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James' APC Revision > Procurement and Tendering > Flashcards

Procurement and Tendering Flashcards

1
Q

What is procurement?

A

The process of obtaining all goods and services required to complete a construction project

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2
Q

What are the main factors that determine the chosen procurement route?

A

The client’s priorities:
- Time
- Cost
- Quality
- Risk
- Sustainability

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3
Q

What procurement routes are there?

A
  • Traditional
  • Design & Build
  • Construction Management
  • Management Contracting
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4
Q

What is traditional procurement?

A

Design is separated from construction:
- Client appoints consultants to fully design the project
- Contractors tender on the fully developed design
- Winning contractor constructs the project

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5
Q

What are the key advantages of traditional procurement?

A
  • COST: Client has cost certainty before construction starts
  • QUALITY: Client maintains control of design
  • Bids easier to compare
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6
Q

What are the key disadvantages of traditional procurement?

A
  • TIME: Longer project duration as no overlap of design & construction
  • QUALITY: Contractor cannot provide buildability input
  • RISK: Client retains design risk
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7
Q

When might traditional procurement be used?

A
  • TIME not client priority
  • COST CERTAINTY is client priority
  • QUALITY: Client wants to maintain control of the design (has specific or detailed design requirements)
  • RISK: Client happy to take the design risk
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8
Q

What is design & build procurement?

A

Client appoints a contractor to design and build the project in line with their requirements

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9
Q

What are the key advantages of design & build procurement?

A
  • TIME: shorter project duration by overlapping design & construction
  • QUALITY: Contractor can provide buildability input
  • RISK: Contractor takes design and construction risk
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10
Q

What are the key disadvantages of design & build procurement?

A
  • COST: Contractors will likely include D&B risk in their tender returns
  • QUALITY: Client has less control over design, design only as good as their requirements
  • Bids more difficult to compare
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11
Q

When might design & build procurement be used?

A
  • TIME is client priority
  • QUALITY: On large, complex projects where contractor’s buildability input is required
  • QUALITY: Retaining control of design not client priority
  • RISK: Client wants to minimise their risk exposure
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12
Q

What are the differences between traditional and design and build procurement?

A
  • TIME: D&B usually has shorter project durations
  • COST: D&B tender returns usually include a risk premium
  • QUALITY: In traditional, client maintains control of design, but there is no contractor buildability input (unless there is CDP)
  • RISK: Contractor takes design and construction risk in D&B
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13
Q

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

A

PII to cover the contractor’s design responsibility

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14
Q

What are employer’s requirements (ERs)?

A
  • Documents produced by the client that set out their project requirements, on which the design and construction of the works will be based
  • May include drawings, specifications, programme, pricing document format e.g. for CSA, scope of services
  • Typically found on D&B projects, or a traditional contract where the contactor has a CDP
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15
Q

What are contractor’s proposals (CPs)?

A
  • Contractor’s response to the ERs, setting out their proposals for designing and constructing the project
  • May include drawings, specifications, programme, pricing document e.g. CSA & tender price
  • Typically found on D&B projects, or a traditional contract where the contactor has a CDP
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16
Q

Which procurement route poses the least risk to the employer?

A

D&B because the contractor takes risk for the design as well as construction

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17
Q

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

A

The contractor usually includes an allowance in their tender return for taking on the design risk

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18
Q

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

A

Either:
- Contractor’s in-house design team
- Contractor appoints external consultants
- Employer’s design team is novated to the contractor

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19
Q

What is construction management?

A
  • Client places individual contracts each of the trade contractors, who are managed by a construction manager who supervises the works and coordinates the design team
  • Construction Manager has no contractual link with any of the trade contractors or design team
  • Although the trade contracts are coordinated by the Construction Manager, contractually they are the client’s risk
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20
Q

What are the key advantages of construction management?

A
  • TIME: shorter project duration by overlapping design & construction
  • COST: may be lower due to direct contracts with trade contractors
  • QUALITY: Construction Manager can provide buildability input
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21
Q

What are the key disadvantages of construction management?

A
  • COST: No cost certainty until the last trade package is bought
  • RISK: Client carries (almost) all risk - requires an experienced and proactive client
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22
Q

When might construction management be used?

A
  • TIME is client priority
  • COST CERTAINTY not client priority
  • QUALITY: Construction Manager’s buildability input required (large, complex projects)
  • RISK: Employer is experienced and proactive
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23
Q

Which procurement route poses the most risk to the employer?

A

Construction management - client takes on all the risk (including design, programme, performance of the trade contractors) except for the quality of construction

(client places individual contracts with each trade contractor which are the client’s risk, CM carries no risk except professional negligence)

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24
Q

What is management contracting?

A
  • Client appoints a Management Contractor to manage the entire building process who in turn appoints trade contractors to carry out the construction works
  • Management Contractor has a direct contractual relationship with the trade contractors and is responsible for the overall construction works
  • Client reimburses Management Contractor for prime cost of trade contracts plus a fee (usually a percentage)
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25
Q

What are the key advantages of management contracting?

A
  • TIME: shorter project duration by overlapping design & construction
  • COST: trade packages bought competitively
  • QUALITY: Management Contractor can provide buildability input
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26
Q

What are the key disadvantages of management contracting?

A
  • COST: No cost certainty until the last trade package is bought
  • COST: Can disincentivise the Management Contractor to minimise costs
  • Requires an experienced and proactive client
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27
Q

When might management contracting be used?

A
  • TIME is client priority
  • COST CERTAINTY: not client priority
  • QUALITY: Management Contractor’s buildability input is required (large, complex project)
  • Employer is experienced and proactive
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28
Q

What are the key differences between CM and MC?

A

CONTRACTUAL RELATIONSHIPS:
- CM: client directly appoints the trade contractors to execute the works
- MC: client appoints a management contractor who in turn appoints the trade contractors
.
RISK:
- CM: Construction Manager has no risk except professional negligence
- MC: Management Contractor takes on risk for programme, performance of trade contractors, quality of construction

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29
Q

What is a framework agreement?

A
  • An agreement that allows the client to invite tenders from suppliers of goods and services to be carried out over a period of time (typically 4 years max.) on a call-off basis as and when required
  • Key advantage: Reduces procurement timescales and risk
  • Key disadvantage: Bidders will invest time and money to be awarded onto a framework and then potentially not receive any work through them
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30
Q

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

A

Framework agreement is focused around being an approved supplier for a period of time, whereas a contract is more project-specific with a scope of works and value

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31
Q

What is project partnering?

A
  • Partnering encourages collaboration, openness and trust between parties to a contract
  • Most commonly used on large, long-term or high-risk contracts
  • Can be for a one-off project, or can be a long-term relationship over many projects (e.g. framework agreement)

Key advantage: likelihood of conflict reduced
Key disadvantage: difficult to find a strong partner with the same objective, ethics, attitudes etc

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32
Q

What is tendering?

A

The process of inviting bids from contractors to complete construction works

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33
Q

What is the difference between procurement and tendering?

A

Procurement is the process of obtaining all goods and services required to complete a construction project

Tendering is the process of inviting bids from contractors to complete construction works

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34
Q

What are the 3 main tendering options for construction projects?

A
  • Single stage tender
  • Two stage tender
  • Negotiated tender
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35
Q

What is single stage tendering?

A
  • Tender documents are issued to the competing contractors to obtain prices for the whole construction works
  • Often issued at Stage 4 so the tendering contractors receive the most detailed information to base their bid on
  • The preferred contractor is awarded the contract
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36
Q

What are the key advantages of single stage tendering?

A
  • COST: Competitive (no S2 negotiations)
  • COST CERTAINTY: lump sum (no S2 cost increase)
  • Simpler process
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37
Q

What are the key disadvantages of single stage tendering?

A
  • TIME: Slower as design usually completed to RIBA Stage 4, then tenderers need time to review and accurately price this detailed information
  • COST: As its competitive, tenderers could take risks in their pricing to win the works which can cause problems later on
  • COST: Contractor submits their price but you don’t see the prices they received from subcontractors
  • QUALITY: Contractor cannot provide buildability input
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38
Q

What is two stage tendering?

A

“Stage 1 (COMPETITIVE)
- Tender documents are issued to the competing contractors, including the design so far
- Tenderers submit their proposed team, programme, construction methodology, prelims, OH&P, D&B risk (if applicable)
- Preferred contractor joins the design team on a consultancy basis under a PCSA

Stage 2 (NEGOTIATED)
- Preferred contractor works with the team to complete the design, usually to RIBA Stage 4
- Contractor then negotiates the final contract, price and programme with the client

39
Q

What are the key advantages of two stage tendering?

A
  • TIME: Can overlap design and pricing
  • COST: Open book tendering of subcontract packages
  • QUALITY: Contractor can provide buildability input
40
Q

What are the key disadvantages of two stage tendering?

A
  • COST escalation in second stage (loss of competitive tension)
  • Potential for second stage negotiations to fail
  • More complex process
41
Q

What is a negotiated tender?

A
  • Client invites one contractor of their choice to submit a tender for the project
  • Client then negotiates the final contract, price and programme with that contractor
42
Q

What are the key advantages of negotiated tendering?

A
  • TIME: Can overlap design and negotiation
  • TIME: No tender comparison required
  • QUALITY: Contractor can provide buildability input
  • Client can choose their preferred contractor
  • Good for clients who repeatedly work with same contractors
  • Simpler process
43
Q

What are the key disadvantages of negotiated tendering?

A
  • TIME: Negotiations could be difficult and time consuming
  • COST: Not competitive (potential cost premium)
  • QUALITY: Difficult to prove the contractor is the most suitable (and has provided value for money)
  • Heavy reliance on trust between the parties
  • Can be seen as anti-competitive and exclusive
44
Q

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

A

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 (would need to be agreed upfront with the contractor)

45
Q

What is a Pre-Qualification Questionnaire (PQQ)?

A
  • A series of questions for potential tenderers to answer prior to being invited to tender
  • Reduces number of potential tenderers to those that are genuinely appropriate for the project - saves a lot of time for potential tenderers who don’t have a realistic chance of winning the contract
46
Q

What information would you expect in a PQQ?

A
  • Project overview
  • Information on the procurement route, form of contract and any amendments
  • Instructions for completing and returning the PQQ
47
Q

What might the PQQ ask for?

A
  • Company details (including legal status)
  • Financial information
  • Proposed project team
  • Relevant experience
  • Information about capability and capacity
  • H&S information
  • Innovation and benefits for the project
48
Q

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

A
  • Dun & Bradstreet report
  • Credit agencies such as Experian
49
Q

What documents would you include in your tender pack or invitation to tender (ITT)?

A
  • Instructions to tenderers (includes return date, time & location, how errors will be dealt with)
  • Form of tender & certificate of bona fide tender
  • Preliminaries (project overview, general requirements, pre-construction information (PCI))
  • Proposed contract conditions and amendments
  • Pricing document
  • Drawings & specifications
  • Any other relevant project documents or information
50
Q

What is a form of tender?

A

A form the contractor signs and returns with their proposed tender, including their price and programme

51
Q

What information is typically included in the form of tender?

A
  • Tender price & date it remains valid until
  • Programme duration & completion date
  • Certificate of bona fide tender
  • Tenderer signature and details
52
Q

What is a bona fide tender?

A

A tender submitted in good faith which hasn’t been subject to collusion and meets the bidding requirements

53
Q

When seeking tenders for construction work, price aside, what information might be requested from the contractor?

A
  • Proposed project team
  • Relevant experience
  • Programme
  • Methodology & logistics plans
  • H&S information
  • Innovation and benefits for the project e.g. VE proposals
  • Social value strategy
  • Diversity and inclusion policy
54
Q

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

A
  • Arithmetical errors
  • Pricing errors (items not priced)
  • Pricing methods (front loading)
  • Check form of tender is complete and signed
  • Resolve any qualifications
  • Check CPs comply with ERs (D&B procurement)
55
Q

What happens if a tender is submitted late?

A

Depends if public or private sector project…

  • Public: do not open
  • Private: client decides whether to open (safer not to consider as potential for collusion)
56
Q

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

A

No - project is funded by the public sector

57
Q

What is the danger of accepting a very low tender?

A
  • Tender might not be priced accurately
  • Contractor may intend to recover costs with variations or claims
  • Could indicate contractor is in a poor financial position and is eager to win the work at any cost
58
Q

How do you deal with qualifications within the tender submission?

A
  • Relevant procedures should be outlined in the tender instructions
  • Unauthorised qualifications may invalidate the tender (leading to disqualification)
  • Client team and contractor should resolve any qualifications before signing the contract
59
Q

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

A

I would follow the guidance in the JCT Tendering Practice Note 2017 which suggests 2 options:

ALTERNATIVE 1:
- Tenderer can either confirm or withdraw (if so, next lowest bid is considered)

ALTERNATIVE 2:
- Tenderer can confirm, correct the error, or withdraw

60
Q

What would you do if you thought the contractor with the lowest bid was in financial difficulty?

A
  • Review their company accounts to assess financial stability (if not already done in PQQ). Could lead to disqualification if the contractor is having financial difficulty
  • Consider a performance bond (if contractor fell insolvent, client could call the bond and appoint another contractor to complete the project)
  • Consider a PCG
61
Q

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

A
  • Not enough tenders returned
  • Tender procedure was compromised
  • Tender returns are not at the expected cost level and it’s believed retendering to different contractors would provide a different result
  • Significant changes to design, methodology or programme after issuing the tender documents
62
Q

How would you deal with a front-loaded tender?

A
  • Request contractor removes front loading
  • If contractor refuses this may be grounds for disqualification
63
Q

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

A
  • Have a PQQ stage so that all remaining tenderers have a genuine chance to win the project
  • Ensure tender period is long enough
  • Ensure tender information is as accurate as possible
64
Q

What is a Contract Sum Analysis (CSA)?

A
  • A pricing document submitted by contractor as part of their tender return on D&B projects
  • Breaks down contractor’s price into client’s standard format - easier to compare & analyse tenders
  • Can be used as a basis for calculating payments due to the contractor as works progress
  • Necessary as unlikely to be BQ on a D&B project at the time the contract is entered into
65
Q

What information is typically included in a tender recommendation/analysis report?

A
  • List of tenderers throughout the tendering process e.g. pre and post-PQQ
  • Tender information provided
  • alinea budget and PTE
  • Tenders received (price & programme)
  • Post-tender adjustments
  • Recommendation & conclusions

Appendices:
- PQQ Scoring Matrix
- Post-tender Scoring Matrix
- Tender Analysis Report (compares tender returns)

66
Q

What is a scoring matrix?
What criteria would you include in one?

A

Project team score each contractor (0-10) against weighted criteria (e.g. 30%) to decide which tenderers to progress to the next stage

Criteria depends on the stage of the tendering process…

PQQ Criteria:
- Financial and commercial standing
- Proposed project team
- Relevant experience
- Supply chain procurement
- H&S
- Innovation & benefits for project
- Company approach/policies

Post-tender Criteria:
- Programme
- Cost
- Methodology/logistics
- Sustainability

67
Q

What information is typically included in a procurement report?

A
  • Procurement strategies considered
  • Advantages and disadvantages of each
  • Discounted options and justifications
  • Recommended option and justification
68
Q

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?

A

Check the form of tender, this shows how long the price is valid for e.g. 60 days after the tender return date

69
Q

What would you do if the contractor included a provisional cost in their tender return?

A

I would speak to the contractor and request them to remove it - this may invalidate their submission subject to the tender instructions

70
Q

How can you comfort the contractor regarding liquidated damages when the delivery programme is tight (to avoid excessive pricing in their tender sum)?

A

Amend the contract to include a liquidated damage free period e.g. no damages in the first 3 weeks or levied at 50% for a defined period

71
Q

What is a pre-tender estimate (PTE)?
What is its purpose?

A
  • The final cost estimate of the works described in the tender documents before they’re issued
  • The estimate is then compared against the tender returns
72
Q

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

A
  • Reconcile the tenders against the PTE to identify where the major differences are
  • Use VE to reduce the costs

(could be due to external factors e.g. market conditions, covid or Brexit)

73
Q

What is OJEU?

A
  • Official Journal of the European Union
  • An online portal housing all contracts from the public sector over a certain threshold (advertised across the EU)
74
Q

What happens to OJEU now the UK has left the EU?

A
  • Following Brexit, the UK is not subject to EU procurement regulations, including OJEU
  • Tenders are now published on a new e-tendering portal called Find a Tender Service (FTS)
75
Q

Can you name some of the pricing documents we might use at tender stage?

A
  • Contract sum analysis (CSA)
  • Bill of quantities (BoQ)
  • Schedule of rates (SoR)
  • Schedule of work (SoW)
  • Priced activity schedule
76
Q

Can you name some of the pricing options for construction contracts?

A
  • Lump sum
  • Cost-plus (aka cost reimbursable)
  • Remeasurement
  • Target cost
  • Guaranteed maximum price (GMP)
77
Q

What is a lump sum contract?

A

Employer pays the contractor a set amount (lump sum) which is the contractor’s estimated cost to provide the work + OH&P

78
Q

What are the key advantages of lump sum contracts?

A
  • Cost certainty for employer
  • Contractor can benefit from increased profit if actual costs are less than estimated costs
79
Q

What are the key disadvantages of lump sum contracts?

A
  • Pricing risk lies with contractor
  • Therefore contractors will likely increase their tender prices
80
Q

What is a cost-plus contract?

A

Employer pays the contractor for their COSTS incurred during the project PLUS a pre-agreed percentage for profit

81
Q

What are the key advantages of cost-plus contracts?

A
  • Inaccuracies in the initial bid aren’t as detrimental as with lump sum contracts
  • Allows employers to make design changes along the way, contractors will be paid for the additional costs of those changes
82
Q

What are the key disadvantages of cost-plus contracts?

A
  • No cost certainty for employer
  • Contractor may deliberately incur higher costs to increase profit (no incentive for efficiency)
83
Q

When might a cost-plus strategy be appropriate to use?

A

Where the scope of work can’t be properly defined at the time e.g. infrastructure emergency repair work

84
Q

What is a remeasurement contract?

A

Employer pays contractor for their work on-site: the actual quantities of work carried out are measured and the tendered rates are applied to them

85
Q

What are the key advantages of remeasurement contracts?

A
  • Lower risk for contractor compared to lump sum contract.
  • Since the work is tendered on similar approximate quantities, the contractors submit competitive rates in their tender
  • Inaccuracies in the initial bid aren’t as detrimental as with lump sum contracts?
86
Q

What are the key disadvantages of remeasurement contracts?

A
  • Less cost certainty until project completed, higher risk for employer compared to lump sum contract
  • Cash flow forecasting less accurate
87
Q

What is a target price contract?

A

A target cost is set early in the project. Upon completion, cost savings or overruns are shared between the contractor and employer based on a pre-agreed formula or percentage (‘pain & gain’ mechanism)

88
Q

What are the key advantages of a target price contract?

A
  • Contractor and employer are incentivised to reduce costs
  • Encourages equitable risk sharing based on a clearly defined pre-agreed risk allocation
89
Q

What are the key disadvantages of target price contracts?

A
  • Employer and contractor must share pain and gain, exposes employer to greater risk.
  • Contractor must share gain from improved performance with employer.
90
Q

If the employer wanted a target cost contract using the NEC form, which main option(s) would you use?

A

Option C: Target contract with activity schedule
Option D: Target contract with bill of quantities

91
Q

What is a guaranteed maximum price (GMP) contract?

A
  • Sets a limit the employer will pay the contractor (contract sum), regardless of actual costs incurred
  • If actual cost > GMP, contractor must bear the additional cost
  • If actual cost < GMP, usually the savings are split between employer and contractor using pre-agreed formula or percentage (check contract)
92
Q

What are the key advantages of a GMP?

A
  • Cost certainty for employer
  • Both employer and contractor can benefit from savings
93
Q

What are the key disadvantages of a GMP?

A
  • Contractor must share savings made while taking on the risk of cost overrun
  • Therefore contractors will likely increase their tender prices

James' APC Revision (10 decks)

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