Procurement and Tendering Flashcards

1
Q

What is Tendering?

A

An important phase in the procurement strategy involving:

  • The bidding process,
  • How a price for the works will be obtained and agreed
  • Process of appointing a Contractor
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2
Q

What is typically included within Tender Documents?

A
•	Invitation to Tender Letter
•	Form of Tender
•	Contract Conditions
•	Instruction to Tenderers
•	Employer’s Requirements
•	Pricing Document
•	Appendices:
o	H&S documentation (Pre-construction Information)
o	Key Surveys
o	Planning Permission
o	Design Responsibility Matrix
o	Risk Register 
o	etc, etc…
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3
Q

What should be included in a ITT?

A
  • Date for return
  • Address to return to
  • Site visit details if applicable
  • Proposed programme length
  • Confirmation of receipt of documents
  • How tender should be submitted
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4
Q

What is a Form of Tender?

A
  • Document used to record the main contractor’s price for completing the building project (i.e. tender price)
  • Form a contractor signs to confirm price and programme
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5
Q

What is a “Certificate of Bona Fide Tender”?

A
  • Completed by the Main contractor to confirm that he has not communicated his tender to other parties
  • Usually inserted after the form of tender
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6
Q

What does the Instruction to Tenderers include?

A
  • Sets out conditions of tender
  • Details what is expected to be returned
  • Proposed Scoring Matrix
  • Any applicable questionnaire
  • Details for arranging site visits
  • Details for submitting tender queries
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7
Q

What would you typically include in a tender report?

A
•	Review with design team for their input
•	Issue to client and follow up with meeting to review
•	Includes:
o	Executive summary and recommendation
o	Introduction
o	Tender procedure
o	Tender pricing
o	Programme
o	Qualifications
o	Highlighting any errors found
o	Remaining risks
o	Next steps
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8
Q

How would you go about a tender process (Assume Single Stage Selective for a Private Client)?

A
  • Consult with design team and client to create a contractor shortlist
  • Prepare PQQ to be issued to contractor’s
  • Review returns to select contractors who are suitable
  • Gather & prepare all tender documentation
  • Issue tender documents with cover letter
  • Hold mid tender interviews
  • Collect and respond to all contractor queries
  • Review tender submissions (normalisation, clarifying exclusions)
  • Hold post tender meetings to clarify things
  • Consult design team on their opinions
  • Write and issue Tender Recommendation Report
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9
Q

What is Serial Tendering?

A
  • Hybrid of Competitive Tendering and Negotiation
  • Involves the preparation of tenders based on a typical or notional bill of quantities or schedule of works
  • The rates submitted can then be used to value works over a series of similar projects, often for a fixed period of time following which the tender procedure may be repeated.
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10
Q

When is Serial Tendering likely to be used?

A
  • On simple and small scale projects.
  • Where the client has a regular programme of works that they would like to be undertaken by a single contractor
  • Often minor works, maintenance work e.g. Measured Term Contract or Framework
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11
Q

What will the tender documents contain for Serial Tendering?

A
  • The buildings that will be covered by the works
  • The term over which works may be required (often between one and five years)
  • An estimate of the likely total value of the works that will be required over the term and an estimate of the likely size of individual orders.
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12
Q

What is Open Tendering?

A
  • Allows anyone to submit a tender, generally in response to an advert or online portal giving notice that the contract is being tendered e.g. OJEU
  • Not often used for private projects.
  • Common for public projects or projects that have an element of public funding as they may be required to use open/public tendering by the UK Public Contracts Regulations 2015.
  • High degree of competition and fairness, however costly and slow process. Can get bids from unsuitable contractor’s.
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13
Q

What is a Framework Agreement?

A
  • Often used where Clients have continuous construction work over a period of time in which orders can be issued on a call-off basis
  • Reduces procurement timescales
  • Increases learning curves and reduces risk by using framework agreement
  • The framework contract documents should define the scope and possible locations for the works or services likely to be required during the defined time period. They should describe the contract conditions that will be used for pre-construction services (such as design), and/or the contract conditions that will be used to execute the works.
  • Sometimes, the framework might have optional contracts as part of it. Such as D&B intermediate or minor works contracts which can be picked and chosen depending on the specific works to be undertaken.
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14
Q

Setting up a Framework Agreement

A
  • A description of the contract conditions to be used and assumptions regarding preliminaries.
  • The starting and completion dates of the agreement.
  • Requirements and obligations regarding insurance, bonds and warranties.
  • A description of how the project will be managed in its various stages and the basis of remuneration.
  • A description of inflation, interest and retention percentages to be applied.
  • A description of incentive mechanisms to be applied.
  • A description of dispute resolution procedures.
  • A request for schedules of rates and time charges to be submitted and a breakdown of resources and overheads to be applied to design, or manufacture and installation (including any proposed subcontractor or sub-consultant details).
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15
Q

What are Preliminaries in a Tender?

A
  • Prelims address and communicate to the contractor items that are not directly related to the measured works
  • Helps contractor price management of the project e.g. site establishment, security, safety, welfare etc
  • You can use NBS to produce prelims
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16
Q

Can you give example of typical items you would see in Preliminaries?

A
  • Management and staff
  • Site establishment
  • Mobilisation and demobilisation of staff
  • Site office and welfare set up
  • Temporary services
  • Security
  • Health and Safety
  • Temporary works
  • Cleaning
  • Sites consumables
  • Bonds, guarantees and warranties.
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17
Q

What are Subcontractor Preliminaries?

A

• NRM1 Definition: ‘Preliminaries that relate specifically to building work which is to be carried out by a subcontractor. Costs associated with subcontractor’s preliminaries are to be included in the unit rates applied to sub-elements and individual components.’

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18
Q

What is NBS?

A
  • National Building Specification
  • Construction specification used by architects and other building professionals to describe the materials, standards and workmanship of a construction project.
  • Can be used to draft Preliminaries & General Conditions
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19
Q

Give examples of NBS Prelims you have come across?

A
  • A10 Project Particulars
  • A11 Tender & Contract Documentation
  • A12 The Site / Existing Buildings
  • A13 Description of the Works
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20
Q

What are Preambles?

A

A preamble is an explanation of a document, commonly found in contracts, specifications and bills of quantities. It can help with the interpretation of the document.

A preamble might include:
•	A description of the parties to the contract.
•	The background to the document.
•	Tendering procedures.
•	The objectives of the project.
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21
Q

What is the difference between Prelims and Preambles?

A
  • Preliminaries = Prelims address and communicate to the contractor items that are not directly related to the measured works e.g. Site Establishment, Security, H&S, Welfare.
  • Preamble = is an explanation of a document, commonly found in contracts, specifications and bills of quantities. It can help with the interpretation of the document. A preamble might include, a description of the parties to the contract, the background to the document, the objectives of the project, etc
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22
Q

What Is OJEU?

A
  • Official Journal of European Union
  • Part of a EU directive relates to opening up public procurement.
  • It is used as a publishing forum for Public Sector Tendering. All contracts from the public sector over a certain threshold have to be advertised across the EU.
  • Since Bexit this is now replaced by UK ‘Find a Tender’ service.
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23
Q

Find a Tender thresholds?

A

Central Government

Supply, Services and Design Contracts £122,976

Works Contracts £4,733,252

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24
Q

What is the process for Find a Tender?

A

What is the process for Find a Tender?
• Advert/ notice along with tender info/documents are published on the Find a Tender online portal

  • Contractors can search on the site and find opportunities to submit tenders for
  • The advert/ notice must be open for a certain length of time
  • The regulations provide certain procedures to follow to make sure analysis is not bias
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25
Q

What is the minimum number of bidders required when using Public Procurement?

A
  • Minimum 3 for procedures involving negotiation

* 5 for restricted procedures

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26
Q

What is a Pre-Qualification Process?

A
  • Where contractors have to go through a process of qualifying themselves to bid for the works
  • Commonly used as part of a selective tendering procedure but can also be used for open tendering whereby any contractor can go through the qualification and if they are successful, they can bid for the works. In this case, it helps limit the number of tender returns for public projects
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27
Q

What is a PQQ?

A
  • Pre-Qualification Questionnaire
  • Sets out a series of questions for potential tenderers to answer regarding their level of experience, capacity & financial standing
  • Answers to these questions enable the client to produce a shortlist of suppliers that are likely to be most appropriate for the project
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28
Q

What is usually included in a PQQ

A

Depends on project type, but typical questions could be:
• Company details (legal status)
• Details of insurance cover
• Financial information (recent accounts) e.g. Dun and Bradstreet Report
• Relevant experience
• Information about technical & professional ability
• H&S policy
• Environmental management policy
• Equal opportunities policy
• Relevant references & CV’s
• BIM assessment to determine BIM capabilities
• Company accreditations / awards e.g. Considerate Contractor etc.

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29
Q

What would you do if the lowest tender also has the lowest quality spec?

A
  • The implications should be spelled out to the client. Lowest cost doesn’t always mean best value. E.g. higher maintenance costs
  • It is the client’s decision ultimately
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30
Q

How many contractor’s would you usually put on a shortlist?

A
  • D&B = say 2-4, due to time and cost implications, contractor’s want to think they have a chance of winning
  • For other contracts = say 5 – 6, to get a balance between competition and contractor care in pricing
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31
Q

What should be examined/looked for in a submitted pricing document?

A
  • Arithmetical errors (comp checking)
  • Pricing errors (Omissions / Duplications)
  • Pricing methods (front loading)
  • Qualifications
  • Exclusions
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32
Q

What would you do if the lowest tenderer submitted no prelim breakdown

A
  • Usual to have prelims split into fixed and time related items
  • If they did not break them down as required then it is officially a non-compliant tender
  • BUT in practice the contractor is usually provided the opportunities to provide a full breakdown within a couple of days and this would be regarded as valid
  • They are not allowed to change the provided figure – not allowed to gain an advantage
  • The fact that this was done should be noted in the tender report
33
Q

What is the danger of accepting a very low tender?

A
  • They may have missed some of the works
  • The quality may be lower than some of the other tenders had allowed
  • Once on site they may try and recover their costs by a large no of variations / claims for EOTs and loss and expense
  • Contractor may have purposely bid low just to secure work, could be in financial difficulty so winning work is the crucial
34
Q

What happens if tender returns are higher than cost plan / pre-tender estimate?

A

• Could be market conditions, need to reconcile to identify major differences, VE process could take place on those elements

35
Q

What if one tenderer asks for an extension on the submission date?

A

• Must advise the Client or PM the request has been made. They will have the decision. If yes, then all tenderers must be made aware the deadline has moved back so everyone is treated equally.

36
Q

What would you do if you considered a contractor submitting the lowest tender to be in financial difficulty?

A
  • As part of the evaluation of tenders you would look at the company accounts (if not at Pre-Qual) – Client’s finance team should advise on this though
  • Also request references from previous employers for work recently done
  • See if you can find out if subcontractors were paid on time
  • Ensure the contractor can provide a Bond or Parent Company Guarantee
37
Q

On what grounds would you advise the Client to re-tender?

A
  • Not enough tenderers returned tenders
  • If tenders were not at the cost level required and it was believed that re-tendering to different tenderers would provide a different result
  • Design changes or VE has been carried out that has significantly changed the design that was originally tendered on
  • The tendering procedure is believed to have been compromised for some reason
38
Q

How do you deal with errors in a tender / what are the options?

A
  • Alternative 1 = no correction is allowed. Must confirm they will stick with submission or withdraw
  • Alternative 2 = correction of tender is permitted, they can either stick with submission, correct or withdraw
  • Alternative should be listed in Preliminaries document issued as part of Tender pack
  • I would recommend 2, it allows errors to be corrected. A simple arithmetic error should not cost a strong submission
  • At the end of the day it is the Client’s decision
39
Q

How do you Normalise Tenders?

A
  • Option 1 - Use an average of the submitted costs
  • Option 2 - Use the highest price from tender returns
  • Option 3 - Use the PTE allowance
40
Q

How can a client be protected through Public Procurement like Find a Tender?

A

• Tender Bond

41
Q

Does PFI still exist?

A
  • NO.
  • Government scrapped the PFI model in the wake of the Carillion collapse. The Treasury will support health authorities to manage the costs of old PFI deals
42
Q

How many tenderers would you usually recommend for D&B and how long would you give them?

A
  • No more than 3 (If longer, contractor will be discouraged as they won’t feel confident they will win)
  • Tender period of 10-12 weeks
43
Q

What would you do when opening tender returns?

A
  • Needs to be witnessed by at least 2 people and signed and dated
  • Tender opening form; Should note the contractor’s initial price and programme
44
Q

Is a Client obliged to accept a tender?

A
  • NO. The employer’s request for tenders is an invitation to treat and therefore the employer is under no legal obligation to accept any tender.
  • The cost of tendering is generally borne by the contractor
45
Q

Would you reject a bid automatically if it was a really low price (significantly lower than PTE)?

A

Would you reject a bid automatically if it was a really low price (significantly lower than PTE)?
• No. Would need to complete checks why it was lower than PTE

  • Checking for Errors. Get contractor to revisit their bid, check clarifications
  • Try to work out why tender was significantly lower (e.g. pricing mistakes, quantification errors, clarifications & exclusions)
  • Would make Client aware of findings and include in the Tender Recommendation Report
  • Client would make the final decision
46
Q

What would you do with any queries raised by tenderers?

A

• Collect and record them in a schedule, provide responses and issue back to all contractors without divulging the names of who sent the queries. This is the fair way so that all tenderers have equal information and there is no bias towards one.

47
Q

Different Types of Procurement Route?

A
•	Traditional 
o	Lump Sum
o	Re-Measurement
•	Design & Build
•	Construction Management
•	Management Contracting
•	Partnering
•	Public Private Partnership (PPP) / Private Finance Initiative (PFI)
48
Q

What is Traditional Procurement?

A
  • Most common type
  • Sequential - Design, Bid, Build
  • Design sits with client
  • Can either be Lump Sum or Re-Measurement
49
Q

What is a Lump Sum?

A

Contractual agreement where a price for the works is determined prior to the commencement of construction. The sum will only change if:

  • Fixing provisional sums
  • Variations
  • Relevant Events Occur that add cost
  • Fluctuations
50
Q

What is Re-measurement?

A
  • Contractual pricing mechanism. Can be used where the design can be described in reasonable detail but the quantity / amount cannot. Works are re-measured after works are complete.
  • Example would be excavation works where the amount of excavation is difficult to quantify until after the works have begun
  • Submitted BOQ or agreed SOR will be used to price re-measurement.
  • No cost certainty but can prevent the client paying premium for risks/unknowns
51
Q

What tendering process can be used with Traditional?

A
  • Usually single stage as the design is completed before tendering
  • You can use a 2 stage, but it would be better to appoint a contractor on a PCSA if want contractor input on design / buildability
52
Q

When is a Traditional Procurement route appropriate?

A
  • Suitable for both experienced and inexperienced clients
  • If the employer has had the design prepared
  • If the design is substantially completed at time of contractor selection
  • Client wishes to retain control of design and specification (Quality)
  • Cost certainty
  • Where short programme is not important
53
Q

What are the advantages and disadvantages of Traditional procurement?

A

Advantages:

  • High Quality – design control remains with client
  • Cost – Cost certainty with Lump Sum
  • Changes easy to arrange and value

Disadvantages:

  • Adversarial approach
  • Time – Lengthy design period, no overlap with construction
  • Buildability – No contractor involvement (unless 2-stage)
  • Client wishes to retain control of design and specification (Quality)
  • Changes are more expensive to incorporate
54
Q

What is Design & Build (D&B)?

A
  • Contractor appointed to design and build the work
  • The client gives the tenderers the ‘Employer’s Requirements’ and the contractor responds with the ‘Contractor’s Proposals’ which include a price for the works
  • Contractor is responsible for design
  • Can be Single Stage or Two Stage, whereby the contractor is appointed at the first stage to give input on buildability and then the cost of the works is procured / negotiated later as a lump sum
  • Depending on how much control the client wants over the design the contractor can take over from Stage 1 from a full turnkey solution, or client can take it through to Stage 3 which can be considered a ‘Develop and Construct’. Typically the consultant design team would design to stage 2 / 3 and then hand over to the contractor to develop through to the technical design stage. There is a trade-off between client design control and contractor buildability input.
55
Q

When is D&B appropriate?

A
  • Where early start is required - design can overlap construction
  • Where client wishes to minimise risk – transfers design risk to contractor
  • For technically complex projects where contractor’s input on buildability is helpful
56
Q

What are the advantages and disadvantages of D&B?

A

Advantages:

  • Cost – Cost certainty with Lump Sum
  • Time – Reduced programme with design / construction overlap
  • Programme Certainty
  • Buildability – due to contractor input

Disadvantages:

  • Reduced quality
  • Design changes can be expensive to implement
  • Trade-off between buildability and client control over design
57
Q

Can you tell me the fundamental differences between Traditional and D&B?

A

Time:
• Under traditional design, tendering and construction processes are sequential and leads to longer timescales

• D&B allows overlap between design and construction for instance the piling can have commenced whilst finishes design is completed.

Quality:
• Traditional ensures design is fully complete prior to tendering which helps to ensure quality. Client has control over specification of materials. Quality checks are undertaken by the design team during the construction period together with the Client’s Representative (Clerk of Works)

• Under D&B these responsibilities are undertaken by the contractor. If the Client wants to retain control of the quality, they must list it in the ER’s. Contractor is also responsible for design so may opt for cheaper materials as long as ‘performance’ within ER’s are met.

Cost:
• Traditional, lump sum cost can be competitively tendered, however due to maturity of design, any changes can be expensive and impact completion date

• D&B due to the lack of design the contractor will likely price risk into their costs making it more expensive. However any late design changes will be easier and cheaper to incorporate into the design compared to traditional. Can be argued due to the shorter programme length overlapping construction and design will reduce costs of prelims and fees

58
Q

How could you reduce the risk of lack of control on quality when using D&B?

A
  • By novating design team to contractor
  • By tendering at a more developed stage
  • By ensuring a robust set out ER’s
  • By tendering only to contractor’s that client’s have worked with before
59
Q

What are Employer’s Requirements?

A
  • Issued on design and build projects or on a traditional contract where the contractor is to design discrete parts of the works.
  • They provide a description of the client’s requirements, including; the specification for the building, the scope of services required from the contractor and an allocation of risk for unknown items.
60
Q

What are Contractor’s Proposals?

A

• Prepared by the contractor in response to the employer’s requirements. These present the contractor’s suggested approach for designing and constructing the building, along with their price.

61
Q

What is Construction Management?

A
  • 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 (CM). They are client’s risk
  • The employer places a direct contract with each of the trade contractors and utilises the expertise of the CM who acts as a consultant to coordinate the contracts. The trade contactors carry out the work and the construction manager supervises the construction process and coordinates the design team
  • CM role includes: preparation of the programme, determining requirements for site facilities, breaking down the project into suitable works packages, obtaining and evaluating tenders, co-ordinating and supervising the works and site.
62
Q

When is a Construction Manager usually appointed?

A

• CM is generally appointed early in the design process so that their experience can be used to improve the cost, buildability and procurement.

63
Q

When is a Construction Management procurement route appropriate?

A
  • Where early start on site is key
  • On large, complex projects were the advantages of a CM can be put to use e.g. upfront buildability knowledge, programme advice
  • When price certainty before commencement is not crucial
  • When the Client is experienced – managing trade contracts
64
Q

What are the advantages and disadvantages of Construction Management?

A

Advantages:

  • Quick start
  • Cost – Packages procured directly saving mark-up / management
  • Programme Duration – Can procure certain packages while design is ongoing

Disadvantages:

  • No cost certainty
  • Risk of managing trade contracts with client
  • Requires proactive client with lots of admin
  • Expensive - Changes to later packages may adversely affect packages already let
  • Not as tried and tested as other procurement routes
65
Q

What is Management Contracting?

A
  • The works are constructed by a number of different works contractors who are contractually linked to a management contractor
  • MC is responsible for the administration and operation of the works contractors
  • Unlike D&B, MC is not liable for the consequences of any default by works contractors as long as they have complied with the particular requirements of the management contract
  • MC can advise on the design programming and provide buildability advice at an early stage to the design team.
  • MC programmes, packages up and obtains tenders for the works, which are each let on a competitive basis on lump-sum.
  • MC usually reimbursed for the costs of the construction works plus either a fee. Can also be on a target-cost basis. The terms of the appointment must be clear about what is to be provided by the management contractor.
66
Q

When is Management Contracting appropriate?

A
  • When a quick start on site is needed
  • When time is key objective of the client - MC can tender and commence early packages such as enabling works or piling early whilst design is still ongoing
  • When cost certainty at the outset is not crucial
  • For complex projects
  • Inexperienced client
67
Q

What are the advantages and disadvantages of Management Contracting?

A

Advantages:

  • Duration – Let packages during design
  • Quick start
  • Less admin for client

Disadvantages:

  • No cost certainty
  • Risk of inflation with delayed procurement of packages
  • Requires proactive client with lots of admin
  • Not as tried and tested as other procurement routes
68
Q

What does a Management Contractor typically provide?

A

• The management contractor may provide some of the common services on site, such as office accommodation, tower cranes, hoists and security, which are shared by the works contractors; however, in ‘pure’ management contracting, such works are let as a self-contained work package.

69
Q

What is Develop & Construct?

A

• Based on D&B, the appointed consultant take the design to a more detailed stage, to allow for more client control and influence on the end product.

70
Q

What is a Turnkey?

A
  • Contractor provides an off the shelf building, such as a school classroom, temporary offices, warehouses.
  • True D&B, you tell a contractor what you want, and they build it
71
Q

What JCT and NEC contract would you use for CM & MC?

A

Construction Management
• JCT Construction Management Agreement (Client contract with CM)
• JCT Construction Management Trade Contract (Client with Trade Packages)

Management Contract
• JCT Management Building Contract
• NEC Option F

72
Q

What is the difference between Management Contracting & Construction Management?

A
  • Management Contracting – MC has contracts with all the Trade Contractor’s
  • Management Contractor acts a Principal
  • Management Contracting less admin for Client
  • Construction Management – The Client has contracts will all the Trace Contractor’s
  • Construction Management acts an Agent
  • Construction Management more admin for Client
73
Q

What is ‘Guaranteed Maximum Price’ (GMP)?

A
  • A guaranteed maximum price (GMP) is a form of agreement that the contract sum will not exceed a specified maximum
  • Typically used on D&B contracts
  • As contractor has responsibility for completing the client’s design and for carrying out the construction works, so they are in a good position to control costs
  • If the actual cost of the works is higher than the GMP, then the contractor must bear the additional cost
  • If the cost is lower than the GMP, then the contract should set out whether the savings made go to the client, to the contractor or are shared. This can create a ‘pain/gain’, or a target cost agreement, where the contractor is incentivised to make savings, but the client has the security of a cost cap.
74
Q

What is a ‘Not To Exceed Price’?

A
  • This is not a contractual agreement. A ‘not to exceed price’ is just an agreement between parties on a cost limit that they will try to no go higher than
  • Encourages collaboration.
75
Q

What factors would you take into account when advising a Client on a procurement route?

A
  • Client’s aspirations in relation to time, cost and quality
  • Client’s experience level – wouldn’t recommend a new Client using CM as it requires more involvement
  • Client’s attitude to responsibilities – do they want to always control the design
  • Client’s attitude to risk– is the Client risk averse? Do they want to shift risk to the contractor in D&B
  • Size and complexity of the project
76
Q

How is risk allocated in the different procurement routes?

A
  • Traditional: Design risk with employer, cost and programme risk with contractor
  • D&B: Design, cost and programme risk with contractor
  • Management Contracting: Design and cost risk with client, programme with contractor
  • Construction Management: Design, cost and programme risk with client
77
Q

What is a Target Cost Agreement?

A
  • Target costs are generally associated with cost-reimbursable contracts
  • Enable the contractor, and sometimes the consultant team, to share in the benefits of cost savings, but also to bear some of the client’s cost when there are cost overruns
  • Good collaboration
  • The target cost is set early in the project, and then cost savings or overruns are shared based on an agreed formula. The aim is to provide a financial incentive encouraging cost control, rather than to penalise. Bonus and penalty payments are usually capped to prevent over-zealous or adversarial behaviour.
  • New Engineering Contract (NEC) Engineering and Construction Contracts Option C: Target contract with activity schedule and Option D: Target contract with bill of quantities.
78
Q

What is Partnering?

A
  • A collaborative management approach that encourages openness and trust between parties to a contract.
  • The parties become dependent on one another for success and this requires a change in culture, attitude and procedures throughout the supply chain.
  • Used on large, long-term or high-risk contracts. Partnering can be adopted for a one-off project or can be a long-term relationship over a number of projects (such as a framework agreement)
  • Contracts are often arranged on a cost-reimbursable, target-cost, open-book basis including both incentives, and penalties.
  • Partnering agreements include JCT Constructing Excellence and NEC Partnering Agreement.