Tender bid analysis starts with a task that looks administrative and is not. Before any comparison means anything, every bid has to be adjusted so that all of them cover the same scope, carry the same risks and assume the same conditions. That process is normalising, and skipping it is how the wrong contractor gets appointed.
The reason it matters is simple. Contractors do not compete by pricing the same thing differently. They compete by pricing different things and presenting a total.
Qualifications are the document
Every bid arrives with a covering letter and a list of qualifications, exclusions, assumptions and clarifications. It is the most important part of the return and the part most often skimmed.
A qualification moves risk. A bid excluding, say, work to an existing structure has removed an item from its price; it has not removed it from the project. Until that item is valued and added back, the total understates the cost of appointing that contractor.
Reading them is not enough. Each has to be valued, either from the other bids, from measurement, or from a market check, and added to the total as an adjustment shown separately so the client can see where the movement came from.
Common places bids differ
Scope exclusions, most often around existing structures, statutory diversions, temporary works and anything with a survey behind it that was not issued.
Programme. A contractor offering a shorter period is offering a different preliminaries cost and a different risk profile. A longer one may simply be honest.
Contract amendments. A bid conditional on removing an amendment is priced against a different contract, and the value of that amendment is the value of the difference.
Provisional sums and prime cost sums, where bidders sometimes substitute their own figures. Two bids carrying different provisional sums are not comparable at the total line.
Risk allowances and inflation. A bid with fluctuations excluded and one with them included are different products, and which is better depends on where you think the market is going.
Loaded rates and the shape of a bid
Two bids with the same total can behave very differently once on site. A bid with high rates on early work and low rates on late work improves the contractor's cash position and weakens the client's, and it makes any reduction in scope later disproportionately expensive.
The pattern to look for is rates that are out of line with the rest of the bid on items likely to increase, and rates below cost on items likely to be omitted. Neither is improper, but both should be understood before appointment rather than discovered at valuation six.
Comparing the rate build up rather than only the totals is what surfaces this. Where a bill has been priced item by item, that comparison is straightforward. Wherever a lump sum has been returned with no breakdown, the client has no way to test it, which is itself a finding.
Preliminaries deserve their own analysis
Preliminaries are the clearest signal of how a contractor has understood the job. They are driven by time, by access, by logistics and by staffing, and they can be tested against the programme in a way that measured work cannot.
A preliminaries figure far below the others usually means a shorter assumed programme, a thinner site team, or an assumption about access that the tender documents did not support. Any of those will surface later.
On residential schemes with repeated units, preliminaries and the assumed sequence between blocks often explain most of the spread between bids, which is set out further under residential development.
What a normalised comparison looks like
The output is not a league table. It is a schedule showing each bid as submitted, each adjustment with its value and its reason, and each bid as adjusted. The reader can see the arithmetic and disagree with any single line.
Alongside it sits a short note on what each contractor has assumed about programme, access, risk and design responsibility, because those determine what happens after appointment and they are not visible in a number.
A report structured that way lets a board make a decision it can defend later. A report that says one contractor is cheapest does not, because the first time a variation arrives somebody will ask why that bidder was selected.
The lowest bid problem
A bid materially below the others is information, not a bargain. Either that contractor has understood something the others have not, or they have missed something, or they have priced to win and intend to recover through change.
The right response is to test it rather than to accept or reject it. Ask for the build up on the items where they diverge. A contractor who has genuinely found a better method will explain it readily. One who has made an error will discover it during the conversation, which is a better time than after appointment.
Our approach to preparing and testing tenders sits under tendering and procurement.
What this means for you
Do not compare totals. Compare adjusted totals, with the adjustments visible, and read the qualifications before the numbers.
If the tender documents were tight, normalising is quick because there is little to adjust. Where it takes a long time, that is telling you something about the documents rather than about the bidders, and it is worth knowing before the next scheme goes out.
Have tenders back and totals that do not feel comparable?
Send the returns and the tender documents. We will normalise them and tell you what each contractor has actually priced.