Procurement and tendering Flashcards
What is procurement?
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.
In the context of a construction project, and in many wider commercial contexts, procurement refers to the process of obtaining a product or service. On a construction project, it is a way of allocating design and construction responsibility. For example, deciding and allocating contractual responsibility for the design and construction of a project.
Construction professionals (including construction lawyers) call the different methods of making that allocation “procurement routes”.
This is separate from “public procurement”, the regulation of the way in which public bodies must manage their contracts.
What is tendering?
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 are the common forms of procurement?
The ‘traditional’ procurement route (sometimes referred to as design-bid-build) is a single-stage, fully designed project where the design is developed in detail by a consultant teamworking for the client and a contractor is then appointed under a lump-sum construction contract which includes penalties for late completion. The contractor may have no responsibility for any design other than temporary works.
Design and build is a procurement route in which the main contractor is appointed to design and construct the works. Design and build can be attractive to clients as it gives a single point of responsibility for delivering the project. Design and build projects can follow either a single-stage or two-stage tender process.
Construction management is a procurement route in which the works are constructed by a number of different trade contractors. These trade contractors are contracted to the client but managed by a construction manager. The construction manager acts as an agent for the client, administering and co-ordinating the works contracts.
The construction manager is generally appointed early in the design process so that their experience can be used to improve the buildability and packaging of proposals as they develop.
A management contract is one where the works are constructed by a number of different works contractors who are contracted to and managed by a management contractor. A management contract structure is similar to a traditional contract, however, instead of taking the risk associated with a fixed price, the management contractor is reimbursed the amounts paid to works contractors, and is paid a fee usually in the form of a percentage.
What is the difference between Public and Private Sector Procurement?
The procurement process for the public and private sector is broadly the same. However, there are differences in how they are funded and regulated, which affect the procurement process.
1. Funding
Public sector spending is estimated to be just over £908 billion in 2020. The sector is mainly funded through taxes and government departments. Difference organisations can also raise revenue commercially, for example, through charging rent or for parking. Private sector organisations are financed using private money, through investor, shareholders or loans and other forms of finance. They can move money around their organisations reasonably quickly in response to changing economic conditions or business requirements. Public sector organisations don’t have the same flexibility when it comes to amending their budgets.
On the other hand, cuts or delays in Government funding can happen quickly. Public sector organisations are then left with a budget shortfall for procurement teams to address, putting pressure on them and services the organisation is providing. Procurement is often suspended, leading to supply issues and impacting relationships with suppliers. When private sector organisations face financial difficulties, they have access to more funding options than the public sector and can often quickly replace any shortfall.
2. Regulation
Another of the differences between public and private sector procurement is how they are regulated. The public sector is subject to more rigorous scrutiny, and organisations are constrained by different legislation than the private sector. Public sector organisations can be subject to both UK and international regulations, some of which are considered inflexible and hinder public procurement processes.
Private sector organisations are also subject to legal regulations and scrutiny by shareholders. However, they are generally less onerous and don’t impact procurement in the same way.
Because of the regulatory regime, and requirements that they must account for their spending, public sector procurement is more procedurally heavy. Often you’ll find the procurement process is slowed down by their processes and procedures.
However, using procurement software allows organisations to follow the requisite procedures while keeping the procurement process moving. Atamis provides procurement software to several public sector organisations, including the Home Office and DCMS, which provide them with increased flexibility and agility.
3. Stakeholders
Private organisation’s stakeholders are much smaller in number than those in the public sector. Stakeholders include owners, investors, shareholders and customers. Interests are limited to the product and services or financial performance. Public sector stakeholders include everyone who is financing or using the services the public sector is providing, effectively the general public. The public sector is under far greater scrutiny than the private sector. As a result, the procurement process has to be managed differently and is far more transparent than private sector procurement.
4.Focus
For public organisations, the focus for procurement is on reducing spend and saving money. They need to ensure they remain compliant with regulations and must share information with other organisations in the industry to help them save money too. Private organisations are profit focussed and continuously try to increase profit margins. Sharing procurement information would give a competitive advantage to competitors and so would never be done.
Those in the public sector also need to consider the social value when procuring goods or services, not just value for money and supply. For example, creating jobs or improving education. Some private sector companies include an element of social value in their procurement; however, this is through choice rather than a legislative requirement.
What needs to be considered when selecting a procurement strategy?
The selected route should follow a strategy which fits the long-term objectives of the client’s business plan. Considerations are likely to include:
Speed. Cost. Quality. Specific project constraints. Risk. Asset ownership. Financing.
How Public bodies are obligated to managed their contracts in the UK?
Public procurement is subject to the EU Treaty principles of: • non-discrimination • free movement of goods • freedom to provide services • freedom of establishment In addition to these fundamental treaty principles, some general principles of law have emerged from the case law of the European Court of Justice. The most important of these general principles of law for you to be aware of in the procurement context are: • equality of treatment • transparency • mutual recognition • proportionality
What are the key procurement and contract’s regulations applicable in the UK?
EU Procurement directives
Public Contracts Regulations 2015
The Public Procurement (Amendments, Repeals and Revocations) Regulations 2016
HM Treasury - Managing Public Money HM Treasury - Green Book
Describe procurement for DfT? How the procurement strategy was selected?
The Procurement Strategy for the refurbishment of Great Minster House outlines a two-stage process of tendering whereby the 1st Stage was tendered on a predominantly qualitative basis to five Government Hubs Fit-Our Framework contractors. This was followed by a second stage during which BW Interiors and Overbury submitted a predominantly commercial tender each based on an Invitation to Tender that included RIBA Stage 4 Technical Designs.
All tenders were fully compliant and received by the stipulated deadlines. All communications with tenderers were conducted transparently through the DfT’s tendering portal AWARD. Our report outlines the tendering processes, evaluations and outcomes of both stages and provides a recommendation to the DfT for awarding a contract for the works to the outstanding tenderer. It also provides residual risks in the tenders received and highlights additional information from the tenderers that has been addressed in the evaluations.
• Client required full control over the design with some high level specs elements; in addition the quality and cost certainty was the key Client’s drivers.
What is the tender sum and how did you analyse it?
The tender sum is the overall pricing figure proposed by a tendering contractor in accordance with the tender pricing document.
The objective of the tender pricing document is to:
• Enable like-for-like comparison between tenders and the cost plan (pre-tender estimate).
• Enable the cost consultant to assess where value lies within the different tenders (such as foundations or finishes) allowing assessment of value for money.
• Identify any significant differences in pricing between tenderers to ensure the design has been correctly interpreted.
• Identify areas of savings that might be negotiated with tenderers while still in competition.
• Form the financial basis of the tender report.
1. Price Evaluation:
• Arithmetic checks
• Assumptions, inclusions and exclusion checks
• Clarification sent to Tenderers
• Provisional sums analysis
• Tender adjustments
• comparing the tender sum with pre-tender estimate to establish cost certainty
• risks analysis
What is a tender report?
A tender report is a brief history of the tendering process and an analysis of each tender submission and any subsequent negotiations. It is generally prepared by the cost consultant for submission to the client but should have observations and contributions from the design team regarding the perceived value of each bid.
The report should conclude with a clear recommendation as to the best value for money offer. If the tender process has any implications for the project, or changes the position compared to the impression the client had been given pre-tender, then these should be clearly set out.
The tender report provides an audit trail for the selection process and might include:
• The background to the contract.
• The scope of the contract.
• Pre-qualification criteria.
• The tender evaluation criteria.
• Reasons for rejection of unsuccessful tenders.
• Reasons for the recommendation.
• A summary of any post-tender negotiations.
• Comparison with the pre-tender estimate.
• Any implications for the project.
What was included in your tender report ?
1.0 Executive Summary
2.0 Introduction
3.0 Stage 1 - Tendering
3.1 Tender Process
3.2 Tenders Received
3.3 Qualitative Evaluation
3.4 Price Evaluation
3.5 Stage 1 Outcome
4.0 Stage 2 - Tendering
4.1 Tender Process
4.2 Tenders Received
4.3 Qualitative Evaluation
4.4 Price Evaluation
4.5 Stage 2 Outcome
5.0 Qualifications
6.0 Remaining Risks
7.0 Conclusion and Recommendation
Appendices
Appendix A Scoring Evaluation Matrix
Appendix B Stage 1 Qualitative Scoring Consensus
Appendix C Stage 2 Qualitative Scoring Consensus
Appendix D Stage 1 Form of Tender
Appendix E Stage 2 Form of Tender
Appendix F Stage 2 Tender Sum Analysis
Appendix G Not used
Appendix H BW Clarifications
Appendix I Overbury Clarifications
Appendix J BW Tender Qualifications
Appendix K Overbury Tender Qualifications
Appendix L Overbury Provisional Sums
Appendix M BW Provisional Sums
Appendix N Overbury Tender Adjustments
Appendix O BW Tender Adjustments
What is OJEU?
The Official Journal of the European Union is the official gazette of record for the European Union. It is published every working day in all of the official languages of the member states of the EU, except generally Irish. Only legal acts published in the Official Journal are binding.
