Experience Area D - Procurement Flashcards
1
Q
What are the general steps of the tender process?
A
Select your tenders (selective tendering vs public tnedering
Preparation and submission of tender doucments including instructions
3-4 weeks should be given to prepare tenders
Notice to tenders if required
Tender is recieved prior to the date of submission. Late submissions not valid.
Evaluate the tender sumbissions as soon as possible
Let pricipal know your thoughts and get their agreement of winning tenderer
Notify winning tenderer with a Letter of Acceptance - here a contract exisits
Each tenderer should be sent a list of the tendered sum submitted by each tenderer together with the name of the successful tenderer.
Where a schedule of quantities has been provided, the priced schedule should be submitted as required by NZIA SCC Schedule C2 Schedule of Quantities
2
Q
Typically how many tenders would you approach?
A
3-4, max 6
3
Q
What should the tenders receive as part of the tender documents?
A
identical documents including:
* drawings
* specifications
* contract pro-forma
* two copies of the tender form
* submission instructions (tender schedules)
* a schedule of quantities if applicable
4
Q
What is a Notice to Tenders?
A
A letter with attached doument idenfying additonal information to be given to all tenderers. This will include attachments for related doucments.
5
Q
How long do you have to evalue the tenders?
A
Do as quickly as possible. Typically a tender is deemed to remain in force for one calender month
6
Q
How long should generally be allowed for Tenders
A
3-4 weeks
7
Q
What is a letter of acceptance?
A
A letter to inidicate a successful tender.
8
Q
What is a PCE?
A
Preliminary Cost Estimate
Used in ECI
A preliminary estimate is made before the tender of a project when there’s limited information available.
9
Q
What is an EOI?
A
Expression of Interest (we can send this to a contractor).
This is one way of getting a list of tenderers
An expression of interest (sometimes referred to as ‘request to participate’) is a submission made by a prospective tenderer in response to an advert (or contract notice) for the supply of goods or services.
10
Q
What methods are there to get tenderers?
A
compile a list of capable builders based on past
- collaborations
- client recommendations,
- industry professional recommendations
And EOIs
11
Q
What is Early Contractor Involvement?
A
Early contractor involvement is a type of construction contract where the principal contractor is engaged at an early stage in a project to offer input into the design phase.
12
Q
What are the pros and cons of a CRC?
A
Pro:
You are paying for what is done
CON:
Unknown final costs
13
Q
What is Open/Public Tendering?
A
This method involves inviting contractors to apply for a project through a public forum, providing them
with adequate information to submit their applications.
14
Q
What is Selective Tendering?
A
SGA uses a selective tender process by requesting Expressions of Interest (EOI) from potential
contractors. We compile a list of capable builders based on past collaborations, client recommendations,
and industry professional recommendations.
15
Q
What are Pros and Cons of Early Contractor Involvement (ECI)?
A
Pro:
a less complex and time-efficient approach compared to a selected tender process.
Figure out details early on
Transparency
Con:
Tension if ECI goes to tender
Ensure no intellectual property conflicts if contractor not awarded to the contractor
16
Q
What other tender processes exist outside of the NZIA processes?
A
3910 tendering schedules
Government Electronic Tenders Service (GETS)
17
Q
If the tender is accepted, what does the client become and what does the tenderer become?
A
Principal and Contactor
18
Q
LOOK AT PN 4.110 and make cue cards
A
ok
19
Q
What date should you put on the in the Specific Conditions when tendering?
A
Practical Completion date. Or time in working days to acheive PC
20
Q
What happens if the Pricipal requests PC in the shortest period of time when Preparing tender doucments?
A
Where the Principal seeks Practical Completion in the shortest possible time, alternative times for Practical Completion may be stated in the Tender Documents and referred to in the Tender Form
Tenderers can provide alternative prices, for shorter or longer construction periods, on a clearly defined basis.
21
Q
What happens if tenders ask the Architect for names of subbies?
A
During the Tender period, the Architect may, if requested by tenderers, provide the names of subcontractors who have indicated to the Architect willingness to quote for their particular portion of the work. - nominated subcontractors
22
Q
What information may the Architect provide to subcontracting companies upon request? Why might increasing the number of subcontract quotations be advantageous for the Principal?
A
The Architect may provide the names of tenderers to any subcontracting company requesting this information.
Increasing the number of subcontract quotations may be to the advantage of the Principal.
(Most practicing Architects believe this information should only be released in the final few days of the Tender period to minimise any opportunity for subcontractors to act as a conduit for exchange of pricing information that might disadvantage the Principal).
23
Q
How should the Architect handle additional Tender information during the Tender period?
A
The Architect should number each additional issue sequentially (as Notice to Tenderer No….), date them, and ensure they reach all tenderers in time to allow them to act on the information provided.
24
Q
What requirement should tenderers fulfill in response to the issuance of additional Tender information?
A
Tenderers should state in their Tenders that they have received the additional information. The tender form should include a pre-prepared statement to this effect.
25
Can the tenderer submit additonal tenders?
It is the prerogative of tenderers to submit additional
alternative tenders, qualified to suit their own capabilities.
26
What should you do if a Tender is received after the specified date and time for submission?
Any Tender received after the date and time for the submission of Tenders is invalid and should be returned to the tenderer unopened.
27
What restriction is imposed on tenderers regarding the alteration of their Tender after the submission time?
No tenderer may alter the amount or terms of that Tender after the time set for the submission of tenders.
28
What action should a tenderer take if the Architect requires additional information to evaluate the Tender?
The tenderer should supply the information within the time determined by the Architect, which should be adequate to allow the tenderer to provide the required information.
29
What is the confidentiality status of each Tender?
Each Tender is confidential, and the Architect is prohibited from releasing any details to any other tenderer or to anyone with a financial interest in tendering.
30
What action should the Architect take if a Tender appears unreasonably low or contains errors?
f any Tender appears to the Architect to be unreasonably low or to contain errors, the Architect should notify the tenderer. This allows the tenderer to confirm the Tender price or withdraw the Tender.
31
When is a tenderer allowed to withdraw a Tender?
Any tenderer may withdraw a Tender before acceptance.
32
How long is each Tender deemed to remain in force, unless stated otherwise?
Unless qualified to the contrary, each Tender is deemed to remain in force for one calendar month from the date for submission to Tenders.
33
What action should the Architect take if the acceptance of a Tender is delayed?
If acceptance of a Tender is delayed, the Architect should write to each tenderer under consideration, explaining the reason for the delay and requesting written confirmation that the Tender remains in force. If acceptance may take more than one month, an indication of this should be given to tenderers in the Tender Documents.
34
Why is the opening of Tenders in public or in front of invitees not recommended?
The opening of Tenders in public or in front of invitees is not recommended as it can lead to misunderstandings.
35
What potential issue is highlighted regarding Tenders that offer the lowest price?
Many Tenders will include qualifications that may influence the evaluation and awarding of the Contract. It is not unusual for the Tender that offers the lowest price to be subsequently found to be an inferior offer when all factors are taken into account.
36
How fast should the decision on the Tender acceptenace be made?
It is very important that a decision in regard to acceptance be made at the earliest possible time after the submission of Tenders and that all tenderers be promptly notified
37
What information should be sent to each tenderer as soon as practicable after a Tender is accepted?
As soon as practicable after a Tender is accepted, each tenderer should be sent a list of the tendered sum submitted by each tenderer (although each tenderer is not usually identified by name), together with the name of the successful tenderer.
38
When does a Contract come into existence after the acceptance of a Tender?
s soon as a Tender is accepted, normally by a letter of acceptance, a Contract comes into existence. The validity of the Contract is not affected by any delay in signing the Contract Documents.
39
What is the requirement for submitting a priced schedule of quantities when a schedule has been provided?
Where a schedule of quantities has been provided, the priced schedule should be submitted as required by NZIA SCC Schedule C2 Schedule of Quantities.
40
What is the general procedure for Open/Public Tendering?
Open/Public Tendering involves issuing an invitation to tender through public advertisement. The advertisement should include particulars such as a general description of the work, the location of the site, the proposed date of availability of tender documents, and the names of the Principal, Architect, and other consultants
41
How are deposits handled in the context of Open/Public Tendering?
Deposits in Open/Public Tendering should be provided and processed as described in the Conditions of Tender.
42
What information must tenderers provide to the Architect in the Open/Public Tendering process?
Tenderers must furnish adequate information to the Architect to establish that they have the capacity to undertake the work and achieve expected standards of work.
43
What is the primary objective of selective tendering?
The primary objective of selective tendering is to obtain tenders from builders, each of whom is believed to be capable of successfully completing the project.
44
How is the list of suitable builders prepared in selective tendering?
In selective tendering, a list of suitable builders is prepared, and each builder is asked if their company wishes to be placed on the tender list. A maximum of six tenderers is considered sufficient to provide competitive tendering.
45
What information is included in the invitation for selective tendering?
The invitation for selective tendering, whether oral (e.g., by telephone) or in writing, should contain information similar to that given in a newspaper advertisement for public tender or registration of interest.
The advertisement should include particulars such as a general description of the work, the location of the site, the proposed date of availability of tender documents, and the names of the Principal, Architect, and other consultants
46
How are tenderers selected in selective tendering?
Tenderers may be selected from a list held by the Architect, firms recommended by the client or other architects, or through an advertisement inviting registration of interest and submission of credentials from suitably qualified contractors.
47
What is the role of the Architect in the inclusion of suggested tenderers in the selective tendering process?
The Architect has the responsibility to advise the Principal about the tenderers suggested by the Architect. The inclusion of these tenderers in the tender process requires the agreement of the Principal.
The architect must be careful not to “recommend” tenderers but speak from an experiential or factual point of view (stick to the facts)
48
Do you need the clients permission to include selected tenderers into the tendering process?
Yes
49
Why may a Tender deposit not be required for selected tenderers in selective tendering?
As selected tenderers have been chosen based on their ability to carry out the work successfully, a Tender deposit may not be required in selective tendering.
50
What is a tender deposit?
Tender Deposit means a deposit which may be required to be paid with the submission of a bid as an act of good faith by the potential supplier or contractor. Mainly for open tenders
51
What is the difference between the trade summary and the tender summary proformas?
Trade summery is form 1a and Tender summary is form 1b (masterspec classification)
52
What proformas could you send to the tenderer?
Proformas on Trade/Tender Summary and Montary Alloances (Prime Cost and Provisional Sums).
The tenderer may provide their own documents from thier inhouse template
53
Why are there Principal Supply Items?
Reasons might include:
a) Goods that the client already has or owns
b) Goods the client believes that they can purchase for inclusion in the contract.
54
Do tenders need to know about client supply items?
Tenderers need to know about these at the time of tendering, and to allow for the same in their tender.
55
Examples of Principal Supply Items
For a residential project, these might typically include:
a) Hardware
b) Sanitary ware & accessories
c) Tapware
d) Tiles
e) Light fittings
f) Kitchen cabinets
56
Who retains responsibility for Principal supplied items throughout the construction process, even after they are fixed in the building?
At all times, the responsibility for Principal supplied items remains with the Principal, even after they are fixed in the building.
57
What are the disadvantages of pricipal supply items?
* The Principal may not order correctly.
* Additional time input required by the Architect and the Principal.
* There may be a shortage of the selected product, or there may be defective goods.
* Quality of goods
58
What advice should be considered when it comes to the supply of goods in a construction project?
Consider advising the Principal of the merits of having the main Contractor supply all goods from a list prepared by yourself or the Principal.
59
How can the supply of goods be handled when specific items have not yet been selected?
Where goods have not yet been selected, consider the use of a monetary allowance in the main contract for the supply of these items.
60
hat information should be included in the tender to inform the Contractor about Principal supplied items?
Include in the tender a detailed list of the items, quantities, technical specifications, etc., so that the Contractor is fully informed of the nature of the items
61
What precaution should be taken regarding the delivery of goods to avoid delays?
Verify the Contractor’s construction programme for the latest delivery dates so as not to cause delay.
62
Why is it important for goods to be supplied early in the construction process?
Ensure the goods are supplied early enough so that they can be inspected, checked as being correct, etc.
63
How should Principal supplied items be valued for insurance purposes?
Ensure Principal supplied items are valued for insurance purposes at full replacement cost.
64
What aspect should the Principal be made aware of regarding the time required for handling supplied items?
Make the Principal aware of the time required for selection, replacement of incorrectly supplied items, defective items, returns, etc.
65
How do we know the tenderer has capacity?
You must communicate with the tenders and ask about their business timelines including other jobs
A tender deposit may be required from public tenders as a means of insurance against the tenders pulling out.
66
What do the tenders provide you when they have completed their tender?
All information requested int he tender doucments. All the tender schedules, and tender forms
67
What are the issues to consider where more than one Contractor might be working on the site at the same time?
* Co-ordination / demarcation between main Contractor and separate contractors
* Responsibility for site safety issues
* Insurance
* Performance liability
68
What should be considered regarding costs for the main Contractor in the coordination of separate contractors?
Be aware of the costs for the main Contractor associated with the coordination of separate contractors. They can also add to the administrative costs of the Architect.
69
What action is recommended regarding the identification of separate contractors during the tendering process?
Identify to all parties who are to be separate contractors at the time of tender.
70
Is it recommeded to use serpate contractors?
Do use only where necessary – try to avoid separate contractors, as they are not the ideal way of
working on a construction project.
Do restrict the use of separate contractors to specialists only.
71
What is the importance of identifying separate contractors in the tender documents?
Do identify them in the respective tender documents, and describe the scope of the separate work, and provide names of personnel and contact details.
72
How can potential disputes be minimized concerning the work of separate contractors?
Do include for the insurance of the work of separate contractors in the main Contract Works insurance to eliminate the potential for disputes.
73
What responsibility should the main Contractor have regarding health and safety on the site?
Do require the main Contractor to be responsible for health and safety on the site.
74
What should be included in the main Contractor's program for the works regarding separate contractors?
Do require the main Contractor to provide for separate contractors in their program for the works.
75
What specific needs of separate contractors should be identified in the project?
Do identify particular or unique preliminary & general needs of separate contractors such as scaffolding, craneage, power, etc.
76
Is the contractor responsible for the performance of seperate contractors?
The main Contractor is not responsible for the performance of the separate contractor
77
hat steps should be taken when nominating subcontractors for specific parts of the Contract Work?
a) Nominate them in the tender documents.
b) Clarify the scope of the work to be carried out by the nominated subcontractor.
c) Consider nominating more than one subcontractor to ensure competitive pricing.
78
Why is it generally recommended to allow the main Contractor to work with subcontractors they normally work with?
It is generally best to allow the main Contractor to work with the subcontractors they normally work with because they have greater certainty about the performance and quality of the work of those subcontractors.
79
What issues may arise if a Contractor is required to work with a nominated subcontractor with whom they have no previous relationship?
equiring a Contractor to work with a nominated subcontractor with whom they have no previous relationship may result in issues relating to project delivery.
80
Is the responsibility for the performance of nominated subcontractors different from other subcontractors?
No, after nominated subcontractors enter into a contract with the main Contractor, they become just like any other subcontractor, with the same contractual obligations.
81
What information should be included in the tender documents if the price, including terms & conditions, of a nominated subcontractor has already been obtained?
Where the price, including terms & conditions, have already been obtained, include these in the tender documents.
82
What should be highlighted to main contract tenderers regarding exclusions in the nominated subcontractor’s tender/scope of work?
Ensure that any exclusions in the nominated subcontractor’s tender/scope of work are highlighted to the main contract tenderers.
83
Should main contract tenderers be informed about the possibility of obtaining prices from other subcontractors besides the nominated one?
Yes, clearly state to the main contract tenderers whether or not prices can be obtained from other subcontractors besides the nominated one. If not, consider stating that "no other subcontractors will be considered."
84
Nominated subcontractors - Why is compliance with conditions of nominations fundamental, and what is the implication of not complying? (For tendering parties)
Compliance with conditions of nominations is fundamental, and consideration of alternative subcontracting arrangements may not be considered as a substitution, which the Architect is not bound to accept.
85
In what scenario might nominating a subcontractor be a way of achieving control over the subcontracting arrangement?
Where there are critical sub-trades, for example with specialist skills, and there is a wish by the Architect or Principal to control who the work is subcontracted to, nominating the subcontractor is a way of achieving this control.
86
What is a BOOT contract?
form of public private partnership
*
Build
Own
Operate
Transfer
* BOT, DBO, DBFO
* private sector finance and expertise
* risk allocated to party best placed to
manage it
87
What is the benefit of PPP?
Profits can be shared. The achievement of the same or better OUTCOMES at the same or lower cost than can be achieved by the Public Sector using any other procurement model. Incentive to complete contruction on or ahead of time.
88
What is BOT/BOOT/BTO/BOO/DBOM/DBFO
Build Operate Transfer / Build Own Operate Transfer / Build Transfer Operate, Build Own Operate, Design Build Operate Maintain, Design Build Finance Operate
89
What is a Collaborative Works Agreement (CWA)/Collaborative Partnerships/Syndicated Contracts?
Collaboration agreements document the terms and conditions of a project between two or more companies. Each company may be contributing intellectual property, resources, or research, product development or marketing expertise to the project. Common terms may cover project funding, treatment of confidential information, and termination of the agreement.’
A CWA is a contractual arrangement which sees two parties enter a long-term business arrangement which is designed to deliver shared goals on integrated planning, customer service and delivery, efficiencies and value for money.’
90
What is the benefit of a Collaborative Works Agreement (CWA)/Collaborative Partnerships/Syndicated Contracts?
**New Zealand Government:** Encourages government collaboration, contract consistency, and efficient use of taxpayer money through economies of scale.
**Lead Agencies:** Empowered to manage needs, influence the market, and attain enhanced procurement value through aggregation, contributing to government collaboration.
**Participating Agencies:** Gain efficiency, consistency, and access to specialist expertise by leveraging collaborative initiatives and achieving procurement value through aggregation.
**Suppliers:** Aggregation streamlines bidding, contract management, and access to multiple government agencies, boosting supplier competitiveness.
91
What are the stages of **creating** an Open Syndicate Contract?
Stage 1. Initiate Project
Stage 2. Identify Needs and Analyse the Market\
Stage 3. Specify Requirements
Stage 4. Plan Approach to Market and Evaluation
Stage 5. Approach to Market and Select Supplier
Stage 6. Negotiate & Award Contract
Stage 7. Manage Contract & Relationships
Stage 8. Review
92
What are the stages of **joining** an Open Syndicate Contract?
* Make sure you’re eligible
* Check what options are available
* Identify who the Lead Agency is on your chosen contract(s) and make contact
* Sign the Lead Agency’s Non-Disclosure Agreement (NDA)
* Assess the contrac
* Sign a Letter of Accession (LoA) (or similar) with Lead Agency
* Secondary Procurement Process (not always applicable)
* Engage with the Supplier
93
What do you have to submit when doing a CRC tender?
Submit *CRC* proformas - Schedule T,T1-T5
And also include CRC special conditions - Cost Reimbursement Contract as part of Schedule B2 in SCC proforma
94
What is a Cost Reimbursement Contract usually reffered to?
a Charge-Up Contract or Overheads and Margin, Cost Plus
95
What is a Cost Reimbursement Contract (CRC?)
A CRC is where the Principal only pays for the work done. The contractor is paid its actual costs for the work completed. Instead of a fixed price contract.
96
When is it appropriate to use a CRC?
to be used when it is difficult to be precise about a total contract price at the Tender Stage. Good for when there is existing work/the project is an alteration. For when there may be unforeseeable costs
97
Why is it important for the Contractor to provide an estimate of direct costs and lump sum items at the Tender Stage?
It is important for the Contractor to provide an estimate of direct costs and lump sum items at the Tender Stage for the purpose of establishing a notional Contract Price, even if only for insurance purposes. This estimate can be revised as the project continues.
98
What impact does the CRC (Cost of Construction) have on the Architect's role in administering the Contract, and what duty is increased as a result?
The CRC does put an increased duty on the Architect administering the Contract to monitor costs on a regular basis to keep the Principal informed.
99
What is a Design Build Contract?
Contractor is responsible for design as well as construction
100
What are the benefits of a design build contract?
Saving time by having th construction begin before the final design has been completed
For agencies (or developers) this means that the product can hit the market quicker
* Design Time is reduced
* Construction Drawings are simplified
* Reduces construction calendar
* Change Orders are minimal.
* Fast Track Schedule
* The Project could be customized to actual site conditions easily
* It allows for the project to be repeated
101
What are the drawbacks of a design build contract?
- Project outcomes may not meet expectations.
- Poor project scheduling can cause significant delays.
- Design-build contracts may not influence labor costs.
- Final costs may exceed initial estimates.
- Integrated design may be precluded.
- Reduced counterweight between contractor and design team may lead to conflicts.
- Architect's vision may seem biased toward the contractor.
- Inexperienced project inspectors may result in frequent problems and costly repairs.
102
What are the tender schedules?
The tender Shedules must be issed to each tenderer with Proforma SCC
Tenderest should fill out this information when sending information back.
Schedule T: Pro-Forma Tender Documents
Schedule T1: Specific Conditions of Tender (principal details, architect details, site details)
Schedule T2: Special Conditions of Tender (any special conditions)
Schedule T3: Conditions of Tender (general conditions/rules)
Schedule T4: Tender Submission (contract price, time for completion etc)
Schedule T5: Tender Summary (cost estimates etc)
There are seperate shcedules for CRC contracts. They are essentially the same as this
103
What is the NBC?
National Building Contract.
A contract between the principal and contractor when an architect is not involved in contract administration. For use on larger projects.
Short Form used in smaller projects
104
When should SCC be used?
Standard: For use between Client and Contractor where the Architect is engaged to administer the contract. Suitable for construction projects of any size or complexity.
Short Form: For use between client and contractor where the architect is commissioned to administer the contract. Suitable for construction projects that are small and less complex.
105
When would you use 3910
If an architect is not administering the contract. If required by client or if builder has prefernce for it. Client and Builder have to agree
(Not sure check this).
106
What is NZS 3910: 2023
NZS 3910: 2023 Conditions of contract for building and civil engineering construction
NZS 3910 can be used where a professional designer has been employed by the owner to design the building and administer the contract. It is intended for high-value, highcomplexity projects and is not generally appropriate for residential building work
107
What is NZS 3916: 2013
NZS 3916: 2013 Conditions of contract for building and civil engineering – Design and construct
NZS 3916 is for use where a contractor is responsible for both the design and construction of a building. This is useful for fast-tracking building projects
108
What is NZS 3917: 2013
NZS 3917: 2013 Conditions of contract for building and civil engineering – Fixed term?
NZS 3917 is for use where the contract is intended to run for a period of time rather than covering a defined scope of work. This is typically intended for maintenance, repair and renewal work.
109
What are some differences between NZS 3910 and SCC?
3910 VS SCC
**Admintered** by Engineer (individual) **VS** Architect (NZIA pratice) - now 3910 is done by administrator and certifier
**Payment** timelines: 0,7,10,12,17 days **VS** 0,5,8,10,17 days
**Retentions** 50-50 **VS** Retentions 40-60
**Specification** takes precedence **VS** Drawings take precedence
**Dispute** resolution is more prescribed in SCC
Various differences between **Indemnity** and **insurance** sections
**Extension of time** differences
3910 has **target price**
3910 requires Administrator to Accept **Safety Plan**
Final Completion Certificate **VS** Defects Liability Certificate
Construction programme required **VS** Only Required if Special Condition
Site-Safety Plans Required **VS** Only Required if special Condition
Defects to be Fixed Within 5 Working days **VS** No specific time frame (both have 3 month Defect Notification Periods)
2 months for the contractor to provide a bond from tender acceptance **VS** bond to be provided before work commences
3910 requires the Contractor to have a competent supervisor in-site at all working times **VS** No provision
Extensions of Time: Contractor must give notice within 20 days **VS** 5 days
Extensions of Time: Engineer must evaluate extension request within 20 days **VS** 10 days
Calander month vs not??
110
What was the purpose of the CCA?
ensure that regular and timely payments are made.
provide fast and cost-effective adjudication processes to deal with disputes.
provide methods of enforcing the recovery of unpaid money
111
When do you need to use Schedule C1 Fluccations in cost?
This schedule will only be required where there is a long contract period and / or a period of high and unpredictable inflation. Most projects with a contract period of less than 12 months will not generally require the inclusion of the schedule.
112
What is NZS 3902: 2004?
NZS 3902: 2004 Housing, alterations and small buildings contract
NZS 3902: 2004 is a standard building contract designed for building owners who self-manage their projects, particularly in residential construction. While primarily for homeowners, it can apply to small building works and alterations where the building owner oversees the project. It is not suitable for labor-only contracts.
113
What is the purpose of a Bond?
Bonds, represent a third party's commitment to provide financial compensation should a party, often the contractor, fail to fulfill their contractual obligations.
An incentive to perform
114
Bonds VS Retentions
A bond is a peice of paper? Retension is money set aside?
Retentions are deductions made from progress payments (the client withholds)
Bonds are a promise by a third party to pay money in the event that one of the parties to the contrcution contract (typically the contractor) fails to perform.
115
What is a bond?
The Bond is a document arranged between the Principal and the Contractor to provide protection for the
Principal against financial loss resulting from the default of the Contractor.
Its usually a deed - certificate/piece of paper - not actual money! (yet)
116
At what project value may you consider a bond?
NZ$ 1.5 million
117
How do you set up a bond?
Tender document:
* Discuss and agree with the Principal on the Bond requirements using NZIA SCC Schedule D1.
* Clearly state the requirement for a Contractor's Bond, following NZIA SCC Rule 3.1 in Schedule B1 Special Conditions, in tender documents.
* Exclude Bonds from parent or affiliated companies of the Tenderer.
* Include a Tender Form item prompting the Tenderer to state the proposed surety's name (bank or insurnace company)
* Plan the schedule to allow time for Bond issuance before the Contractor applies for the first progress payment.
* If Bond issuance is delayed, make a firm and decisive decision on how to proceed, avoiding a 'wait and hope' approach driven by the urgency for an immediate start.
118
How is a bond executed?
* The Contractor's Bond requires execution by the Contractor and Surety or Sureties (Bank or insurance company) in deed format.
* If a party is a company, it can affix its seal, attested per its articles of association, or be signed by two directors, witnessed.
* Individual parties must sign, with the signature witnessed, including the witness's occupation and address
119
How should a bond be trated during procurement and Contract administration?
* Accept tender conditionally on a completed Bond for the Principal.
* Ensure Principal receives and verifies the Bond before certifying the initial progress payment.
* Advise the Principal to involve their solicitor for Bond checks, a responsibility beyond the Architect's normal engagement.
* Certify progress payments only after receiving and Principal's approval of the Bond.
120
When is a Bond discharged?
* At Practical Completion, discharge the Contractor's Bond with a Practical Completion Certificate to the Principal or, if required by the surety, a letter to the Contractor.
* Issue the letter after discussing and obtaining agreement from the Principal.
121
What is the process if you have to call up the Bond? (ie if the contractor defaults)
a) Confirm with the Principal that the default justifies invoking the Bond.
b) Notify the Principal in writing about the default, reasons for Bond invocation, and estimated damages.
c) Certify the Contractor's default and inform about damages, copying the Surety.
d) After seven working days, ensure the Surety has made payments to the Principal.
122
What is a good amount for a bond?
The suitable Bond amount varies:
- Contractors may find 5-10% of the contract value adequate.
- Using overdraft facilities for Bonds can impact a contractor's ability to fund other work.
- Sureties suggest 40-50% of the contract value (with some reports of costs reaching 20-25%)
- Larger practices often specify Bonds in the 10-15% range.
- Consider a Bond equivalent to three months of estimated progress payments as a cross-check.
- Judgment on the appropriate Bond amount depends on the case and should be confirmed in writing with the Principal.
123
What are some examples of special conditions of Tender?
Examples:
Tender enquiries will not be considered: within 2 working days of the time I day for submission of tenders.
The Principal requires that the tenders submitted should be free of all clarifications, conditions and
tags. The Principal reserves the right to consider tenders that are submitted with clarifications,
conditions or tags.
124
What is a schedule of quantities?
A list of items prepared by the QS showing the descriptions/rates/measurements of all items of work required for the construction project to be achieved.
All materials and labour in the building itemised **trade by trade.** Sent out as a part of the tender issue/ documentation.
This allows for all tenders to price for the same amount using the same 'template'
125
What is the purpose/benefit of a schedule of quantities?
* Saves client costs by relieving tenderer of compiling expenses.
* Offers a broader subcontract price range, leading to cost savings in a buoyant market.
* Facilitates easy and fair tender evaluation, ensuring an apples-to-apples comparison.
* Improves tender quality by eliminating contractor mistakes from pricing off drawings.
126
When is a Schedule of Quantities prepared?
* Prior to tender off the tender documentation set - BC docs don’t give sufficient info for a Q.S to prepare a schedule as they require all the details of a project
* Timing: Q.S often start on structural trades ahead of architectural documents – will require a month to prepare a thorough schedule
* NZIA SCC Schedule T3 Conditions of Tender Clause 3 states that the tender must be based on the tender documents, which include a full Trade Summary & may include Schedule of Quantities
127
Who engages the Quantity Surveyor? (Schedule of Quanitities)
* Can be engaged as a separate or sub-consultant
* Schedule C2: Quantity Surveyor is the Architect’s representative on matters relating to the schedule of quantities
128
If a QS is engaged does the architect still do a payment schedule?
If a quantity surveyor is involved in the makeup or assessment of the Contractor’s Payment Claim, the Architect’s obligations with respect to issuing Payment Schedules within the times specified in the Contract remain unchanged. - PN9.508
A QS might prepare a progress evalution for you
129
How do you use a priced schedule of quantites during construction?
- Contractor submits a payment claim to Quantity Surveyor (Q.S.).
- Q.S. prepares a progress evaluation, sent to the architect for the Provisional Payment Certificate.
- Q.S. negotiates and measures variations with the contractor, creating an addendum schedule using tender rates for labor and materials when applicable.
- Finalizes and agrees on the Q.S. payment schedule.
From SSC:
"The schedule of quantities is a Contract Document. It must be used in assessing Variations and for assessing Payment Claims in relation to the extent of the Contract Work carried out. The Architect may require the Contractor to include in the Contractor’s Payment Claim details of the extent and the value of Contract Work done related to the numbered items in the schedule of quantities."
130
What happens if there are discrepencies in a Schedule of Quantities?
- Architect decides on admissibility of schedule discrepancies.
- Contractor promptly notifies architect of any mistakes, with a 10-day rectification period.
- If a substantial discrepancy requires re-measure, fees are borne by the requesting party unless the Quantity Surveyor made an error in the original schedule.
- Contract Price remains unchanged for errors in the schedule by the Contractor or subcontractors.
- Contractor informs the Architect of any errors for agreement within 10 working days, ensuring the revised schedule aligns with the Contract Price.
131
What is 2 Stage Tender?
This is usually in conjunction with Early Contractor Involvement
The first stage involves early design info, budget guidance, and a pre-construction services agreement (PSA).
After evaluation, the preferred contractor moves to the second stage, collaborating with the design team to develop the tender price on an open-book basis. Contract award is contingent on meeting PSA conditions.
132
What is a Buyer Created Tax Invoice?
Where both parties agree, any GST registered buyer purchasing from a GST registered seller can provide buyer-created taxable supply information. You do not need our approval.
In the following situations, you may want to use buyer-created taxable supply information.
When the buyer determines the price
Buyer-created taxable supply information is useful where the buyer is in a better position than the seller to determine the price of the goods or services.
For example, an abattoir buys sheep from a farmer. The abattoir weighs, slaughters and prices the sheep. It also determines other costs, such as levies.
The abattoir is in a better position than the farmer to provide taxable supply information.
*Question:* What are the two options available for issuing a payment certificate under SCC?
*Answer:* The two options are (a) Buyer Created (Architect generated) Tax Invoice and (b) Contractor Generated Tax Invoice.
133
What is a PSA (PCSA)?
pre-construction services agreement (PSA). This is for ECI. - Formal agreements more common in UK and AUS
Sometimes nor charge for early-contractor invovlment unless project terminated.
The is no standard for this type of agreement in NZ
134
What is RBC1: 2018 Building contract
this is a contract prepared by the Master Builders Association for use by their members.
135
What are some of the NZCB Building Contracts?
These are the various types of building contracts available:
1. **Preliminary Services:**
- Used for preliminary work before a building project begins or for feasibility studies.
2. **Small Works and Alterations (Under $30,000):**
- For short-duration projects where the builder invoices once. Can be charge-up or fixed quote.
3. **Spec Build:**
- Used when the builder owns the land and sells it with a completed or partially completed building.
4. **Portable Building/Prefabricated Building Component:**
- For building portable or prefabricated structures that will be relocated after completion.
5. **Fixed Price+:**
- Allows flexibility for variations to the quoted price while ensuring payment security. Deposit is held by the builder.
6. **Cost & Mark-Up:**
- Total price payable is based on actual costs incurred by the builder plus a margin for administration, overhead, and profit.
7. **Renovations (Fixed Price + or Cost & Mark-up):**
- Similar to standard contracts but with provisions for partial possession, owner-procured insurance, and flexible completion stages.
8. **Labour Only (Fixed Price + or Cost & Mark-up):**
- Used when the owner or project manager oversees project management. Allows for supply of incidentals and agreed variation rates and margins.
Samples of these contracts can be accessed for free from the NZCB members’ Toolshed.
136
What are the three BuildSafe Contrats?
These are the types of contracts offered under the BuildRight framework:
1. **BCC:2016 General Conditions of Contract:**
- Suitable for any residential construction contract or small commercial projects without an engineer involved.
2. **BCS:2016 Subcontract Conditions of Contract:**
- Designed for residential construction contracts between a head contractor and a subcontractor under either BCC:2016 or BSPCC:2016.
3. **BSPCC:2016 Small Projects Conditions of Contract:**
- A more concise version of the General Conditions of Contract, suitable for smaller building projects and labor-only contracts.
137
What is the difference between a Contractor Performance Bond and a Principals Bond?
Contractor Bond - Contractor takes out the bond (Schedule D1)
Principals bond - principal takes out the bond (Schedule D2)
138
Where might a principals bond be useful?
Developers - where there is a risk of contractor not getting paid
139
What are the two options available for issuing a payment certificate under SCC?
The two options are (a) Buyer Created (Architect generated) Tax Invoice and (b) Contractor Generated Tax Invoice.
140
What are fast-track projects in procurement?
Fast-track construction is a project delivery strategy where some parts of construction can begin before the design is completed. It allows different portions of the project to be done simultaneously at different stages of completeness.
141
Prime cost vs provisional sum
Prime cost is without labour (materials only)
also known as PC sums: price for materials only, with contractors cost and profit, but not including labour.
Provisional is with labour included
everything: materials, labour and contractors cost and profit.
142
Differences between SCC SF vs SCC Standard
Standard for All types of Projects, Short form for smaller or less complex jobs
Short form:
No Allowance to Schedule C1 Cost Fluccuations
No Allowance for Schedule C2 Schedule of Quantities
No Allowance for Schedule D1-D3 - Bonds
No Allowance for Schedule E2 Contractors Producer Statement
General Conditions:
Bonds Not used in SF
Less Reference to Schedule of Quantities in General Conditions in Short Form
Less talk about Fluccuations in Short Form
No liquidated damages in short form
More defnitions and clauses in Standard Form
143
Name all SCC Schedules
Schedule A1 - Contract Document
Schedule B1 - Specific Conditions of Contract
Schedule B2 - Special Conditions of Contract
Schedule C1 - Fluctuations in Cost
Schedule C2 - Schedule of Quantities
Schedule D1 - Contractor’s Performance Bond
Schedule D2 - Principal’s Bond
Schedule D3 - Contractor’s Bond in lieu of Retentions
Schedule E1 - Contractor’s Advice of achieving Practical Completion
Schedule E2 Producer Statement - Construction
Schedule E3 - Practical Completion Certificate
Schedule E4 - Defects Liability Certificate
Schedule F1 - Specific Conditions of Insurance
Schedule F2 - Confirmation of Insurance – Contract Works
Schedule F3 - Confirmation of Insurance – General (Public) Liability
Schedule F4 - Confirmation of Insurance
Motor Vehicle Third Party Liability
Schedule F5 - Confirmation of Insurance
Construction Plant and Equipment
Schedule F6 - Confirmation of Insurance Contractor arranged Professional Indemnity Insurance
Schedule G1 - Warranty Agreement
Schedule G2 - Security for off site goods or materials
144
Does the contractor need to provide you with a timeline at the tender stage?
PC date discussed and defined at tender stage yes, date or number of days
There is a clause re constriction programme and its stated in the B1 specific conditions (clause 11.2 in SCC 2018) and Clause 11 in the General Coditions
145
What is a letter of intent? Graham crust
A letter of intent should NOT be used in tender. It is a letter that falsely claims that there is an intention for the contractor to be accepted on the condition of a resoltuion of some minor itmes, before the letter of acceptance is sent. (ie the intent to go into agreement even though noting is finalised)
146
Which days and times should you not accept tender?
As per tender documents.
Generally accepted procedures:
Not earlier than 2pm
Not later than 4pm
Not on a Monday - allow teneders to complete their tender of a working day
Not on a Friday - to allow reciver to complete a preliminary review on a working day
147
What are the key aspects of the master builders contract?
Not too relevant to you as an architect
compared to NZS 3910, NZCB’s contract does not require the contractor to follow a strict process for variations.
in favour of the builder
148
How do disputes differ between 3910 and SCC?
3910 has a compulsory good faith negotiation provision at clause 13, absent in SCC
3910 allows parties to agree to refer matters to an expert for resolution, unlike SCC
SCC prescribes time limits for dispute resolution stages and provisions for mediator and arbitrator appointments, not found in 3910.
SCC:
1. Notify Architect of dispute and request a formal decision within 10 days.
2. Architect's decision is final, unless parties seek mediation within 30 days if dissatisfied.
3. If mediation fails within 30 days, the dispute must proceed to arbitration.
4. Parties appoint an arbitrator within 15 days, whose decision is binding.
5. Parties may still seek court action for undisputed payments or urgent relief.
3910:
1. Disputes must be referred to the Engineer within one month.
2. The Engineer provides a written decision.
3. Parties can attempt to resolve disputes through meetings or an agreed expert.
4. If unresolved, parties may request mediation within one month.
5. If mediation fails, arbitration can be initiated (arbitration can be done at anytime with 3910:2023)
6. The arbitrator's decision is final.
7. Disputes do not permit work suspension or payment withholding.
8. Interest may be awarded on disputed sums.
149
Who are AMINZ?
Arbitrators' and Mediators' Institute of New Zealand (AMINZ)
150
What is a Project Alliance?
Where two parties (contractor and client) join to develop a project.
Generally large scale projects
Sharing of risk and reward
151
What is a consortia contract?
Allows 2 or more businesses to combine their capabilities
Similar to joint venture
152
What are the SCC standard Form retention values?
10% of the first $200,000; plus
5% of the next $800,000; plus
1.75% of any amount excess of $1,000,00
Max of $200,000
153
What is a Separable portion?
A part of the project that has a different access and/or date for practical complete than other parts of the site
154
What is a demand bond?
On demand - A Surety promises to pay without delay when requested by the benefactor.
Demand - On request / “demanded” at any time during the construction project, without proving a breach in court
Performance Bond - Conditional, if there is a breach
155
What is an open book tender?
Where there is transparency with all tender costings
156
What if there are late tenders?
Decline tender. Return tender unopened.
Alternatively, Tenderers can call and state their contract price excluding gst and receiver can record. Tenderer can repeat to a seperate person to report contract price. Compare two to ensuite correct and wait until Tender is submitted within a reasonably practicable timeframe.
157
What are some typical contingency sum percentages?
2.5% for straight forward contracts
5% for typical contracts
7.5% for more complex contracts
158
What is a bond in lieu of retentions and why would they be used?
As a form of security from the outset if retentions are not used in the contract.
not common in smaller projects (bonds usually not common in small projects in general
To maintain cashflow in bigger projects
159
How long to keep professional indemnity for?
6 years since services have been complete (when retired)
Otherwise as long as you are in business
160
Describe the Fluccuation of Cost claim process under SCC
Submission of Fluctuations: The contractor may submit a **Statement of Fluctuations** of "Basic Costs" for approval by the Architect
Decreases in Cost: If the contractor fails to provide details or claim fluctuations in Basic Costs, the Architect may prepare a statement for decreases in costs to be included in the Payment Schedule.
Other Changes in Costs: Fluctuations arising from changes in **government fees or charges can be claimed**, following the same procedure as fluctuations in Basic Costs.
Alternative Methods: The contractor, with Architect's approval, **can use different methods for calculating fluctuations** in labor or materials.
**Statement Requirements:** Statements of Fluctuations for Basic Costs must include materials affected, dates of purchase, fluctuation dates, prices, and a verification statement.
**Must be verified a QS**
Claims for Fluctuations must be made within **3 months** of the date of the submission of the Payment Claim
10% added for **Contractor's** costs including payment of QS
A **margin of 5%** is to be added to the amounts of the Fluctuations in Basic Costs in respect of **subcontractors**
161
Define Basic Costs
Basic Costs means the price of materials, from normal sources of supply, which form part of the
Contract Works, effective on the date 5 Working Days before the closing date for tenders. The
Contractor’s Basic Costs include subcontractors’ basic costs.
162
What is the format of 3910?
**Contract Agreement
General Conditions of Contract**
Appendix
**Schedules to General Condions of Contract**
**Conditions of Tendering**
Guidlines
General Aid to Valuation of Variations
Index
163
What are the standard retention percentages in 3910
Same as SCC!!!
164
When is contractors professional indemnity insurance used?
When contractor is involved in specific design issues, specific fire design, facade design. Shop drawings, site works (shoring - holding up retaining walls)
165
How much bond?
5-10 percent for works over 1.5 million
166
What is a variation under SCC?
a. an increase or decrease to, or omission of, any part of the Contract Works;
b. a change to the character or quality of any material or work;
c. a change to the level, line, position or dimension of any part of the Contract Works;
d. additional work to be carried out by the Contractor;
e. additional demolition or removal of any material or work;
f. a change to the order in which the Contract Works are to be carried out.
167
What steps must the Contractor take if the Architect issues a direction without stating it as a variation?
The Contractor should notify the Architect within 10 working days or as soon as possible, stating their belief that the direction constitutes a variation. The Architect must respond within 10 working days, and if they disagree, the Contractor retains the right to dispute the variation.
168
Does a contractor have to do a variation after PC?
The Contractor is not bound to carry out a Variation if the Variation is to be carried out after Practical Completion.
169
Has NZIA any Standard Conditions for Labour Only contracts?
Misnomer - labour only means several trade contracts and not one contract
NZIA contracts are written with one main contractor in mind
TYPICALLY NOT RECOMMENDED TO BE INVOLVED IN THESE TYPE OF WORK
