L1 - Procurement & Tendering - Tendering Flashcards
Tendering
Procurement vs tendering?
Procurement - The process of obtaining construction goods and services
Tendering - The act of obtaining, analysing and recommending construction goods and services
Types of tendering procedures?
- Single stage
- Two stage
- Negotiated
What is single stage tendering?
- Single stage competitive tender
- Invitation to tender documents issued to bidding contractors based on identical tender documentation
- Typically done with Stage 4 information so it’s most detailed
- Bids are returned within a predetermined time, and analysed
- Analysed in terms of cost and quality
- Single contractor is declared the preferred contractor
What is two-stage tendering?
- Two stage more common in recent years
- Often used when time is constrained as it allows a overlap of design and tendering
- Also used when contractor buildability is obtained
- It is used to obtain the early appointment of a contractor
What is the process of two-stage tendering?
- Tender documents (Stage 2/3) issued to set contractors
- At the 1st stage, the contractors issue their quality of bid, quality of team, preliminaries price, OH&P, risk %
- The preferred contractor is appointed on the basis of the above
- Preferred contractor joins the design team on a consultancy basis using a PCSA
- Preferred contractor works with team to complete design typically Stage 4
- A bid for the works is then obtained.
What is negotiated tendering?
Negotiated tender is a single stage tender with a single contractor who returns an initial price.
Reasons for robust tendering strategies?
Positive tender results through:
Accountability, audit-ability, ensuring everything has been picked up, parity, helping to reduce claims of corruption, ensuring the correct price has been paid.
What is a PTE and why do you produce it?
- PTE is produced to know the estimated cost of the project
- This is so the Client will know what the can afford and so there is a basis of costs to compare against.
- PTE produced in accordance with NRM1
Why get early contractor involvement?
- Buildability advice
- Emphasis put on the lead designer who is the contractor for BIM
Single Stage - Advantages
Most competitive price
Single Stage - Disadvantages
- Contractor may not fully understand the project so there may be risk allowances priced
- Programme implication to include for tender period
Two-Stage - Advantages
- Buildability advice in design and construction
- Improved cost certainty through early contractor involvement
- Overlap of design and tender
- Facilitate a quick start on site
Two-Stage - Disadvantages
- Lack of competitiveness at 2nd stage which could lead to increased costs
- Contractor is not obligated to submit a second bid
Negotiated - Advantages
- Time saved from removing the tender process
- Client has flexibility in choosing their preferred contractor
Negotiated - Disadvantages
- Lack of competition
- Contractor doesn’t have any incentive to mitigate risk and cost
- Heavy reliance on trust between parties
Types of Contractor selection?
- Open tendering
- Selective tendering
- Single contractor selection
Selection of tendering contractors (long list)
- Long list to 8
- Based on previous experience, word of mouth, meetings from contractors, Client recommendations
Open Tendering
- Open to anyone
- Published in journals / websites
- Public procurement (OJEU) is a form of open tendering
What do Pre-Qualification Questionnaire’s (PQQ) obtain?
- Company details and legal status
- Details of insurance cover
- Financial information
- Relevant experience and key personnel
- Information about technical and professional ability
- Information about capability and capacity
- Health & Safety
Financial checks in PQQ?
- Credit checks (Dunn and Bradstreet) / Experian
What is included in a PQQ?
- Project and estimated value
- Employer and professional team
- Proposed tendering procedure
- Requirements for contractor design
- Contract to be used
- Completed contractor particulars
- Contract amendments
How many contractors should be included in a PQQ?
- JCT Tendering Practice Note 2017 - between 3-6 is sufficient
- No more than 4 in D&B
- Minimum 3 in public procurement
How are PQQ’s analysed?
- Scoring matrix (different weightings)
- Commercials, technical, management, insurances, sustainability and project specifics
Assessing a suitable tender period?
- Period varies on a project basis
Key factors: - Complexity
- Size
- Time of year
- Market conditions
Considerations of a tender period
- Too quick = risks priced in, not enough time to produce a full bid so may be artificially low/high
- Assurances of tender periods mentioned at PQQ stage
- Potential for tender extensions
What is the tender process?
- Longlist and issue to Client
- Client approves list
- PQQ interviews and recommendation
- Issue PQQ to 4 contractors
- Prepare and issue tender docs
- Tender addendums / mid-tender interviews
- Receive bids
- Analyse bids
- Tender recommendation report
What is included in the tender documents?
- Invitation to tender
- Instructions to tenderers
- Form of tender
- Preliminaries
- Form of Contract
- Pricing document
- Employer’s Requirements
- Design documents incl. risk register
- Certificate of Bona Fide tender
- Return envelope
Different types of tender documents depending on procurement / contract route
What is the invitation to tender?
Contractor is formally invited to tender on the project
Includes project details, return date and contact details for queries
What is the form of tender?
- Form contractor signs
- Includes price and programme
- Alternative proposals / able to achieve a reduced programme / design
What is the instructions to tenderers?
- Conditions of the tender
- Sets out what is expected to be returned and by what date
- Involves the scoring mechanism, questionnaire and details for tender queries
- ITT doesn’t form the basis of the contract documents
- Document clarifies the basis of errors as per the JCT Tendering Practice Note 2017 (Alternative 1/2)
What is included in the preliminaries document?
This is where the project is described in detail and the contractual obligations. It includes:
- Setting base date
- Fluctuation procedures
- Completion strategies
- Level of LDs
- Method of payment strategy
- Insurance strategy
- Period of suspension
- Dispute resolution strategy and alternatives
- Collateral warranty requirements and strategy
- Joint Fire Code application
- Level of design responsibility
What is a certificate of bona fide tender?
Statement saying the tender is competitive and has not been produced in collusion / conjunction with any other party
What are the different pricing documents for each Contract type?
- D&B - Contract sum analysis (CSA)
- Term / frameworks - Schedule of rates
Methods of issuing tenders?
- Traditional
- E-Tendering
How to deal with tender queries?
- Anomalise queries
- Issue back to all contractors so there is a fair level of information for all
- No unfair advantage
What are tender addendums?
- Tender addendums are new information being made aware to the tenderers after their tender submissions e.g. the release of survey information.
- Looks disorganised for the project team
What happens in mid-tender interviews?
Common for larger projects.
- Opportunity to meet people working on tender
- Tenderers can raise queries
- Can be combined with site visits
- Opportunity for Client team to assess progress of each tenderers to date
What do you do when receiving tenders?
- Produce tender opening report
- Includes original price obtained, if the bid is compliant, programme
What is included in a tender opening report?
Tender price
Proposed programme
Key comments / exclusions
Any alternative tender offers
Confirmation that all documents have been submitted
Dated and signed
What is tender normalisation / analysis?
- Tenders are compared line by line
- Any gaps / p sums / alternative specs are highlighted and replaced
- Replaced with either PTE, highest tender bid, average bid
- Make sure whatever is chosen, it is uniform across the board
What is the purpose of post-tender queries?
- Final queries are answered
- Final bids are submitted are normalising
Key factors in a Tender Recommendation Report?
Price
Programme
Technical proposal
H&S
Sustainability
Experience
Resources
Cost fixity
What key headings are included in Tender Recommendation Reports?
Executive summary
Financial summary
Initial vs adjusted tender returns
Technical analysis
Commercial analysis
Recommendation and next steps
Scoring matrix
How do you deal with errors in tenders?
Alternative 1 - A tenderer can withdraw / stand by their original bid
Alternative 2 - A tenderer can confirm their price / amend it to correct an error
Risk allowances in construction bids?
D&B contractors price risk allowance to reflect completeness of design.
Risk register incl. in tender docs has specific list of risks - if a contractor has excluded this, analyse why
Why might you need to re-tender?
Not enough tenders returned
Tender process is believed to be compromised
Tenders not at the required level
Significant design change since tender issue
Advising on tendering strategies
Tendering can occur at any time during the design process
e.g. a D&B project could be tendered at RIBA Stage 1, this would be different to analysing a Traditional, single staged project at Stage 4
What to advise the Client on negotiated tender?
If the bid is to far apart from PTE / Contractors, the Client doesn’t have to agree a CSA and can walk away
Negotiations should include cost, programme, contractual items
Report should identify issues discussed during negotiations and what was agreed
Additional advice on tender reports?
What 3rd party actions are required
Any outstanding contractual issues
Alternative time tenders
Set PCSA scope for the 2nd stage on a D*B
What is serial tendering?
Hybrid tendering method combining normal competitive tender with negotiation
Advantages of serial tendering
Contractor selected on a competitive environment in 1st phase
Disadvantages of serial tendering
Pitfalls of negotiation still apply
Does 2 stage tendering promote collaboration?
Collaboration is forced on parties to complete the design and packages
If the 1st stage is carried out too late in tender process, there wont be enough time to allow to contractor to have influence on design
Risk that 2 stage, contractors can increase their prices
2nd stage process
Pricing exercise - Allow for quicker start on site as overlapping design and tender - Contractor input to design is minimal
Contractor lead designer - may be fully responsible for co-ordinating the design
Contractor’s responsibilities need to be carefully set out in the PCSA
GMP / Target Costs
Seen typically in management contracting routes but can be applied in a 2 stage tender
If the Contractor can beat this cost agreed in the 1st stage, the contractor can be rewarded by percentage share
Incentivise the contractor to price competitively
What guidance is there for procurement and tendering?
- RICS Tendering Strategies 1st edition - 2015
- JCT Tendering Practice Note - 2017
Contents of the RICS Tendering Strategies 1st Edition 2015?
Intro
General principles
Practical application
Practical considerations
Appendix A - Example tender opening form
Tender periods?
Minimum 28 days for private sector.
D&B may be 3/4 months if required but depending on design information is sufficient in ERs, then shorter is ok.
What is a PCSA?
A PCSA enables Clients to employ contractors before contract signature
Typically 2 stage process, enables the contractor to:
- Contibute to design process
- Advise on buildability
- Construction monitoring
- Surveys & investigations
- Assist in addressing scope gaps and planning
- Advise on key procurement dates
- Advise on selection of specialist contractors
- Help develop cost plan and construction programme
What is CDP?
Contractor’s design portion - contractor does design under traditional contract (JCT SBC - section 2.2)
What are frameworks agreements?
Used by Client when they are procuring projects on a regular basis. Contractor’s tender on basis to secure work for future projects.
Best for Employers who procure work on a regular basis and want long term relationships with supply chain
Reduced procurement timescales
What is competitive open book tender?
Competitive Open Book Tendering is a procurement method where the buyer approaches multiple suppliers and negotiates the terms of the contract with each of them. The suppliers provide a detailed breakdown of costs in their tenders, including labour, materials, overheads, profit, and contingency provision. This transparency allows the buyer to understand the real costs of a service and ensures they are not being overcharged.
Why it would be used:
* It ensures a competitive price is obtained.
* It’s useful when services are difficult to specify precisely up front.
* It allows the buyer to see into the supplier’s business and understand their pricing and margins.
* It can include incentives (and penalties) calculated as a percentage of the difference between the real cost of the project and an estimate provided up front.
Why it wouldn’t be used:
* It requires a high level of monitoring and involvement on the buyer’s side.
* It can be challenging to isolate the cost variables for which the contractor will accept sole responsibility.
* It can be counterproductive if it results in less effective contract management.
* A saving in the management fee can quickly be lost if the result is less effective operational management or failure to respond to the changing needs of the customer.
* It may not guarantee value for money. Simply knowing how supply chain costs are made up does not necessarily mean that they will be minimised.
What are the advantages and disadvantages of framework agreement?
Advantages include:
o Reduce tendering costs
o Quick start on site
o Buildability improved as contractor involved earlier
o Integration of supply chain
o Repeat work and continuity of projects
- Disadvantages include:
o Reduced competition resulting in higher tenders
(Can carry out random audits & benchmarks with industry data to ensure
costs remain competitive during FA)
o Higher cost to set up at tender
o May act as barrier to some smaller firms
