L1 - Procurement & Tendering - Procurement Flashcards
Procurement
What is procurement?
Procurement is the process of obtaining constructions goods or services.
Key considerations of procurement routes
Funding
Time
Performance
Capital vs operational costs
Risk
Speed
Financing
RIBA Construction Contracts and Law Report - 2022 - Procurement findings
RIBA Construction Contracts and Law Report - 2022 - tendering findings
What are the different procurement routes?
Traditional (design by consultants prior to lump sum tenders)
D&B (detailed design by contractor for lump sum)
Management contracting (design by consultants, management contractor lets packages in contractors name)
Construction management (design by consultant, construction manager appointed to manage trade contracts in Employers name)
The effectiveness of tendering procedures for procurement routes
Tendering strategies with RIBA works.
What is traditional procurement?
Design work will separate from construction
Design completed by consultants
Design is finalised prior to tender
Typically RIBA Stage 4 and a JCT Standard Building Contract
Traditional - Advantages
Competitive tender
Early cost certainty
Design led process so high quality
Early programme certainty
Contractor risk on cost and programme
Traditional - Disadvantages
If design isn’t complete on time, delay and disputes
Long project duration - no overlap in design and construction
No contractor input on buildability
Client team responsible for design
Major changes = client risk
What is Design & Build?
Contractor appointed to design and construct works
Can be either single or 2 stage
ERs are developed by designers, designers then novated to main contractor to continue design development
Typically JCT D&B, and Stage 2 to Stage 4
Design & Build - Advantages
Single point of responsibility
Early contractor input
Early cost certainty assuming limited changes
Design and construction overlap - reduced programme
Familiar to project team
Design & Build - Disadvantages
ERs are crucial - need a robust set
Client has to commit to design concept early on (2 stage)
Longer tender periods
Potential reduced quality as contractor taking over design
Comparison of bids can be difficult
Design & Build
The design team is novated to the Contractor once the Contract is signed.
What is management contracting?
Works are constructed by a number of contractors who are contracted to a management contractor
MC is appointed early to provide input in cost and buildability
MC doesn’t carry out works but manages the project on behalf of Client (Middle man)
Typically JCT Standard Form of Management Contract
Management Contracting - Advantages?
Quick start on site due to early procurement of packages
Design and cosntruction can overlap - shorter programmme
Reduced workload of Client as MC pays subbys
Management Contracting - Disadvantages?
High level of Client involvement
Delays on procurement exposes Client to market fluctuation risks
Prime cost basis which means no cost certainty
Cost and programme risk sit with Employer
Limited cost certainty
What is Construction Management?
Each trade contractors are contracted by Client but managed by CM
CM acts as a consultant, Client takes risk on performance of subbys
Construction Management - Advantages
Enables quick start on site with staggered procurement
Can incorporate change easier
Early contractor involvement on programme, buildability
Employer has option to stop works prior to construction
Construction Management - Disadvantages
High level of Client involvement
Requires experienced Client’s to have success
Very close cost control required
Programme certainty not achieved until all works packages are procured
Management Contracting vs Construction Management?
MC = manages and directly appoints subbys
CM = works on a consultancy basis managing the subbys but the Client has direct links to the subbys
Risk and Procurement routes
Traditional - design risk with Client. Programme and cost with Contractor
D&B - design, cost, programme risk with contractor
MC - design, cost - Client. Programme with contractor
CM - design, cost, programme risk with Client
What is a PFI?
Private finance initiative - private firms contracted to complete and manage public projects
- PFI eliminates immediate burden of financing projects from governments
- Typically used in UK and Australia
PFI - Advantages
Improve on time project completion
Improve relationship between public and private sector
PFI - Disadvantages
Repayment terms include payments and interest
What is PPP
Public private partnership - arrangement between 2 or more public and private sectors e.g. privately run prison
What is prime contracting
Client enters a relationship with a contractor who provides a single point of contact for a supply chain to deliver 1 or more projects
What is the difference between traditional (procurement route) with and without quantities?
With quantities is a BoQ. The traditional design is measured and the requirements are listed out for
a contractor to put his costs to (measures are employers risks). Without the contractor makes their
own assessment of the measures and costs (measures are contractors risks).
