Undertaking 2 Stage Tendering: UK Bidders Guide

What is 2 Stage Tendering?

2 stage tendering is a procurement route that splits the tendering process into two stages: selection and award. In the first stage, the buyer selects a shortlist of contractors based on their experience, qualifications, and technical capabilities. In the second stage, the buyer invites the shortlisted contractors to submit detailed proposals, including price, design, and delivery plans. The buyer then evaluates the proposals and awards the contract to the most suitable contractor.

If you are involved in construction procurement, you may have heard of 2 stage tendering. This is a procurement method that involves two distinct stages of tendering, with the aim of achieving better project outcomes through collaboration and innovation. In this article, we will explain what 2 stage tendering is, how it works, and how it can benefit your business. We will also discuss the impact of the Procurement Act 2023 on 2 stage tendering and how to prepare for success in this process.

The main difference between 2 stage tendering and traditional single-stage tendering is that the contractor is involved earlier in the project development, often before the design is finalised. This allows the buyer and the contractor to collaborate on the design, scope, and specifications of the project, ensuring that they are aligned and realistic. The contractor can also provide valuable input on the feasibility, cost, and risk management of the project, leading to more efficient and effective solutions.

What are the Benefits of 2 Stage Tendering?

2 stage tendering offers several benefits for both buyers and contractors, such as:

• Improved quality: By involving the contractor early in the project, the buyer can leverage their expertise and experience to optimise the quality of the project. The contractor can also ensure that the project meets the buyer's expectations and requirements, reducing the risk of errors, defects, or disputes.
• Innovation: 2 stage tendering creates a collaborative environment that fosters innovation and creativity. The contractor can propose alternative or innovative solutions that can enhance the project's performance, functionality, or sustainability. The buyer can also benefit from the contractor's knowledge of the latest technologies, materials, and best practices in the industry.
• Cost savings: 2 stage tendering can reduce the overall cost of the project by minimising variations, delays, and rework. The contractor can provide more accurate and competitive pricing, based on a clear and agreed scope of work. The buyer can also achieve better value for money, by selecting the contractor that offers the best combination of quality and price.
• Risk mitigation: 2 stage tendering can help manage and reduce the risks associated with complex projects, by allowing the buyer and the contractor to identify and address potential issues early on. The contractor can also share the risk with the buyer, by taking responsibility for certain aspects of the project, such as design, planning> or delivery.
• Relationship building: 2 stage tendering can strengthen the relationship between the buyer and the contractor, by establishing trust, communication, and collaboration. This can lead to improved satisfaction, loyalty, and repeat business.

What are the Risks of 2 Stage Tendering?

Despite its benefits, 2 stage tendering also involves some risks and challenges, such as:

• Uncertainty: The first stage of 2 stage tendering involves some degree of uncertainty, as the contractor does not have a guaranteed contract and the buyer does not have a fixed price. This can create some ambiguity and insecurity for both parties, especially if the project is subject to changes or delays.
• Resource commitment: 2 stage tendering requires significant time and resources from both the buyer and the contractor in the early stages of the project. The buyer must manage the selection and negotiation process with multiple contractors, while the contractor must invest in preparing detailed proposals and engaging with the buyer. This can be costly and time-consuming, especially if the project is complex or large-scale.
• Competitive pressure: 2 stage tendering involves a high level of competition among the shortlisted contractors, who have to compete on both quality and price. This can create pressure for the contractors to offer low prices or high specifications, which may not be sustainable or realistic. The buyer must balance competitive pricing with risk management, ensuring the contractor can deliver the project within the budget and timeframe.

How Does the Procurement Act 2023 Affect 2 Stage Tendering?

The Procurement Act 2023 is a new legislation that aims to modernise and reform the public procurement system in the UK. The act emphasises transparency, efficiency, and value for money in public procurement, and introduces several changes that impact 2 stage tendering, such as:

• Enhanced transparency: The act mandates documentation and accessibility of all procurement stages, from planning to contract award. This means buyers must publish their procurement documents, evaluation criteria, and contract notices online and make them available to the public. This increases the accountability and visibility of the procurement process and enables greater scrutiny and challenge from stakeholders.
• Improved value for money: The act encourages buyers to consider the broader social, environmental, and economic value of their procurement, rather than just the lowest price. This means that buyers have to define and measure the outcomes and benefits of their projects, and select contractors that can deliver them. This supports the early contractor engagement and collaboration that 2-stage tendering offers, as it allows buyers to optimise the project outcomes and align them with their strategic objectives. This is also why we believe Social Value will keep increasing in importance.
• Innovation and collaboration: The act supports procurement strategies that foster innovation and collaboration, such as 2 stage tendering. The act recognises that some projects may require more flexibility and adaptability than traditional procurement methods can provide and allows buyers to use alternative or innovative solutions that best suit their needs. The act also encourages buyers to work with contractors and other stakeholders to co-create and co-deliver the projects, enhancing the quality and efficiency of the procurement process.
• Risk management: The act aligns with the collaborative nature of 2 stage tendering to manage risks early and effectively. The act requires buyers to conduct market engagement and consultation with potential suppliers and users, to understand their needs, capabilities, and expectations. This helps buyers to define the scope and specifications of the project and identify and mitigate any potential issues or risks. The act also allows buyers to negotiate and amend the contract terms with the selected contractor, to reflect the changing circumstances or requirements of the project.

What is the Competitive Flexible Procedure?

The Procurement Act 2023 introduces a new procurement procedure called the Competitive Flexible Procedure, which provides greater flexibility and simplicity in procurement. This procedure allows buyers to design and tailor their own procurement process, using a mix of negotiation and competitive tendering, depending on the nature and complexity of the project. This flexibility enhances the two-stage tendering process by:

• Allowing more tailored engagement with suppliers: The Competitive Flexible Procedure enables buyers to choose how they engage with potential suppliers, and how they select and evaluate them. Buyers can use different methods and criteria for each stage of the process, such as pre-qualification, selection, shortlisting, invitation to tender, negotiation, or best and final offer. Buyers can also adjust the number and duration of the stages, depending on the project needs and market conditions. Including increasing requirements for preliminary market engagement (PME).
• Facilitating innovation and improved solutions: The Competitive Flexible Procedure supports buyers to seek and encourage innovation and improvement from suppliers, by allowing them to negotiate and co-develop the solutions with them. Buyers can use dialogue, feedback, or testing to refine and optimise the solutions, and to align them with the project objectives and outcomes. Buyers can also reward and incentivise suppliers who offer innovative or value-added solutions, by giving them preferential treatment or additional points in the evaluation.
• Enhancing the ability to negotiate terms that better reflect project complexities: The Competitive Flexible Procedure allows buyers to negotiate and finalise the contract terms with the selected supplier, to ensure that they are suitable and realistic for the project. Buyers can negotiate aspects such as price, scope, quality, delivery, performance, or risk allocation, and make changes or amendments as needed. Buyers can also use outcome-based or incentive-based contracts to ensure that the supplier delivers the expected results and benefits. These post tender negotiations provide a significant change for most bidders.

The Reality of 2 Stage Tendering: What It Means for Everyone Involved

The journey through a 2 stage tendering process creates a unique dynamic between bidders and procurement teams. Unlike traditional procurement routes, this approach demands a shift in mindset from both sides of the table.

How Procurement Teams and Bidders Navigate the 2 Stage Process

For procurement teams, the decision to use 2 stage tendering represents a commitment to a more collaborative approach. Gone are the days of simply issuing a tender pack and waiting for bids to roll in. Instead, the process becomes an active conversation that evolves over time. This means procurement professionals must be ready to engage more with potential contractors, sharing information openly and responding to questions with greater transparency. The reward for this additional effort comes in the form of more tailored solutions and fewer surprises once the project begins.

From the bidder's perspective, 2 stage tendering offers both opportunities and challenges. The chance to shape a project before final pricing creates space for innovation and relationship-building that simply doesn't exist in single-stage approaches. Successful bidders recognise this early stage as their moment to demonstrate value beyond simply quoting the lowest price. By bringing thoughtful insights to the table during the first stage, contractors can position themselves as trusted advisers rather than just service providers.

This dynamic plays out most visibly during the transition between stages. As the focus shifts from selection to detailed pricing, both sides face a critical moment. Procurement teams must maintain enough competitive tension to ensure value for money, while bidders need to convert their early involvement into a workable commercial arrangement. This balance requires honest conversations about expectations, constraints, and what success looks like for the project.

The reality of 2 stage tendering in practice often hinges on how well this middle ground is managed. When procurement teams provide clear feedback to shortlisted bidders and set realistic parameters for the second stage, contractors can respond with solutions that genuinely address the project's needs. However, when communication breaks down or expectations remain unclear, the process can drift into uncertainty, with rising costs and delayed timelines as a result.

Creating Successful Bid Strategies for Complex 2 Stage Projects

What makes this approach particularly valuable for complex projects is the space it creates for genuine problem-solving. When a school needs to remain operational during construction, or a hospital must maintain critical services while adding new facilities, these challenges benefit from early contractor involvement. Bidders who understand the operational needs can suggest phasing plans that minimise disruption, often identifying solutions that might never have emerged from a traditional tendering process.

For procurement teams working with limited resources, 2 stage tendering needn't be overwhelming. The key lies in focusing effort where it matters most. By clearly articulating project goals and constraints upfront, teams can guide bidders toward the most important issues. This targeted approach helps avoid the common pitfall of scope creep, where a project gradually expands beyond its original boundaries simply because the option exists to make changes.

Bidders face their own resource challenges when engaging with 2 stage processes. The first stage requires investment with no guarantee of moving forward, a risk that must be carefully weighed. Successful contractors approach this stage strategically, showcasing their relevant experience and demonstrating their understanding of the project without overcommitting resources. The most effective bidders find ways to add value during stage one through thoughtful questions and observations rather than elaborate presentations.

The changing nature of projects over time adds another layer of complexity. What seemed straightforward at the outset often reveals hidden complications as designs develop and stakeholders provide input. This reality affects both sides – procurement teams must remain open to necessary changes while keeping sight of core objectives, and bidders need to adapt without seeing every change as an opportunity to increase prices. The most successful projects maintain this balance through regular, honest communication.

When things go well, the benefits of 2 stage tendering become clear to everyone involved. Procurement teams gain greater certainty about what they're buying and when it will be delivered. Bidders build better relationships with clients that often lead to further work. And end users – whether school pupils, hospital patients, or office workers – receive facilities that better meet their needs because operational considerations influenced the design from an early stage.

Behind every tender submission and evaluation sits a team of people trying to achieve something worthwhile within various constraints. By recognising this reality and encouraging good dialogue between procurement teams and bidders, 2 stage tendering creates space for the kind of trust that leads to successful projects. This approach doesn't remove all challenges, but it does create a framework where they can be discussed openly and resolved together, often leading to better outcomes for everyone involved.

As bid writing specialists we help our clients bid for through these complex 2 stage tendering procedures. Our experience shows that bidders who can clearly explain their value while showing they understand the client's challenges tend to progress to the second stage, regardless of whether they're the lowest priced option at that point. We also work with public bodies offering procurement consultancy - so we really can add value.

See a bid writing case study and also a procurement consultancy case study.