Impact of contractor internal tendering procedure governance on tender win-rates: How procedures can be improved

Abstract

Construction contractors normally, though not always, pursue tenders with the expectation of winning and subsequently making a project profit. Corporate governance (CG) constraints, risk appetite, and selected tender strategy impact contractors' tendered prices and any associated qualifications. Therefore, failure to win may not constitute 'failure' in senior executive's eyes. Increasing CG within some jurisdictions has led to more complicated contractor internal tendering procedures (ITP) with layers of management reviews and risk committee sign-offs. The question arises as to whether these changes make any difference to tender win rates and subsequent project outcomes. A series of qualitative semi-structured interviews were undertaken with 25 high-profile Australasian based construction contractors (11, either directly or via parent companies, operate internationally-Europe, Africa, Asia and North America), providing a mix of publicly listed and privately owned companies, as part of a wider research program investigating the efficiency and effectiveness of contractors' ITP. Moving beyond previous research limitations of smaller contractors (often sub-AU$100m turnover) this qualitative research looks at much larger contractors. Content analyses of the interview transcripts found that, while contractors talked equally about 'win' and 'lose', most did not see losing a tender as 'failure'. Only a quarter felt their changed ITP made a difference to their tender win-rate. Somewhat unexpectedly interview findings suggest that approximately three-quarters of contractors have ITP that do not formally require lessons learned (LL) from previous tenders nor projects to be inputs in subsequent tender pursuits. Larger contractors (over AU$500m turnover) were twice as likely to discuss LL, indicating different governance approaches to tender outcome expectations. Informal LL approaches were applied to clients' reputations (particularly payment) in bid/no-bid decisions. Interviewee suggestions of processes by which contractors can improve resultantly their LL procedures, as part of their CG, are also presented.