Analysis of tendering strategies on the survival of contracting firms in Nigeria.
No Thumbnail Available
Files
Date
2015
Journal Title
Journal ISSN
Volume Title
Publisher
Faculty of Environmental Studies University of Ilorin, Ilorin, Nigeria.
Abstract
In a competitive tendering situation, contractors constantly face the dilemma of submitting a high price to maximize profit with the possibility of failing to win the contract and thereby suffering a shortage of work. Alternatively, the contractor may submit low prices which wins contract, but show very little or no profit margin. A bidding strategy may be evolved for determining the optimum bid, which will be the relationship between maximum profit and the possibility of being the lowest tenderer (Ashworth, 2002). With the introduction of due process in the procurement of works in the country, especially the public contracts, and the multiplicity of contracting firms, it has become very expedient for contractors to find a way of surviving in the highly competitive environment construction market. The aim of the study is to examine the use of tendering strategies by construction firms in Nigeria as a survival strategy. This study uses cross sectional survey research design to examine the common subjective winning tendering strategies among construction contracting firms in Nigeria. Findings show that Client long term gain or losses which include other sub-factors like amount of work the client carries out regularly, the amount of repeat business level that the client has been following, the client's possible effect by giving recommendations in referral markets, the relationship between the company and the decision makers in the owner's institution and the possibility of solving problems that may occur during work and the client's general procedures to awarding the contracts was identified as the most important factors in tendering decision and percent mark-up to be added to base estimates; tendering strategies/models were rarely used in determining the appropriate mark-up to be allowed for in a tender by contracting firms. However, a few firms do use it with no observed marked difference from those that do not. Respondents identified the unsuitability of tendering models as survival strategies in the Nigerian construction industry as a major factor that negates the use of the different tendering models. A greater proportion of them believe that they were not designed for our kind of environment where reliable data are difficult to come by. It was recommended that when considering tenders for construction projects, contracting firms should give primary attention to client’s long-term gains or losses. This factor should also be weighed when deciding on the most suitable mark-up size for tenders.
Description
Keywords
Tendering, Strategy, Market share, Solvency ratio, Tendering model
Citation
1. Theophilus O.O, Olowa, Soliu Idris and Lukman O. Olorunoje (2015): Analysis of tendering strategies on the survival of contracting firms in Nigeria. Journal of Environmental Spectrum. 1 (1) 188-202, Published by the Faculty of Environmental Studies University of Ilorin, Ilorin, Nigeria. Available online at http://www.jes.com.ng/index.php/jes/issue/view/JES