ASSESSMENT OF FACTORS AFFECTING CONTRACTORS TENDER FOR CONSTRUCTION PROJECTS IN NIGERIA

ABSTRACT

Companies must have the capability to deal with various tendering situations successfully in today‟s highly competitive construction market. The first step that the companies need to consider is whether to tender or not to tender when they received a tender invitation. The contractors‟ decision is affected by various factors and influences. This decision is highly reliant to the specific project and the macro environment. It is difficult to make this crucial decision in a short time frame by the management team.  This research is looked at the factors affecting the tender/ no tender decision making and the focus group was on the  to d contractors in Lagos region. Data were collected for by carrying out a face to face structured interview format, incorporating a questionnaire with eight participants. Through the course of the interview, both quantitative and qualitative questions were asked. “Experience and familiarity of your firm with this specific type of work”, “Possible contribution in building long-term relationships with other key parties” and “Current financial capability of the client” were the top 3 most important factors identified by the participants.  There are many differences between the  contractors‟ opinion for the tender/ no tender decision. d contractors have very similar responses about important factors affecting tender/ no tender decision. By contrast, every d contractor has nearly every different individual comment on most important factors. It is seen that d contractors have stronger individual business strategy. In comparison to the literature, it was apparent that the tender/ no tender decision making is very dependent on the location the contractors are. The Marco environment is a very big influence driver for contractors‟ decisions. So, it is important that the different construction contractors should not use one standard to make the tender/ no tender decision for projects in different countries

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Shash (1993) explains that a construction company can either negotiate with the client or use a competitive tendering process to obtain a contract. Fu and Drew (2002) suggest that competitive tendering is the most common method used for contractor selection. In competitive tendering process, a client selects a numbers of contractors to tender for the proposed project. The selected contractors must to decide whether to tender or not tender. The contractors need to submit an estimated cost to execute the project at hand, if they intend to tender. The client would select the contractor who submitted the best cost for executing the project. (Shash 1993, p.111). Therefore the decision to tender is the first step that contractors need to consider.

There are various factors that need to be considered by the contractors in order to make the decision to tender or not. The decision is highly related to the specific project and macro environment. It is hard to make a decision in a limited time by the management team. The decision generally is made on the basis of experience, intuition and guesses. (Egemen and Mohamed 2007, p.1373)

There are many researchers that have discovered the factors that affect the tender/ no tender process. Unfortunately, there has not been any similar research projects carried out in Nigeria. Furthermore, during the global economic recession, construction related activities are decreased significantly. Construction contractors‟ original tender/ no tender decision making criteria may be changed.

1.2 PROBLEM STATEMENT

Designing and implementing an effective tender is a huge challenge for most contractors who seek government contracts in Nigeria. A study conducted by Obuji (2003) in some West African countries including Nigeria, revealed that some  scale contractors are not favoured during a tendering process by prospective clients because, they neglect various factors that affect the success and failures of submitting a tender for a contract. Some contractors do not structure and draft their tenders in an appropriate manner; hence their chance of being contracted is reduced.

Construction industry has complexity in its nature because it contains large number of parties as clients, contractors, consultants, stakeholders, shareholders, regulators and others. Construction projects in Nigeria suffer from many problems and complex issues in performance because of many reasons and factors. This project is very important to identify and to evaluate the main factors affecting contractors’ tenders in construction projects in Nigeria. The practices concerning with Tenders such as time, cost, project owner satisfaction and safety checklists will be analyzed in order to know the main practical problems of contractors who do not win tenders as well as practical solutions to help enhance the chances of our indigenous contractors in Imo state in winning Federal government and foreign contracts.

1.3 OBJECTIVES OF THE STUDY

The aim of this research is to analyze and assess the local factors that account for the success or failure of tenders submitted by contractors when applying for a construction project in Imo State. The aim of this research can be broken down into the following objectives:

To identify the challenges faced by contractors when applying for contracts in Nigeria

To assess the factors that affect contractors tender for construction project.

RESEARCH QUESTIONS

What challenges do contractors in Nigeria face when submitting tenders for projects/contracts?

What are the factors that affect contractors tender for construction projects?

1.5 SIGNIFICANCE OF THE STUDY

This research will help contractors become aware of what the factors which need to be considered when they intend to submit tenders for different projects. This research will also provide the information that would be used by any contractor to create a competitive bidding strategy.

This study will also give a clear insight into the various ways in which profit and efficiency from contracts and contracting can be increased and how the challenges facing contract tendering can be properly tackled. The study also gives a clear insight into the various factors affecting tenders and their effects on contractorâ efficiency and chances of winning a contract in Nigeria. The findings and recommendations of the researcher will help in building a strong and better contract policy and tendering guideline for contractors, especially  scale contractors in Imo State other construction companies in Nigeria.

HYPOTHESIS FORMULATION

Statements of Hypothesis for the study are:

Ho: There is no significant relationship between factors that affect contractor tender and contractor chances in winning a construction project.

Hi: There is a significant relationship between factors that affect contractor tender and contractor chances in winning a construction project.

SCOPE OF STUDY

This research focuses mainly on the assessment of the factors that affect tenders for construction projects, using construction companies and private contractors in Lagos State as case study. Results and recommendations may not be used to generalize other construction companies or contractors in other parts of Nigeria, as the researcher could not cover a wider scope due to financial and time constraints.

Based on the findings of this study other possible researchable areas may include studies on the various effects of other aspects of contracts such as contract laws in Nigeria and contract management and control.

1.8 LIMITATION OF THE STUDY

The only limitation faced by the researcher in the course of carrying out this study was the delay in getting data from the various respondents. Most respondents were reluctant in filling questionnaires administered to them due to their busy schedules and nature of their work. The researcher found it difficult to collect responses from the various respondents, and this almost hampered the success of this study.

1.9 DEFINITION OF TERMS

Tender: According to Simmons (2002), a tender refers to an offer (usually by a contractor or a vendor) to undertake a job or supply goods.

Contract:  Erikson (2002) defined Contract as an agreement that creates an obligation binding upon the parties thereto. The essentials of a contract are as follows: (1) mutual assent; (2) a legal consideration, which in most instances need not be pecuniary; (3) parties who have legal capacity to make a contract; (4) absence of fraud or duress; and (5) a subject matter that is not illegal or against public policy.

Contractor: According to Simmons (2002), a contractor refers to an organization or individual that contract with another organization or individual (the owner) for the construction of a building, road or other facility.

Construction/Projects: In the fields of architecture and civil engineering, construction is a process that consists of the building or assembling of infrastructure. Far from being a single activity, large scale construction is a feat of human multitasking. Normally, the job is managed by a project manager, and supervised by a construction manager, design engineer, construction engineer or project architect.  For the successful execution of a project, effective planning is essential. Involved with the design and execution of the infrastructure in question must consider the environmental impact of the job, the successful scheduling, budgeting, construction site safety, availability of building materials, logistics, inconvenience to the public caused by construction delays and bidding, etc. Marshall (2001)

Related Project Topics :