Cost of tendering: adding cost without value?

Uncertainty about the cost of tendering has led to research being conducted to understand the cost of tendering within the Australian construction industry. This has involved reviewing work done in Australia and overseas as well as exploring the efforts within the construction industry to collect cost of tendering information. While there is currently awareness of the cost of tendering and that efforts should be taken to minimise this cost, there is little precise understanding of it in terms of value or how it happens. This paper explores the barriers to understanding the cost of tendering. Throughout the worldwide construction industry tendering is acknowledged to be complicated, adding considerable cost to construction. Efforts to understand the cost of tendering are confounded by issues that are both visible and invisible to formal accounting of the construction process. This paper intends to demonstrate the problems and their causes. Anecdotes are derived from the literature, observations of construction purchases, and interview data to demonstrate the barriers to understanding the cost of tendering. This is augmented by corresponding observations of other major purchases. Problems and causes are described in terms of these anecdotes. Because of the diverse activities undertaken by constructors and limitations of accounting categories, expenses associated with tendering are difficult to capture and quantify. These problems are explained through examples. Even in those cases where there are genuine intentions to capture costs of tendering there is a failure to do so. It appears that implementation difficulties are so insurmountable that either people do not bother or management redirects effort from collecting cost of tendering data. It is also shown that the expense of tendering and uncertainty of outcomes leads tenderers to engage in concealed behaviour to reduce the uncertainty and cost associated with tendering. That is, collusion. For this reason especially, it is concluded that tendering and associated costs need to be understood in greater detail.