Procurement and tendering

Question 1

What is procurement?

Answer 1

• The overall act of obtaining goods and services for a construction project.
• There are several routes by which the design and construction of a building can be procured. The selected procurement route should follow a strategy which fits the project criteria and objectives

Question 2

What are the main factors which typically govern procurement route selection?

Answer 2

• The key is to identify the client’s objectives and key drivers in terms of time, cost and quality. Other factors such as risk allocation should be considered.
• It’s unusual to satisfy all these elements with one procurement route. Consideration must be given to the client’s list of priorities to identify the most appropriate procurement route.

Question 3

Which procurement options are you familiar with?

Answer 3

• Traditional procurement
• Design & build
• Management contracting
• Construction management

Question 4

What is traditional procurement?

Answer 4

The traditional procurement route involves separating design from construction. The employer first appoints consultants to design the project in detail, contractors are then invited to submit tenders based on a fully developed scheme.

Key points:

• The design is completed by the employer’s design team before competitive tenders are invited. The contractor is then appointed to build what the designers have specified
• The contractors tender based on a complete design produced by the employer’s consultants (with exception to Contractor’s Design Portions or CDP).
• Assuming no significant design changes arise, construction costs can be determined with reasonable certainty before work begins.
• The employer retains the design consultants during construction. The consultants prepare any additional design information and review CDP designs prepared by the contractor.

Question 5

What are the key advantages?

Answer 5

• The employer retains control of the design
• The design is largely finalised before the contractors tender for the build, this means the employer knows exactly what they are getting.
• All tenderers produce a submission based on the same information (tender returns are much easier to compare).
• Assuming the design is robust, reasonable price certainty is achieved at contract award.
• Minimal built-in contractor risk premium (unlike design and build).

Question 6

What are the key disadvantages?

Answer 6

• The overall project duration may be longer than design and build procurement (limited opportunity to overlap design and construction phases).
• Zero or limited contractor buildability input
• Design risk is retained by the employer, any changes post contract will be a variation or compensation event
• Dual point of responsibility (employer for design and contractor for construction)

Question 7

When might traditional procurement be appropriate?

Answer 7

• The employer may have specific or detailed design requirements.
• Cost certainty is important (traditional has significant advantages over construction management or management contracting procurement routes).
• The shortest overall programme is not the employer’s main priority.

Question 8

What is design & build?

Answer 8

The contractor is responsible for completing the design and executing the construction phase of the project. This is a completely different approach to delivering a project via traditional procurement, where the client appoints consultants to undertake the design and then a contractor is appointed to construct the works.

Key points:

• Under JCT contracts, the employer’s team produce a set of employer’s requirements (ERs), the contractor then responds to the ERs with their contractor’s proposals (CPs).
• The original employer’s design team may be novated to the contractor for continuity, or the contract may appoint their own design team.
• The contractor is responsible for the design, planning, organisation, control and construction of the works.
• Design risk is transferred to the contractor.

Question 9

What are the key advantages?

Answer 9

• Single point of responsibility for design and construction (contractor).
• Earlier commencement on site is possible (if design and construction can be overlapped).
• Benefit of contractor’s experience harnessed during design (buildability input).
• Design and construction risk rest with the contractor.
• Provides more cost certainty that traditional procurement.

Question 10

What are the key disadvantages?

Answer 10

• The design is only as good as the employer’s requirements (the employer may find it difficult to prepare a sufficiency comprehensive brief).
• More complex to compare tender returns.
• Employer changes can be expensive and difficult to value
• The employer may have less control over aesthetics and quality.
• The contractor will build in risk premiums into their tender return

Question 11

When might design & build be appropriate?

Answer 11

• Where there is a need to make an early start on site (D&B has potential to overlap design and construction).
• Where the employer wishes to minimise their risk profile (design risk is passed onto the contractor)
• For technically complex projects, the design will benefit from the contractor’s buildability input
• Where retaining control of the design is not a priority

Question 12

What additional insurances might be needed under a D&B contract?

Answer 12

The contractor and their design team will have design responsibility; therefore, it is likely additional professional indemnity insurance (PII) will be required.

Question 13

What are employer’s requirements (ERs)?

Answer 13

The expression employer’s requirements is used to describe the document(s) produced by the employer to set out its requirements in relation to the project (including performance specifications, drawings, initial designs etc) and this is what the design and construction of the works will be based on.

Question 14

What are contractor’s proposals (CPs)?

Answer 14

• CPs are prepared by the contractor which responds to the employer’s requirements
• In this document(s), the contractor will set out a more detailed design (based on the employer’s requirements), which will require further development throughout the course of the project.

Question 15

Which procurement route poses the least risk to the employer?

Answer 15

Design & build, this is because the design risk is transferred to the contractor

Question 16

Why does the employer usually pay a premium for design & build procurement at tender stage?

Answer 16

The contractor will usually factor in an allowance within their tender return in exchange for taking on the design risk

Question 17

Under design and build, who executes the design for the contractor?

Answer 17

The contractor may use their own in-house designers or they can appoint external consultants. The employer’s original design team can also be novated to the contractor.

Question 18

What is construction management?

Answer 18

The employer directly appoints multiple subcontractors (referred to as trade contractors) instead of employing a single main contractor. The single feature that makes construction management unique, particularly from management contracting, is that the employer places individual contracts with separate specialist trade contractors themselves.

Key points:

• The employer places a direct contract with each trade contractor and utilises the expertise of a construction manager to coordinate the works
• The construction manager programmes and coordinates the works
• The construction manager has not contractual link with the trade contractors
• The construction manager has no vested interest in the financial outcome of the project and, barring professional negligence, carries no risk.

Question 19

What are the key advantages?

Answer 19

• Speed to get to site
• Overall project duration reduced by overlapping design and construction
• The construction manager can be contribute to the design and project planning processes
• Changes in design can be accommodated without paying a premium
• Prices may be lower due to direct contracts with trade contractors
• The employer has means of redress with trade contractors through direct contractual links

Question 20

What are the key disadvantages?

Answer 20

• Price certainty not achieved until the last trade package is let.
• The procurement route requires an informed, experienced and proactive employer to work
• The employer has a lot of consultants and contractors to manage

Question 21

When might construction management be appropriate?

Answer 21

• The employer is experienced in construction and has the suitable resources to manage a construction project.
• The employer wants to achieve an early start on site
• The employer wants the flexibility to make minor changes to the design / specification throughout the process with minimal impact on time or finances
• The project is technically complex and requires detailed engagement of specialist consultants and trade contractors

Question 22

Which is the riskiest procurement for the employer?

Answer 22

Construction management. This is because the employer places individual contracts direct with each trade contractor and the construction manager carries no risk (barring professional negligence)

Question 23

What is management contracting?

Answer 23

• The employer appoints a management contractor to manage the entire building process who in turn appoints trade contractors to carry out the construction works.
• The management contractor is usually paid a fee percentage based on construction costs
• The management contractor has a direct contractual link with the trade contractors and is responsible for the overall construction works.

Question 24

What are the key advantages?

Answer 24

• Overall project duration can be reduced by overlapping design and construction.
• The management contractor will provide buildability input.
• Single point of responsibility (management contractor).
• Trade packages are let competitively and transparently
• There can be considerable flexibility in the design, with changes being made throughout the construction process

Question 25

What are the key disadvantages?

Answer 25

• Price certainty not achieved until the last trade package is let
• Requires an informed and proactive employer to be successful
• Depending on how the construction manager is remunerated, there may be a built-in disincentive for the construction manager to minimise cost

Question 26

When might management contracting be appropriate?

Answer 26

• When an early start on site is a priority.
• Flexibility in design is required
• Buildability input from the management contractor is required
• Where cost certainty is not a priority for the employer

Question 27

What is the key difference between management contracting and construction management?

Answer 27

• Construction management - The employer directly appoints multiple trade contractors to execute the works
• Management contracting - The employer appoints a management contractor who in turn appoints the works contractors

Question 28

What is a framework agreement?

Answer 28

• A framework agreement is an umbrella agreement that a party enters with one or more suppliers (who may be contractors, subcontractors, suppliers or consultants) to establish governing terms
• A framework usually sets a strategic partnering relationship for the procurement of goods, works, or services

Question 29

How long can a framework be?

Answer 29

Typically, a framework agreement lasts for 4 years. However, this is determined by the buyer. They can range between 2-10 years.

Question 30

What are the key advantages?

Answer 30

• Framework agreements can help to develop stronger relationships between the parties involved and encourage long term collaboration and co-operation
• Time saving (can speed up the procurement of goods and services)
• Repeat work and continuity of delivery
• Rates and prices are usually agreed upfront.

Question 31

What are the key disadvantages?

Answer 31

• The contractors, suppliers or consultants can become complacent
• Bidders will invest time and money to be awarded onto a framework and then potentially not receive any work through them
• May be restrictive to new suppliers who offer innovative, new, solutions with the changing and evolving nature of technologies

Question 32

Why might the employer choose a framework agreement to procure goods and services?

Answer 32

• Employers that are continuously commissioning construction work might want to reduce procurement timescales, learning curves and other risks by using framework agreements.
• A framework allows the employer to invite tenders from suppliers of goods and services on a call-off basis as and when required

Question 33

What the difference between a framework agreement and a contract?

Answer 33

• A framework agreement rarely provides any specific commitment in terms of project and value of works. It is more focuses around being an approved supplier.
• A contract is usually a specific fee, with project scope and timelines allowing you to quite and tailor your product/service for the specific job at hand

Question 34

What is project partnering?

Answer 34

• Partnering is a broad term used to describe a collaborative management approach that encourages openness and trust between the contracting parties.
• There is more opportunity for building working relationships, finding improvements and planning investment
• Ownership of risk is spread between the parties and a collaborative approach is encourages to delivering the solution and overcoming problems

Question 35

What are the key advantages of partnering?

Answer 35

• The overall construction and design programme can be shortened
• The likelihood of conflict is reduced
• Improved communication and mutual objectives
• Improved customer satisfaction
• Improved value for the employer
• Improved buildability (early involvement of contractors for example)
• Better predictability of time and cost

Question 36

What are the key disadvantages of partnering?

Answer 36

• Less opportunity to understand what other contractors/potential partners have to offer
• Difficult to find a strong partner which have the same objects, ethics, attitudes

Question 37

What is tendering?

Answer 37

• Tendering is the process by which the employer invites contractors to place a bid for work on a construction project. The overall objective is to obtain a price for the works

Question 38

What is the difference between procurement and tendering?

Answer 38

• Procurement is the overall act of obtaining goods and services from external sources and deciding the strategy on how these goods are to be acquired
• Tendering is a phase in the procurement strategy and deals with obtaining a price through a bidding process and deciding how a contractor is appointed

Question 39

What are the 3 main tendering options for construction projects?

Answer 39

• Single stage tender
• Two stage tender
• Negotiated tender

Question 40

What documents were included within your tender pack?

Answer 40

• Invitation to tender (ITT), including cover letter with tender return information
• Form of tender
• Contract conditions and employer’s amendments
• Instructions to bidders including how errors will be dealt with
• Tender scoring matrix
• Project information, drawings, specifications, surveys, planning conditions.
• Pricing document
• PCI (Pre-construction information)
• Quality questions (such as experience and methodology)
• Receipt of tender

Question 41

What is a bona fide tender?

Answer 41

• A bid submitted in good faith, complete and in prescribed form which meets the conditions of the bidding requirements.
• Confirmation that the supplier has not colluded with another party when compiling the tender

Question 42

What is OJEU?

Answer 42

• The Official Journal of the European Union (OJEU)

- An online portal that houses public sectors contracts that are over the stated procurement threshold.

Question 43

What happens to OJEU after Brexit?

Answer 43

• From the 1st of January 2021, the UK is not subject to EU procurement regulations and therefore no longer follow rules outline for OJEU tenders
• Tender will now be published on a new e-tendering portal, called Find a Tender Service (FTS)

Question 44

What is a PQQ (Pre-qualification questionnaire)?

Answer 44

A pre-qualification questionnaire sets out a series of questions for potential tenderers to answer regarding their level of experience, capacity and financial standing. Prior to being invited to tender for the contract

Question 45

What is the purpose of a PQQ?

Answer 45

The pre-qualification questionnaire has the effect of reducing the number of potential tenderers to those that are genuinely appropriate for the project. This saves a great deal of time for potential tenderers who would not have any realistic chance of winning the contract

Question 46

What might the PQQ ask for?

Answer 46

• Company details (including legal status)
• Details of insurance cover
• Financial information (such as company accounts)
• Relevant experience
• Information about technical and professional ability
• Information about capability and capacity
• Health and Safety policy and records
• Quality assurance policy
• Environmental management policy
• Equal opportunities policy
• References

Question 47

A credit check is usually part of the PQQ process, where could you get a credit check from?

Answer 47

• Dunn and Bradstreet report

- Credit agencies such as Experian

Question 48

What is single stage tendering?

Answer 48

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.

Question 49

What are the key advantages of single stage tendering?

Answer 49

• The employer benefits from a competitive tendering process which can lead to more competitive pricing
• The employer can benefit from a fixed price through this tendering process

Question 50

What are the key disadvantages of single stage tendering?

Answer 50

• No buildability input from contractor (as the point of tender)
• The price is only as good as the design information
• Contractors may be unwilling to tender in a good economic climate (too much competition)

Question 51

If you had a £25m new build project under design and build procurement (single stage tender), how long would you allow for the tender period?

Answer 51

The tender period is largely dependent on the complexity of the project. However, 10-12 weeks would be reasonable as it will take some time to interpret the employer’s requirements

Question 52

What is two stages tendering?

Answer 52

Stage 1:
The employer provides an outline project design and contractors then compete for preferred contractor status. The preferred contractor is usually chosen based on the quality of their bid, the quality of their team, preliminaries and OH&P allowances. The preferred contractor then joins the design team on a consultancy basis using a pre-construction services agreement (PCSA)

Stage 2:
Once the design has sufficiently progressed, the contractor enters into a detailed contract negotiation with the employer to agree the final price, contract conditions and programme

Question 53

What are the key advantages of two stage tendering?

Answer 53

• Early appointment of the contractor to work in parallel with the design team
• Early involvement of the contractor to benefit from the buildability input
• Earlier start on site is possible
• Employer involvement in subcontractor selection
• Increase opportunity to value engineer with the contractor’s input
• Improved opportunity to identify project risk

Question 54

What are the key disadvantages of two stage tendering?

Answer 54

• The contractor has less inventive to price the second stage competitively, negotiations may therefore be difficult
• Additional cost of the contractor’s pre-construction fee
• Potential for the negotiation stage to fail (contract sum not agreed)

Question 55

What is a negotiated tender?

Answer 55

A negotiated tender is effectively a single-stage tender carried out between the client, employer and one contractor. Negotiated tenders are obtained by the client, inviting one contractor of their choice to submit a tender response for the project.

Question 56

What are the key advantages?

Answer 56

• Simplicity
• Speed, a negotiated process can have programme advantages if undertaken in good faith.
• The employer has flexibility in terms of choosing their preferred contractor
• Time and cost savings involved in comparing and analysing multiple tender submissions
• The process can allow early contractor involvement

Question 57

How could you justify value for money in a negotiated tender?

Answer 57

Insist on an open book approach when agreeing subcontract packages and a minimum of 3 quotes to be provided for each element of the works (this would need to be agreed upfront with the contractor)

Question 58

What is a form of tender?

Answer 58

• The contractor usually signs and returns with their proposed tender submission
• It is formal acknowledgement that the tenderer understands and accepts the terms of conditions of the tender documents and any other requirements that are stipulated. The document also includes the contractor’s price and programme

Question 59

What information is typically included in the form of tender?

Answer 59

• Tender sum
• The date until which the price remains valid
• Construction period
• Confirmation of the tender being genuine and bona fide
• Tenderer details and signature
• Acceptance of terms and conditions

Question 60

When seeking tenders for construction work, in addition to the actual price for the work, what additional information might be requested from the contractor?

Answer 60

• Track record of previous experience (for example, case studies)
• Proposed team and hierarchy
• Methodology or approach
• References
• Programme
• H&S information
• Value engineering proposals
• Logistics plans
• Social value strategy
• Diversity and inclusion policy

Question 61

Once tenders have been submitted, what should be examined for compliance with the invitation to tender and tender instructions?

Answer 61

• Arithmetical errors
• Pricing errors (items not priced)
• Pricing methods (front loading)
• Compare the contractor’s proposals against the employer’s requirements for compliance (D&B procurement)
• Check the form of tender is complete and signed
• Resolve any qualifications

Question 62

What happens if a tender is submitted late?

Answer 62

• Public sector project - the documents should be accepted
• Private sector project - the matter should be discussed with the employer to understand if they would like to accept. The safest option is not to consider (potential fraud, collusion, bid-rigging risk)

Question 63

Would you open a later tender submission for a school project?

Answer 63

The tender should be discarded on the basis the project is funder by the public sector

Question 64

What is the danger of accepting a very low tender submission?

Answer 64

• The contractor may be trying to ‘buy’ the project with a view to recover their costs with variations and/or claims
• It could indicate the contractor is in a poor financial or cash flow position and they are eager to win the work at any cost
• Areas of the project may not be priced accurately, potential for an adversarial relationship to develop post contract

Question 65

How do you deal with qualifications within the tender submission?

Answer 65

• Procedures associated with qualifications should be outlined in the tender instructions
• If the qualifications are unauthorised, it might invalidate the tender (leading to disqualification)
• The employer team and contractor should look to resolve the qualifications prior to signing the contract. Any outstanding matters should be clearly documented in the contract to avoid future disputes

Question 66

How would you deal with errors identified in the tender submissions?

Answer 66

JCT have produced a tendering practice note where two options are suggested to deal with errors, one of these options is usually drafted into the tender pack

Alternative 1:

• The tender should be given the details of the errors and afforded the opportunity of confirming or withdrawing their tender.
• If they withdraw, the next lowest bid is considered

Alternative 2:
The tenderer should be given the opportunity of confirming their offer or amending it to correct genuine errors.

Question 67

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

Answer 67

• As part of the evaluation process, the company accounts would be reviewed to assess the financial stability of the contractor (if not already complete at PQQ stage). This could lead to disqualification if the contractor is having financial difficulty
• Consider a performance bond. in the event the contractor fell insolvent, the employer would be able to call on the bond and appoint another contractor to complete the project
• Consider a parent company guarantee.

Question 68

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

Answer 68

• Not enough tenderers returned tenders
• The tendering procedure is compromised for some reason
• 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 of VE has been carried out that has significantly changed the design that was originally tendered on

Question 69

How would you deal with a front-loaded tender?

Answer 69

• Front loading is generally not a pricing error

- Request contractor removes front loading, if the contractor refuses, this may be ground for disqualification

Question 70

How could you reduce the risk of contractors pulling out during the tenderer process?

Answer 70

• Ensuring the tender information is as accurate as possible
• Ensure the tender period is long enough (extend id required)
• Go through the PQQ (pre-qualification questionnaire) to ensure the correct tenders are selected
• Check the contractor have time capacity to complete the tender

Question 71

On what grounds would you advise your client re-tenders the project?

Answer 71

• Not enough tenders returned
• The tender procedure was compromised in some way (potential fraud, collusion, bid-rigging)
• Significant design, methodology or programme changes after issuing the tender documents

Question 72

What is the contract sum analysis document under design and build procurement?

Answer 72

• A contract sum analysis (CSA) is an alternative pricing document to a schedule of works (SoW) or bill of quantities (BoQ). It’s often prepared in a standard format by the employer’s team to support the tender analysis. The employer’s team usually request that all tenders are returned on the same CSA format

Question 73

What information is typically included within a tender analysis report?

Answer 73

• List of tenders received
• Initial return totals
• Any qualifications identified
• Post-tender adjustments
• Revised tender sums
• Issues to be resolved
• Comparison of tender returns
• Comparison with pre-tender estimates
• Recommendation

Question 74

If the tender was received on time, but the works were delayed and did not commence until a few months later, what would you need to check?

Answer 74

Check the form of tender, this would show how long the price (the offer) was valid for (for example, 60 or 90 days after the tender return date)

Question 75

If the contractor (in their tender return) put a cost against an item and marked it provisional, what would you do?

Answer 75

I would seek further information from the contractor and request this to be removed, subject to the tender instructions, this may invalidate the submission

Question 76

If you think the delivery programme is tight, how can you give comfort to the contractor regarding liquidated damages (to avoid them excessively pricing in their tender sum)?

Answer 76

The contract can be amended to include a liquidated damage free period (assuming the employer agrees). For example, damages would not be levied for the first 3 weeks or levied at 50% for a defined period

Question 77

What is the purpose of a pre-tender estimate?

Answer 77

• A pre-tender estimate (PTE) is the last cost check of the project before it is issued to tender. The design should be sufficiently developed at this stage; therefore, the PTE should be an accurate reflection of the works.
• The estimate can then be used to compare against the tender submissions

Question 78

What happens if the tender prices are higher than the pre-tender estimates?

Answer 78

• This could be down to market conditions or some other external factor such as COVID-19 or Brexit
• The employer’s team should reconcile the tenders against the pre-tender estimate to identify where major differences are.
• The team could look value engineer the project if the prices are so over budget