There are two main strategies for selecting a builder. The first is a ‘Negotiated Tender’ and the second is a ‘Competitive Tender’.

Negotiated Tender

Negotiated Tender is when you already have a preferred builder in mind when starting out your new home or renovation project. You approach this builder who is keen to take on your project, and the builder reviews the architectural plans as the project is being designed, as opposed to when the drawings are complete. The builder calculates the construction cost of the project early in the design process, and as such, amendments can quickly be made to keep the project aligned with budget constraints.  By the time the architectural and engineering drawings are complete, you already have a builder who is ready to start your project for a price you have already agreed upon.

Benefits

• Save time by omitting a competitive tendering process; a process which usually takes 4 weeks or more.
• Guarantee for the client that you have a builder who is willing to take on your project at an agreed contract price when your drawings are complete.

Disadvantages

• Less incentive for the builder to keep the price competitive as the builder is not competing against other builders to win the job.
• You will never know how your builder’s price compares with what other builders are able to offer.

Competitive Tender

Competitive Tender is when the completed architectural and engineering drawings are packaged up and sent off to usually 3 selected builders for pricing. The builders can be selected by the architect or the client, and should be pre-interviewed to ensure they are all willing and able to take on your project, should they win the contract. The client will select the winning builder, and will go on to sign a contract with them.

Benefits

• The competitive environment encourages builders to keep the price as low as they can if they want to win the job.
• By having 3 comparisons, it is easy to determine if one builder is significantly over-priced, or under-priced. An over-priced tender can indicate that a builder already has enough work for the year, and is only willing to take an additional job for a high profit margin. If a tender is significantly under-priced, it could indicate the builder has made a mistake in pricing, and thus, is not an accurate final price.

Disadvantages

• This method doesn’t always produce high quality tender packages. Tendering is unpaid, time consuming work for builders with no guarantee of a project at the end. If a builder feels they do not have a good chance at winning the job, they can be unmotivated to provide you with a well calculated price breakdown.
• Competitive tendering can add 4-6 weeks to the timeline of your project.