QUESTION 1: Explain briefly stating their advantages and disadvantages of the

method of tendering .
1.OPEN TENDERING
OPENING TENDERING: Also known as ‘competitive bidding’, open tendering is a
procurement strategy that involves offering bid invites to all potential suppliers
or contractors to provide materials or services for a business project.

ADVANTAGES:
• Any contractor can tender their work
• No favoritism occurs
• maximum competition
• No commitment to tender, all tender received will be genuine.
DISADVANTAGES:
Client must bear expensive cost of tendering (reproducing number of drawings,boq
etc)
• The wrong contractor may be chosen because they are from unknown
background
• Time consumingChoosing a low cost tender may result in:Poor work: a
large number of, or even permanent, defects may occur unless there is closed
supervision by the clients agent.
• Poor organization: a late completion, specialist, subcontractor
delayed.

2.NEGOTIATED TENDERING
NEGOTIATED TENDERING: Negotiated tendering, sometimes called selective tendering,
is a process whereby the procuring authority invites only a limited number of
contractors to bid for a project.

ADVANTAGES:
• Quality assurance: Since a highly reputable contractor is engaged,
quality is sure to exceedingly high. This can also
be said for experience for similar projects.
• High success rate: The chance of the contractor successfully completing
the project is high as the contractor has the experience and resources to do so
• Suitable for emergencies: In case of an emergency, engaging a
contractor is crucial and cannot rely on the long process of an open tendering
method.

DISADVANTAGES:
• Highest price: This method prioritizes construction quality and time
but not cost.
• Long negotiation period: Negotiation can end up in endless arguments on
the price of which the project can be constructed.

3.SELECTIVE TENDERING
SELECTIVE TENDERING: Selective tendering is sometimes referred to as restricted
tendering.
With this tendering procedure only suppliers that have been invited by the buyer
can tender for the contract.

ADVANTAGES
• Better quality of workmanship: Since the average quality of workmanship
has been raised it is natural to expect better than quality of workmanship than
compared to open tendering method.
• Simplified tender evaluation: The contractors participating are all
reputable contractors so the quality of materials and workmanship will only differ
slightly, hence consultants can just focus on the price of which these services
come at.
 • Shorter tendering process: Less contractors involved means less time
spent on evaluating tender documents and better management of the tendering
process.
• Low cost ofdocumentation Less tender documents are required to
accommodate the participating contractors this lowers the printing fee.
•DISADVANTAGES
• High price Since the average quality of materials and workmanship is
higher than the open tendering method, the price of the project is bound to rise.
This is also because it is not as competitive as there are
• lesser contractors tendering for the job:
Employer incurs resources Preparing the list of contractors for pre-qualification
requires for the contractor to make his on list using his own resources and means
to do so.

QUESTION 2: Explain the types of building contract and their advantages and
disadvantages.
• 1. Lump sum contracts
Lump sum contracts are also called fixed price contracts, establish a fixed price
for all of the materials and labor required to complete a job.

ADVANTAGES
• Higher profit margins: A well-calculated bid can cover all project costs and
leave a healthy profit margin
• Easily compare bids: With fixed total costs, property owners can choose among
bids with ease

DISADVANTAGES
• Potential incentive to cut corners: Since the final cost is set in stone,
contractors may wish to cut corners in order to increase their profit margin
• Costs can cut into profits: If contractors are not careful about managing costs,
their profit margin can disappear.

Time and materials contracts

2• Time and materials contracts are also called T&M contracts — reimburse
contractors for material costs and pay a fixed daily or hourly wage for labor
costs.

ADVANTAGES
Mitigates risk for general contractors: Because the owner pays for actual costs,
the GC can manage delays and changes
Profit is predictable: Markup is built into both material and labor costs, so the
GC knows their profit margin

DISADVANTAGES
Increases risk for owners: Unless a “not-to-exceed” clause is built into the
contract, owners face unknown and potentially high costs
Tracking costs can be burdensome: Contractors face the administrative challenge of
tracking and submitting labor hours and materia

3• Unit price contracts

Unit price contracts set a fixed price for a distinct, repeatable aspect of a
project, which is defined as a “unit’’.
ADVANTAGES
Simplifies tracking and billing: Rather than billing for labor hours or materials,
contractors simply bill for each unit
Supports flexible projects: Projects that have an unknown scope or duration match
well with unit pricing
DISADVANTAGES
Owner does not know total cost: Although property owners will know the unit cost,
they may not know the total number and units required
Poor pricing can sink contractors: While unit price contracts offer flexibility, a
poorly priced unit can destroy contractor profit

4• Guaranteed maximum price (GMP) contracts

A Guaranteed maximum price contracts sets a maximum project cost for the property
owner. Any costs that exceed the maximum price are the responsibility of the
general contractor, who will see their profit margin cut as a result.
ADVANTAGES
Reduced risk for owners: Owners know the maximum cost before a project begins
Simplifies project for GC: Project plans are often finalized before construction,
so change orders are minimized.
DISADVANTAGES
Risk of cost overruns for GC: The GC must carefully price the project or risk
paying out of pocket
Administrative cost to accounting transparency: Contractors must maintain intricate
accounting records for owners to review as part of the contract

5• Cost-plus contracts
A cost-plus congrats reimburses contractors for construction costs labor,
materials, and equipment along with a predetermined markup rate or fixed fee.
ADVANTAGES
Lower risk for contractors: Contractors know their costs will be reimbursed even if
prices rise
Incentives to manage costs: Both owners and contractors are incentivized to manage
the project costs

DISADVANTAGES

Project cost is unknown: The owner does not know the full cost ahead of time
Meticulous expense tracking: Contractors must carefully track expenses to submit
for reimbursement