Procurement and Tendering Flashcards
What is Procurement?
The overall act of obtaining goods and services from an external source, which includes deciding on the strategy of how these goods are to be obtained by reviewing the Clients requirements.
What is Tendering?
The bidding process to obtain and price, and also the process of appointing a contractor.
What factors can influence the chosen procurement route?
- Clients appetite for risk.
- Budget.
- Desired quality.
- Timings.
- Funding availability.
- The type of project.
What are the common procurement routes?
- Traditional
- Design and Build
- Management Contracting
- Construction Management
What is a Traditional Procurement Method?
The most common form of procurement.
• Where a client appoints consultants to design the project, prepare the tender documents which are issued to contractors for pricing, usually on a single-stage competitive basis.
Who is responsible for design in a traditional procurement route?
The Client is responsible for design, the contractor is only responsible for the design of their temporary works, and their Contractors Design portion.
What are the advantages AND disadvantages of traditional procurement?
Advantages:
- Quality of product is generally higher
- Client maintains control of design
- Post-contract changes easy to manage
Disadvantages:
- Longer project duration due to sequential phasing, no overlaps
- Buildability can be poor due to no Contractor involvement
- Design open to abuse
What is the design and build procurement route?
- Design and construction phases overlap. Project is tendered before design is complete, Contractor finishes design. Allows design and construction phases to occur concurrently.
- Good brief is important to avoid Contractor designing a building not fit for purpose.
- Contractor take on risk of the project
What are the advantages and disadvantages of the D&B procurement route?
Advantages
- Low cost risk as client pays lump sum for Contract, absorbing design/construction risk. Contract Sum will be inclusive of a %age fee to cover design development/risk
- Low time risk: due to the ability to begin construction before design has been completed means this is a fast track procurement route.
- Cost certainty, if a lump sum contract, known early on in the project timeline.
- Early contractor involvement generally is good for build ability
- Single point of responsibility for the client
Disadvantages
- High design risk. Client loses control over design. Contractors will aim to meet ER’s whilst maximising their margins
- Post-contract changes difficult to manage and often are expensive
What is management contracting?
Management contracting is a procurement route in which the works are constructed by a number of different works contractors who are contracted to a management contractor.
MC is paid on a fee basis and is brought into the project early on in the project timeline
What are the advantages and disadvantages of management contracting?
Advantages
- Fast track procurement option as early packages can be let whilst later packages are still being designed
- Client maintains design control
- Late changes accommodated so long as that package hasn’t been let
- Good buildability with early appointment of MC
Disadvantages
- MC is paid on a fee basis and doesn’t take project cost risk, leaving the client exposed
- Although procurement is fast, cost certainty is poor until the final package is let
- Cost certainty is also poor until the final package is let.
How does negotiation/nomination work?
- There is no competition – likely to lead to a higher price
- BUT client may think it is worth it for a quicker or better quality job
- The contract sum is arrived at by a process of negotiation
- One party usually prices a schedule of rates / bill which is used as a basis
What is a framework agreement?
- A list of contractors selected by the client after a formal tendering procedure to work over a long period of time
- The contractor may have to wait his turn for a contract or tender repeatedly with the same group of contractors
What is a joint venture?
- Used on large complex projects when 2 or more companies take on a joint and several liability for design and execution of the project.
- Would normally be backed up with PCG, Performance Bonds.
How would you put together a set of tender documents?
In accordance with JCT practice note 6. Include: i. ITT (Invitation to tender letter) ii.Instruction to tenderers: Date and time for return, Site visits, Programme Errors 2. Scoring matrix (quality/ price), confirmation of receipt iii. Conditions of proposed contract iv. Prelims, Pricing doc (SOR, BOQ) v. Specification vi. Drawings vii. ERs viii. CPs ix. Pre-construction H&S information x. Form of tender xi. Submission of bona fide tender xii. Return envelope
