Contract Strategies and Procurement Flashcards
What is tendering?
Tendering is the industry name for obtaining an offer from a contractor, which can then be accepted by the employer to form a binding contract
Outline the tender process.
1)Design project - prepare tender docs
2) Choose tendering option -Tender documents ‘go out for tender’
3)Tender period - pricing the tender - tenders returned
4)Assess returned tenders
5) Select successful tender - sign contract
Who prepares tender documents?
Designers will prepare the tender documentation on behalf of the client
What is included in tender documentation?
- Invitation to tender and detailed tender instructions
- Conditions of contract and contract data
- The payment mechanism
- Works information - drawings, specifications, health and safety information.
- Site information
What are the three main types of tender option?
Single Bid, Two-bid options, Framework Agreements
What is open tendering?
Any interested party can bid, work advertised in relevant publications
What is selective tendering?
Invitation sent to pre-selected firms for option to apply
What is pre-qualification tendering?
Assessing capabilities/suitability of a contractor before inviting them to submit tenders
Advantages of open tendering?
Competitive
Transparent (no favourites)
Cost savings - people under bidding each other
New firms can enter market
Disadvantages of open tendering?
Time consuming
Price over quality
Unqualified candidates
Limits to long-term relationships
Advantages of slective tendering?
Quality assurance
Competitive pricing
Client has more control
Improved contractor client relations
Disadvantages of selective tendering?
Time consuing
Not transparent (potential bias)
Limits for new comapnies
Only suitable for larger projects
Advantages of pre-qualification tendering?
-Combination of open and selective
-Client can ensure only the most qualified are invited to tender
-Reduced risk
-Streamlines tender process
-Great transparency with no bias- assessed objectively
Disadvantages of pre-qualification tendering?
Lengthy process
Cost of resources for selction process
Limited competition, reduced amount of bidders
What is negotiatied procurement?
Client goes directly to preferred supplier and negotiaties instead of formal tendering process
Advantges of negotiatied procurement?
Contractor is known so client has more control and certainty
Time-saving
Opportunity for innovation
Improved client/contractor relationship
Disadvantages of negotiated procurement?
Non competitive
Bias
Disagreements on scope due to lack of tendering process
What is two-bid tendering process?
Involves pre-qualification followed by bid for tender
Advantages of two-bid tendering process?
Contractor has full understanding of process
Greater cost certainty
Reduced risk of delays
Disadvantages of two-bid tendering process?
Might not price as competitively as one-bid
Time consuming
Costly additional pre-qualificaiton
What are framework agreements?
Long term agreements between client & contractor/s to procure goods and services
Advantages of framework agreements?
Consitent pricing
Better client contractor relations
Better colaboration due to long term
Reduced procurement times
Disadvantages of framework agreements?
No variety/chance of lowering price
Reduced motivation from contractor
Client is committed to using same contractors even if better options become available
How long is the tender process?
4-8 weeks. Designers and clients answer any queries
How is a tender chosen?
Tender report compiled by desinger, client tries to balance quality,time and price
What happend when a tender is accepted?
Letter of acceptance to winner
Unsucceful tenders get notified - list of tenders names and prices sent out. Tender document becomes ocntract document.
What is a contract strategy?
Determines the contract links between the employer, the designer(s), the contractor and sub-contractors (works contractors)
What is a contract link?
Rights and obligations under contract terms.
What are adminstrative links?
Administration of contracts
What are the factors affecting contract strategy choice for a client?
Timescale
Knowledge
Funding
Risk acceptance
What are the factors affecting contract strategy choice for a designer?
Experience (team)
Benefit of contractor involvement
Clients improvement
What are the factors affecting contract strategy choice for a contractor?
Availibility of work
Future work
Payment and risk
What is a traditional contract?
Seperate design and construction
Design appointed first
Design complete by contrator appointment
Designer acts are contractors admin during construction
What is a design and build contract?
Project requirements clearly states in contractors brief
Could include prelim design
Throurough checks at tendering process
Good for simple
Good for complex - lots of intricate construction techniques
What are the advantages of traditional contracts?
Clients design requirements fully understood by designers
Early design work can be approved
Changes/pausing of project are cheaper as design is seperate from construction
Client has more price certainity
What are the disadvantages of traditional contracts?
Strategy is slower overall
No teamwork
More misunderstanding of tender docs
Can’t tell if defects are due to design or construction
Delays are clients fault
What are the advantages of D&B contracts?
“Buildability” can be incorporated into design
Clients only buy services from one organisation
Client not responsible for design delays
Quicker to contract completion
Quicker site start -design parallel w construction
Less misunderstandings between designers and constructors
What is novation?
Legal mechanism where one contract is trasnferred for another. Rights and obligations passed from one party under contract to a third party
What are the benefits of novation?
No loss of knowledge from preliminary designer
Helps client achieve well devloped design
Possible mismatches in designer/contractor can be rectified
What are ‘managament’ contract strategies?
Contractor is appointed early to a contract with the employer.
The ‘management contractor’ or ‘Construction manager’ does not undertake any actual construction work.
The management contractor or construction manager works on management, liaison and coordination of construction work and ‘partnering’ with the employer and design team during the design stage.
What are the advantages of ‘management’ contract strategies?
Contractor can input to design stage with construction expertise
Good for large/complex projects
Work packages for subcontractors can be phased
Management contractor takes responsibility of sub-contractors
5-10% fee of construction cost
What are the disadvantages of managemnt contract strategies?
Contrator carries interface risk
Late payments to sub-contracotrs
What is interface risk?
Problem with one contract often has affect on contracts that interface it, delays can add up
What are contruction management strategies?
Construction manager manages & coordinates contractors
Normally QS or proj managers
Not contractually liable for contractors performance
What are the advantages of construction management strategies?
Works contractors are direct contractors to the employer and the employer has input into their selection.
Work packages are awarded as the project progresses so some changes can be accommodated.
Good for early start on site (often with incomplete design)
Construction manager is paid a fee.
What are the dsiadvantages of construction management strategies?
Client carries interface risk
EU regs on every contract, must be advertised as such
What is a partnering stratergy?
Collaborative management - client and contractor
Share risks and rewards
Non-binding
Each retains own identitity
Two types of partnering strategy?
Strategic - more than one project
Project - One off
3 elements of partnering?
Agreed mutual objectives
Problem solving mechanism
Commitment to continuous improvement
How is partnering set up?
Contract awarded to successful tenderer
Tenders invited to partnering workshop
Partnering charter is created
What are the advantages of partnering?
Reducing tendering times and costs
Anticipating and avoiding disputes
Securing contractors best staff
Reducing duplication of management and supervision
Achieving quicker start to construction
What is an alliance?
Groups of companies who agree to cooperate and to share gains and losses in some way
Alliances can be between contractors or designer and contractor(s)
Do not form an actual company, CONTRACTURALLY BINDING
What is a joint venture?
Participants form an actual company as a LEGAL entity
What is a consortium?
International joint venture company owned by at least 3 organisations
What are the advantages of alliances and joint ventures?
Increased oppurtunity for large projects/framework agreements
Knowledge sharing and new skills
Share resources and expertise
Specialist equipment
Reduced admin - greater efficiency
Shared risks
What are the disadvantgaes of alliances and joint ventures?
Difficult to combine the culture of different organisations.
*Organisations will have different systems and processes.
Potential ‘power struggle’ (especially if not equal shares) and leadership issues.
Potential restructuring of the original business.
Concerns about confidentiality and intellectual propertY
What is a consortium?
Internation joint venture - at least 3 organisations
What is a private finance initiative?
Private public partnership funding schools and hospitals etc
What is a framework agreement in terms of contracts?
‘Serial strategy’ for setting up a number of similar contracts over a period of time.
What are the advantages of a framework contract?
Long term agreement improving teamwork and communication
Reduce misunderstandings
Improved efficientcy with joint admin, IT, payments
Economics of scale for all participants
Joint purchasing agreements
Long term incentive arangements
Simplified contract conditions
What are some client specific advantages of framework contracts?
Process of advertising and awarding work (EU Regs) only needs done once
Selection and awarding completed before full details of project known
Individual contracts can be set up quickly once framework in place
What are some contractor specific advantages of framework contracts?
Long term - understand clients AND designers needs
Be involved in early planning, development
Predictability of work flow
Contractor can set up longer term relationships with suppliers and sub-contractors
Possibility of local office set up
What are some disadvantages of framework contracts?
Initial tendering can be costly
Unsuccesful contractors lose touch with client
Difficult to plan for unexpected market changes
Difficult to break unsuccessful framework agreement, if broken costly and time consuming to set up a new one
What is BREEAM assessment?
BRE Environmental Assessment Method
What and how does BREEAM assess a project?
Awards points or credits and groups environmental impacts:
* Energy:
* Management:
* Health and Wellbeing
* Transport
* Water consumption and efficiency
* Materials:
* Waste
* Pollution
* Land Use
* Ecology.
Total number of points in each section multiplied by environmental weighting factor (relative importance)
What is a compensation event?
Unexpected event that occurs out of the contractors control and may result in additional costs, time delays or changes to plan
Name some examples of compensation events
Changes in laws or regulations
Unforeseeable physical conditions (injury)
Delay caused by client (site access)
Adverse weather
Unpredicted ground conditions
Who do ‘EU Regs apply’ to?
Utilities Contracts Regulations (Water, Leccy, Royal Mail)
Public Contracts Regulation (Government, Police, Fire)
What are the three type of ‘EU regs’ contracts?
Works contract
Services contract
Supply contract
What are the ‘EU Regs’ for the tendering process?
Utility/public sector must send out PIN (periodic indicative notice)
Utility/public sector employer must ‘call for competition’
Utility/ public sector must tell tenders how tender will be assessed
What are some technical specifications of ‘EU Regs’?
Cannot specify items using suppliers name
Tech specs must state charecteristics, quality and performance instead
Cannot specify item so that only one manufacturer makes it
How may a designer be appointed under ‘EU Regs’?
Reccomendation
Research and interview
Open competition
Selective competition
Exisiting framework agreement
What do invitation documents include when appointing designers?
Clients aspirations, budget, progamme
Management structure of project
Assumptions about procurement method
Scope of services provided
Collateral warranties
Request references
Request details and CVs of staff
Seek hourly rates for work outside proposed scope
What is the difference between Tender and Appointment
Tender = Client - Contractor
Appointment = Client - Designer
How do clients establish a framework agreement?
Client decides number and extent of frameworks
Type of work decided over 5 year period
Group similar work into categories
Each group advertised in OJEU
Tender and contract awarded
Appoint contractor for each category
What is OJEU?
Official Journal of the European Union
Used to publish public sector procurement notices
E.g. tenders, contract awards etc.
Important for transparency
