Procurement and Tendering Flashcards
What is procurement?
- 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.
What are the main factors that typically govern procurement route selection?
- 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.
- 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.
Which procurement options are you familiar with?
- Traditional procurement
- Design & Build
- Management contracting
- Construction management
What is traditional procurement?
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 on a complete design produced by the employer’s consultants (with the exception of Contractor’s Design Portions).
- The employer retains the design consultants during construction. The consultants prepare any additional design information and review CDP designs prepared by the contractor.
What are the key advantages of traditional procurement?
- The employer retains control of the design
- The design is largely finalised before the contractor’s tender for the build, which 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 & build)
What are the key disadvantages of traditional procurement?
- The overall project duration may be longer than design and build procurement (limited opportunity to overlap design and construction phase).
- 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)
When might traditional procurement be appropriate?
- The employer may have specific or detailed design requirements
- Cost certainty is important (traditional procurement has significant advantages over construction management or management contracting procurement routes).
- The shortest overall programme is not the employer’s main priority
What is Design & Build?
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 produces 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 contractor 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
What are the key advantages of design & build?
- Single point of responsibility for design and construction (contractor).
- Earlier commencement on site is possible (if design and construction can be overlapped)
- Benefit of the contractor’s experience harnessed during design (buildability input)
- Design and construction risk rest with the contractor
- Provides more cost certainty than traditional procurement
What are the key disadvantages of design & build?
- The design is only as good as the employer’s requirements (the employer may find it difficult to prepare a sufficiently comprehensive brief)
- 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 risk premiums into their tender returns
When might design & build be appropriate?
- Where there is a need to make an early start on site (D&B has the 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
What additional insurance might be required under a D&B contract?
The contractor and their design team will have design responsibility; therefore, it is likely that additional professional indemnity (PII) will be required.
What are employer’s requirements (ERs)?
The expression employer’s requirements are 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.
What are contractor’s proposals (CPs)?
- CPs are prepared by the contractor which respond to the employer’s requirements
- In this document(s), the contractor will produce detailed design information (based on the employer’s requirements), which will require further development throughout the course of the project.
Which procurement route poses the least risk to the employer?
Design & build, this is because the design risk is transferred to the contractor.
