Level 3 - Procurement & Tendering Flashcards
If your client was building a hotel and quality of finish and programme were the most important factors what procurement route would you advise, and why?
Two stage tender
Where would you look to for procurement and tendering guidelines?
Tendering strategies 1st edition - RICS guidance note
What tendering strategies are available?
- Single stage - Two stage - Negotiated
What is the difference between tendering and procurement?
There is often confusion in the industry about the differences between tendering and procurement. The terms are sometimes used interchangeably without thought given to their actual meaning. They are distinct activities in the construction process and it is necessary to properly understand them to be able to explain the differences. • Procurement is the overall act of obtaining goods and services from external sources (i.e. a building contractor) and includes deciding the strategy on how those goods are to be acquired by reviewing the client’s requirements (i.e. time, quality and cost) and their attitude to risk. • Tendering is an important phase in the procurement strategy but procurement involves much more than simply obtaining a price. Tendering is: • the bidding process, to obtain a price; and • how a contractor is actually appointed.
What is single stage tendering?
The most common type of tendering strategy is the single-stage competitive tender for obtaining a price for the whole of the construction works. Invitation to tender documents are issued to a number of competing contractors who are all given the chance to bid for the project based on identical tender documentation. This is usually done at RIBA Stage 4 so that the tendering contractors receive the most detailed information to base their bid on. The bidding contractors are given a predetermined amount of time to submit their tenders. These are then analysed, in terms of cost and quality, before a single contractor is declared the preferred contractor. They then ultimately enter into a building contract with the client to deliver the tendered works.
What is two stage tendering?
Two-stage tendering has become more common in recent years and is often used where time is constrained (as it enables design and tendering to overlap). It is also used if the design process would benefit from the technical input of a contractor in the later design stages. In this sense it is used to obtain the early appointment of a contractor. The process involves first-stage tender enquiry documentation being issued to bidding contractors at RIBA Stage 2 or 3. Rather than requesting a bid for constructing the entire project (which is still in the process of being designed), the preferred contractor is chosen on the basis of the quality of their bid, the quality of their team and their preliminaries price and overhead and profits allowances. The preferred contractor then joins the design team on a consultancy basis using a pre-construction services agreement (PCSA). The preferred contractor then works with the professional team to complete the design, usually to RIBA Stage 4, before presenting a bid for the works at this stage.
What is negotiated tendering?
A negotiated tender is effectively a single-stage tender with a single contractor who returns with an initial price. This is then negotiated with the client’s professional team (usually the professional quantity surveyor (PQS)). The benefit of this route is the speed with which a price can be obtained for the works. However, the competitive advantage of a formal bidding process is compromised. Also, many public bodies and government departments will not allow negotiated tenders except in exceptional circumstances as it is difficult to prove that value for money in the current market has been achieved.
Can you provide me with an example of tender scoring?
Assessments might consider some of the following criteria: Price. Relevant experience. Understanding of the requirements. Past performance. Technical skills. Resource availability. Management skills and systems. Proposed methodology (this might include mobilisation plans, design proposals, and non-compliant proposals if these have been allowed). Compliance with the requirements set out in the invitation to tender.
Please provide an example of some procurement routes?
1 Traditional contract 2 Design and build 3 Management contracting 4 Construction management
What is traditional procurement including the pro’s and con’s of this method?
Good for: Quality – full design pre tender Design flexibility – variations & instructions Specialist subcontractors – Named specialist update to standard building contract sbc11 Design control – through the architect / contract administrator Contractor’s Designed Portion – such as mechanical and electrical engineering Cost – there may be lump sum cost benefits unless are multiple changes made Not suited for: Time – require full detailed pack pre tender Cost – not a benefit if many changes made Incomplete drawings – lead to delay, costs and claims of negligence
What is D&B procurement including the pro’s and con’s of this method?
Good for: Time – Fast track, overlap of design and construction Cost – lump sum / Guaranteed maximum price Single point of responsibility – Contractor design and build responsibility Has good price certainty Easy to arrange changes in the design Novation – can benefit quality. Low risk for the client Variations can be accurately valued Not suited for: Quality – cheapest route to meet contract specification can lead to low quality products/ build quality. Design flexibility – request for changes will have cost/time implications Contractor carries risk for construction Client exposed to claims for buildability Design could affect the buildability of the project
What is Management contracting procurement including the pro’s and con’s of this method?
Good for: Complex / specialist projects – individually appointed packages to best suited sub-contractor Potential cost saving – competitive tender Time - it is possible to overlap design and construction Quality – each package subcontracted to specialist Design flexibility – changes can be made throughout construction, although there are potential cost implications. Not suited for: Inexperienced clients – risk high Fixed cost - Prime cost basis per package. Lack of available specialists – would leave gaps in work to be undertaken.
What is Construction Management procurement including the pro’s and con’s of this method?
Good for: Complex / specialist projects – individually appointed packages to best suited sub-contractor Time - It is possible to overlap design and construction Design flexibility – changes can be made throughout construction, although there are potential cost implications. Potential cost saving – competitive tender Quality – each package subcontracted to specialist All building types Efficiency – Early appointment of the construction manager to aid programme Inexperienced client – risk high as appointing trade contractors Fixed cost - Prime cost basis per package. Lack of available specialists
What is a Lump sum and what is it priced with?
• A lump sum contract = a single ‘lump sum’ price for all the works is agreed before the works begin. • Lump Sum contract with quantities: Priced on the basis of drawings and BoQ. Items that can’t be accurately quantified = provisional sum. • Lump sum without quantities: Drawings and Specifications. • If lump sum not itemised, schedule of rates will be required.
What does a Lump Sum contract require:
• Defined Scope • Stable market conditions and absence of major economic of political uncertainty • Minimal Scope change • Time for scope definition and building process
Lump Sum Characteristics:
- Well defined Scope - Less appropriate when speed is important (need time to define scope) - Client some certainty around cost - More risk to the Contractor – fewer mechanisms to vary price Variations (Change to nature of works) Provisional Sums - Better defined works = less opportunity for variation - True fixed cost, not necessarily best interest of Client. Less opportunity to vary design/requirements.
Measurement Pricing Definition
contract sum is determined on completion and in accordance after re-measurement in accordance with predetermined method.
Measurement Characteristics
- Early start before design is complete - Uncertainty of works(refurb/Excavation) - Client Change relatively easy - Risk to Client, as cost of works is ‘unknown - Scope of work defined amount not (no bOQ) - Sufficient detail scope to allow contractor to calculate unit rates - Based on drawings and schedule of Rates - Best confined to small projects
