Introduction
This study aims to measure the value to building companies of holding a defined command scheme that is complied with when tendering for new work. The bulk of building companies have a command scheme of some signifier whether it is specified or non, in the case that a company does non prosecute in a procedure of choice when nearing new work so they will offer small value as they would be pricing every occupation available regardless of the contract value, location, programme or their old experience of that type of work.
At the clip of composing the UK economic system ( in peculiar the building industry ) remains gripped by the instability and uncertainness created by the fiscal market convulsion that occurred throughout 2007 & A ; 2008 taking to the greatest economic crisis and subsequent recession since the Great Depression of the 1930 ‘s ( Brunnermeier, Markus K. , 2009 ) . As such building companies are faced with a market topographic point every bit competitory as any in life memory, for most turnover and net incomes have dropped significantly and this subsequently applies excess accent to the importance of the tendering procedure.
The study will foremost reexamine the literature available on command schemes in the building industry with a brief reappraisal of the effects of the recession on contractors offering monetary values. The literature reappraisal will so be advanced upon by carry oning an appraisal of the command scheme utilised by Dawn Construction Ltd, a chief contractor operating in the cardinal belt of Scotland.
2.0 – Command Scheme
2.1 – Definition
A command scheme can be described as a broad scope of applied techniques and timing in order to accomplish predetermined aims. Brook ( 2008 ) offers the undermentioned analogy “ It is interesting to observe that in military footings, the word ‘strategy ‘ means the adept direction of an ground forces in such a manner as to lead on the enemy and win a run. In concern the stated aims can sometimes be achieved by lead oning the resistance but chiefly the specified aim is to be successful in winning contracts at monetary values which would let the administration to transport out the work productively ” In consequence a command scheme is the determination by a company on which work to monetary value for and the degree of net income to integrate in order to successfully procure the undertaking and keep the concerns fiscal security.
2.2 – The Tender Procedure
Under traditional fortunes the stamp procedure for a contractor commences with the clients ‘invitation to tender ‘ . Upon receipt the contractor ‘s response will be shaped by several factors, finally though the volume of available work will find the avidity of the contractor to monetary value the stamp. Very few contractors will really outright worsen the chance to monetary value work for a reputable client, in the case where the contractor does non desire to monetary value a stamp for whatever ground it is more likely that he will monetary value the work utilizing uncompetitive rates in order to guarantee they do non win the contract. ( Smith, 1995 ) This pattern is normally referred to as “ screen pricing ” and the primary aim of it is for the contractor to avoid work that he does non desire to set about without dissing the client and being removed from his hereafter stamp lists. Although screen pricing was made illegal in 2000, it is still on a regular basis employed by contractors who differentiate between subjecting a monetary value that is non-competitive and the act of conspiring with others in a “ bid-rigging ” procedure. ( Bingham, 2009 )
2.3 – Decision to Tender
Prior to perpetrating to pricing a undertaking a contractor must carefully see his determination to tender as every occupation he monetary values costs the company money and reduces the resources available to monetary value other work. Some contractors engage in a scaling system when they receive a stamp ( i.e. a grading scope of 1-4 ) , this is in order to prioritize questions and set accent on winning the types of undertakings best suited to the company. Others prefer to near each stamp with the aspiration of winning the contract, leting their monetary value to be influenced merely by perceived hazard and relevant market factors. Where fortunes change during the command procedure – possibly the contractor wins another contract out of the blue – this can be taken into history at adjudication phase. ( Cook & A ; Williams, 2004 )
Cooke & A ; Williams ( 2004 ) cite the followers as cardinal factors in act uponing a contractor ‘s determination to stamp:
General
* Is it our sort of work?
* What is the current work load?
Working Capital
* Is at that place sufficient working capital to fund the undertaking?
* What will be the consequence on company fiscal resources?
Handiness of Resources
* Do we hold the resources available to monetary value?
* Do we hold the site labor available to set about?
* Are suited subcontractors available?
Location
* Is the undertaking located within our trading country?
* What direction and control jobs will at that place be with a contract located some stat mis from caput office?
Size & A ; Type of Work
* What is the pecuniary value of the undertaking?
* Is the contract excessively large for the company to set about?
* How did the company execute on similar types of work in the yesteryear?
Subcontract component
* What is the extent and value of the contractors work in the undertaking compared with the subcontract component?
* Is the chief contractor merely being asked to pull off a figure of subcontractors?
* Is a sensible mark-up on subcontractors probably?
General
* Is it our sort of work – does it suit into strategic program?
* What is the current work load in both the contracts division and the gauging subdivision?
* Do we hold the fiscal and direction resources to set about the work?
Working Capital
* Is sufficient working capital available to fund the undertaking?
* What will be the consequence on company fiscal resources?
* The on the job capital required to fund a ?500,000.00 undertaking will be about 15-20 % of the pecuniary value at the peak funding month ( state ?100,000-?150,000 )
Handiness of Resources
* General direction forces ( e.g. contracts directors, be aftering applied scientists, measure surveyors )
* Site direction ( e.g. site agents, foremen/gangers, site applied scientists )
* Labour and works
* Subcontractors – are suited subcontractors available and what is their resource state of affairs?
Location
* Is the undertaking located within our trading country?
* What direction and control jobs will at that place be with a contract located some stat mis from caput office?
Size & A ; Type of Work
* What is the pecuniary value of the undertaking?
* Is the contract excessively large for the company to set about?
* Taking on a undertaking which is excessively large could be damaging to future planning and growing
* What impact will at that place be on the viability of the concern if the contract fails to do an equal border?
* If a contractor with an one-year turnover of ?10 million wins a ?4 million contract and this undertaking makes a loss, the whole concern could be put at hazard.
* A major undertaking could give the company terrible liquidness jobs
* How did the company execute on similar types of work in the yesteryear?
Bibliography
Construction planning scheduling & A ; Control
Brian Cooke & A ; Peter Williams
Finance & A ; Control for Construction
Chris March
