a three week tender period, 15 working days, losing 3 days meant losing 20% of the time available.
I decided to do some calculations on the cost impact of this process. I knew it must be significant purely based on the observation of the amount of time and resources going in to distributing these documents. Please note: this is not the cost of the full tender process - estimators pricing etc, this is purely based on the cost of sending out documents to subcontractors and suppliers. I first got the figures for copying the documents (printing, paper etc): for each A1 drawing - £3; for each document - £2.50 (taken from an average size of 50 pages and each sheet of A4 costing 5p to produce). Then I added in postage at £1.90 and £3 of admin time - based on each tender package taking 16 minutes to put together (8 hours for 30 tender packages). On an average tender package consisting of 10 drawings (existing x 3, proposed x 3, demolition x 1, site x 1, electrical x 1, mechanical x 1) and 5 documents (specification, survey, bill of quantities, schedule of works, contract etc) the cost per tender package sent out was £47.40. Send this out to 30 contractors and suppliers and the cost soon mounts up - £1422.
Thinking about the annual cost to the business, considering that on average at least 3 of this size tendering exercise or larger were undertaken each month, 48 tenders per annum gave a total cost of £51,192. I was shocked. To add to this, in time lost, if we just consider the 1 working day lost on admin per tender, thats over 7 weeks of the year spent copying documents and producing tender packages to post out.
I couldn't believe the amount of resources going into distributing tender documents for pricing. I thought of architects, QS firms and clients sending tender documents out further up the tender chain, and the number being received in hard copy paper format. While it was highly unlikely they were sending tender documents out to the same number of contractors and suppliers, they would still be issuing the documents to 5, maybe up to 10 contractors. Based on my calculations costing between £237 - £474 per tender.
The figures above are based on a relatively small tender package, with only 10 drawings and 5 documents. I used this example so I could understand the minimum amount spent on tender distribution per annum. Realistically many of the tender projects included over 20 drawings and more than 5 documents, and were often sent out to up to 50 suppliers. The annual spend would infact have been much higher. There are also other disadvantages, such as environmental impact which must be considered in modern day business processes.
Our etendering solution would save 93% of the tendering costs and 85% of the time burden based on the above example. Take a look at Darley etender for a bespoke etender package thats quick, easy and affordable.
How do you tender? Do you see a place for paper based tender distribution in modern tender processes? Have your say by leaving a comment or let us know on twitter.