Procurement and Tendering

Question 1

Can you explain to me a two stage tendering strategy?

Answer 1

• First stage tender enquiry issued at RIBA Stage 2-3
• Contractor selected on quality of bid, quality of team
• Prelims price and OH/P allowance.
• Preferred contractor joins design team on pre-construction services agreement and develops project to RIBA Stage 4, then presents bid for delivering project.

Question 2

What are the pros and cons of Two stage Tendering?

Answer 2

Pros
- Ability to overlap design and tendering / Quicker start on site
- Benefit of Contractor knowledge/builability through design
- Increase opportunity to Value / Risk management with the contractors’ input.

Cons
- Lack of competitiveness during 2nd stage
- Time/continuity implication to re-tender if second stage unsuccessful.

Question 3

What is a Pre-Consruction Services Agreement?

Answer 3

Used between employer and contractor on two-stage tendering. Appointment follows period between first stage appointment to submission of definitive second stage tender / entry into the main contract for the Works.

Question 4

Explain Single Stage Tendering?

Answer 4

• Competitive open tender when identical ITT issued to number of contractors who submit tender by notified date.
• Decision made on cost/quality and preferred bidder appointment made for the main works.
• Usually at RIBA Stage 4 to ensure bid most reflects the project.

Question 5

What are the key advantages of single stage tendering?

Answer 5

• 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 6

What are the key disadvantages of single stage tendering?

Answer 6

• No buildability input from the contractor (at 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 7

What is a Negotiated Tender?

Answer 7

A negotiated tender is effectively a selective single-stage tender carried out between the client employer and just one contractor.

Negotiated tenders are obtained by the client, inviting one contractor of their choice to submit a tender response for the project.

Question 8

What are the key advantages of negotiated tender?

Answer 8

• 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 9

What are the key disadvantages of negotiated tender?

Answer 9

• Possibility of delay if contract negotiations are protracted
• Potential cost premium due to lack of competition
• There is a heavy reliance on trust between parties
• It can be seen as anti-competitive and exclusive - may put off potential other tenderers in future.

Question 10

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

Answer 10

• Insist on an open book approach when agreeing the package
• Benchmark where necessary using BCIS/current market knowledge.

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 11

What is Procurement?

Answer 11

• 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 12

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

Answer 12

• 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 also be considered.

Question 13

What procurement options are you familiar with?

Answer 13

• Traditional procurement
• Design and build
• Management contracting
• Construction management.

Question 14

What is Traditional Procurement?

Answer 14

• 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 operational scheme.

Question 15

What are the key advantages? (Traditional Procurement)

Answer 15

• The employer retains control of the design
• The design is largely finalized 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 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 16

What are the key disadvantages? (Traditional Procurement)

Answer 16

• The overall project duration may be longer than design and build
• Zero or limited contractor builder 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 17

When might traditional procurement be appropriate?

Answer 17

• The employer may have specific or detailed design requirements
• Cost certainty is important
• The shortest overall programme is not the employer’s main priority

Question 18

What is Design and Build?

Answer 18

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.

Question 19

What are the key advantages? (Design and Build)

Answer 19

• 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 than traditional procurement

Question 20

What are the key disadvantages? (Design and Build)

Answer 20

• The design is only as good as the employer’s requirements
• More complex to compare tender returns
• Employer changes can be difficult to value and expensive
• the employer may have less control over aesthetics and quality
• The contractor will build in risk premiums into their tender returns

Question 21

When might design and build be appropriate?

Answer 21

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

Question 22

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

Answer 22

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

Question 23

What are employer’s requirements (ERs)?

Answer 23

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 and this is what the design and construction of the works will be based on.

Question 24

What are contractors proposals (CPs)?

Answer 24

CP takes precedence if conflict with ERs

• 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 25

Which procurement route poses the least risk to the employer?

Answer 25

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

Question 26

What is Construction Management?

Answer 26

The employer directly appoints multiple subcontractors (known 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.

Question 27

What are the key advantages? (Construction Management)

Answer 27

• Speed to get to site
• Overall project duration reduced by overlapping design and construction
• The construction manager can contribute to the design and project planning processes
• Changes in the 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 28

What are the key disadvantages? (Construction Management)

Answer 28

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

Question 29

When might construction management be appropriate?

Answer 29

• The employer is experienced in construction and has the suitable resources to manage the 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 30

Which is the riskiest procurement route for the employer?

Answer 30

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 31

What is Management Contracting?

Answer 31

• 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 32

What are the key advantages? (Management Contracting)

Answer 32

• 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 33

What are the key disadvantages? (Management Contracting)

Answer 33

• 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 management contractor to minimize costs.

Question 34

What is a Framework Agreement?

Answer 34

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

Question 35

How long can a framework be?

Answer 35

Typically, a framework agreement lasts for 5 years. however this is determined by the buyer. They can range between 2 and 10 years.

Question 36

What are the key advantages? (Framework Agreement)

Answer 36

• Framework agreements help 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 37

What are the key disadvantages? (Framework Agreement)

Answer 37

• The contractor, 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 nature and evolving nature of technologies for example.

Question 38

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

Answer 38

• Employers that are continually commissioning construction works 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 39

What’s the difference between a framework agreement and a contract?

Answer 39

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

Question 40

What is Project Partnering?

Answer 40

• 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 encouraged to delivering the solution and overcoming problems

Question 41

What are the key advantages or partnering?

Answer 41

• 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
• Better predictability in terms of time and cost

Question 42

What are the key disadvantages of partnering?

Answer 42

• Less opportunity to understand what other contractors/potential partners have to offer
• Difficult to find a strong partner which the same objectives, ethics, attitude etc.

Question 43

What is Tendering?

Answer 43

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

Question 44

What is the difference between procuring and tendering?

Answer 44

• 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 45

What documents were included within your tender pack?

Answer 45

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

Question 46

What is a bona fide tender?

Answer 46

• 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 47

What is a PQQ (Pre-Qualification Questionnaire)

Answer 47

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

Question 48

What is the purpose of a PQQ?

Answer 48

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 change of winning the contract.

Question 49

What might the PQQ ask for?

Answer 49

• Company details
• Details of insurance cover
• Financial information
• Relevant experience
• Information about technical and professional ability
• Information capability and capacity
• Health and safety policy and records
• Quality assurance policy
• Environmental management policy
• Equal opportunities policy
• References

Question 50

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

Answer 50

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

Question 51

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

Answer 51

• The contractor may be trying to ‘buy’ the project 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 52

How do you deal with qualifications within the tender submission?

Answer 52

• Procedures associated with qualifications should be outlined in the tender instructions.
• If the qualifications are unauthorized, 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 clearly be documented in the contract to avoid future disputes.

Question 53

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

Answer 53

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 tenderer should be given details of the errors and afforded the opportunity of confirming or withdrawing their tender.

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

Question 54

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

Answer 54

• Not enough tenderers returned tenders
• The tendering procedure is compromised for some reason
• If tender 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

Question 55

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

Answer 55

• Ensure the tender information is as accurate as possible
• Ensure the tender period is long enough (extend if 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 56

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

Answer 56

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

Question 57

What information is typically included in the tender analysis report?

Answer 57

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

Question 58

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

Answer 58

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

Question 59

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

Answer 59

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 60

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 60

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

Question 61

What is the purpose of a pre-tender estimate?

Answer 61

• 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 62

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

Answer 62

• 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 the major differences are.
• The team could look to value engineer the project if the prices are over budget.