CHOP 6.5 - CONSTRUCTION PROCUREMENT

Question 1

Addendum

Answer 1

A change to the bid package (usually a modification of the drawings and specifications) issued during the bid period and before execution of the contract.

Question 2

Base Bid

Answer 2

The stipulated sum of money without any adjustment because of alternative prices or substitutions, etc., for which the bidder offers to perform the work called for in the bid documents.

Question 3

Bid or Tender

Answer 3

An offer in response to a bid or tender call; a price and/or time estimate in response to a bid or tender call; the offer forms a “bid contract” until the time period for acceptance is over. “Tender” and “bid” are used interchangeably; however, the CCDC formally abandoned the term “tender” in the early 1980s in favour of the term “bid.”

Question 4

Bond

Answer 4

A financial security for the performance of an obligation; usually a written document supported by a pledge of collateral.

Question 5

Guarantee

Answer 5

A promise to answer for payment of a debt or performance of an obligation if the person liable in the first instance fails to make payment or perform the obligation (to be enforceable, must be evidenced in writing)

Question 6

Pre-purchasing

Answer 6

A procedure for purchasing materials, equipment or services by the owner prior to award of the prime contract.

Question 7

Pre-selecting

Answer 7

A procedure used by an owner to pre-qualify and select a manufacturer or supplier before the tender or award of the total contract.

Question 8

Pre-tendering

Answer 8

A procedure for calling tenders by the owner prior to the prime contract tender call. The contractor may then be directed to include the amount of this pre-tender in their own tender.

Question 9

Surety

Answer 9

The party (surety company) that issues a bond which guarantees the performance of the person bonded (in construction, the contractor) to fulfill obligations under contract within the financial and time limitations stated in the bond.

Question 10

Warranty

Answer 10

A statement of fact or quality intended to be relied upon by another party, carrying with it an implied or express promise to make good any breach

Question 11

procuring a construction contractor involves the following steps:

Answer 11

planning the method of procurement;

prequalification of tenderers;

conducting the tender;

evaluating the tenders;

awarding the construction contract.

Question 12

Planning the Method of Design-Construction Program Procurement

Answer 12

Clients, with the help of architects, select a general contractor for construction projects by generally using one of the following common methods:

open competitive bids (sometimes called public tender);
invited competitive bids (sometimes called invited tender);
direct selection.

At the outset of the project, the architect and the client must determine:

the form of design-construction project delivery;
the type of construction contract;
the method for awarding the contract.

Question 13

Open Competitive Bids (or Public Tender Call)

Answer 13

In this type of tender call, the bidders are not usually “screened” or otherwise pre-qualified, and the capability of the contractor may be uncertain. The contractor may be selected on price alone. This type of tender call is frequently used when the project involves public funds.

Question 14

Invited Competitive Bids (or Invited Tender Call)

Answer 14

When inviting bidders, the client may select contractors with whom the architect or the client have had a satisfactory experience; alternatively, the client and the architect may select bidders by pre-qualification. Architects often assist the client in assessing the capacity and previous record of contractors and subtrades who might be invited to bid on the work.

Question 15

Direct Selection

Answer 15

It is always possible for clients to negotiate a contract with a single contractor, especially a contractor with whom a relationship of trust has been established over time

Question 16

Negotiated Contracts

Answer 16

Negotiated contracts are mostly used in case of emergency when time is of the essence or when an owner values the benefits of established long-term relationships.

Question 17

bid bonds

Answer 17

The bid bond submitted by the contractor (bidder) guarantees that if the bid is accepted within the time stated, the contractor will enter into a formal contract with the owner. If the contractor fails to enter into a contract, the surety will guarantee — up to the amount of the bid bond — to pay the difference in money between the amount of the contractor’s bid and the amount for which the owner legally contracts with another contractor for the project. Bid bonds are usually between 5% and 10% of the estimated construction cost; on very large projects, 2.5% is considered an appropriate amount.

Question 18

performance bond

Answer 18

The function of a performance bond is to indemnify the owner up to the amount of the bond in the event of default (bankruptcy or insolvency) on the part of the contractor. In the event of a contractor’s default, the performance bond will cover the costs of completing the contract as well as other costs for which the surety is liable, up to the total amount of the bond.

Question 19

Labour and Material Payment Bond

Answer 19

A labour and material payment bond guarantees that claimants (subcontractors, subtrades and suppliers who have direct contracts with the contractor) will be paid for labour and materials provided to the contractor for use on the project identified in the bond.

Question 20

Preparing the bid package

Answer 20

To ensure that clients receive competitive prices, contractors must have adequate time to review the bid documents and to prepare a bid. The length of the bid period will vary, based on the project size and complexity.

It is not recommended to receive bids in more than one location.

It is not recommended that bids close on a Friday or a Monday, nor immediately following or preceding a statutory holiday. Usually, the time for closing bids is mid- to late-afternoon.

The person receiving the bid should time-stamp, date-stamp, and initial the bids on receipt at the designated place of closing. Bids received after the designated bid closing time should be returned unopened to the bidder, indicating that it was a late bid.

Ideally, bids should be opened soon after the bid closing time. Only the following information should be announced:

1) Bidders name
2) The base bid amount
3) The required bid security or bid bond

If only one bid is submitted, the architect should advise the client to consider returning the bid unopened or negotiating with the sole bidder.

Question 21

Analysis of Bids

Answer 21

If part of the agreed-to services, the architect may assist the client in analyzing the bids and reporting. However, it is the client who will select the successful bidder.

The architect will carefully review each bid. Prior to reporting to the client, the architect should analyze and research:

1) The completeness of each bid.
2) The bid amount and the amount of value added taxes.
3) The proposed construction start date and schedule.
4) Inclusion of all addenda.
5) Subcontractors listed, including follow-up of the references.
6) Manufacturers and suppliers listed with follow-up as required.
7) Alternatives.
8) Unit prices.

The architect should report in writing the findings of the bid analysis, including a comparison of all price and bid information, and recommend a course of action (that is, usually the selection of a contractor that most closely meets the applicable criteria) to the client.

Question 22

Bid Types

Answer 22

Bids are described in the following two terms:

1) Compliant bid.
2) non-compliant bid – that is, any irregular bid that might be considered informal, non- responsive, incomplete, improperly qualified, or conditional.

Any bid is considered non-compliant if:

1) it does not meet the basic requirements concerning confidentiality (for example, being in a sealed envelope).
2) it does not indicate that the correct number of addenda were received and included in the bid amount.
3) it is not accompanied by the requested bid bond or bid security.
4) it is not properly signed or sealed.
5) bonding requirements are not submitted (for example, “Consent of Surety” or “Agreement to Bond”).

The architect should limit advice to a client.

Question 23

Over Budget

Answer 23

When the lowest of the formal bids is higher than the most recent construction cost estimates and the client does not wish to revise the budget or abandon the project, there are two possible solutions:

1) If the difference is more, Revise the construction documents and administer a new tender call, at no additional fee.
2) If the difference is less, propose alternatives and negotiate an acceptable price.

Question 24

Contract Award

Answer 24

1) Letter of Acceptance:

The award of a contract is usually accomplished by issuing a letter of acceptance from the client. This letter allows the contractor to start work immediately while a formal contract is drafted and executed.

A letter of intent, which is issued with the intention of binding the contractor to the project with no real commitment, can be misleading. Letters of Intent should be avoided in favour of a Letter of Acceptance.

2) Notification of Unsuccessful Bidders:

Unsuccessful bidders should be notified promptly of the contract award; this permits contractors to make arrangements with bonding companies, staff, and subcontractors to bid on other projects.

3) Preparation of the Construction Contract:

The architect usually prepares the construction contract. It is recommended that the standard Canadian Construction Documents Committee (CCDC) forms of construction contract be used.

4) The construction Contract:

The number of copies of the contract to be executed depends on the client and the client’s lawyer. A minimum of two original copies (with CCDC authorization seals) should be prepared – one for the client and one for the contractor – as well as one photocopy for the architect.

Some lawyers recommend binding and sealing the documents to make it difficult to remove and replace pages without breaking the seal. Two sealing methods are:

1) a ribbon or cord through each page with a wax seal on the cover.
2) wire and lead seal.