Procurement and Tendering Flashcards
What are the main types of tendering procedures?
Single-stage tendering
Two-stage tendering
Negotiated tender
- Single Stage – design and tender documentation issued to contractors, tenders are received and an appointed made.
- Two Stage – initial tenders received based on outline spec and contractor is appointed. Detailed design is undertaken and further cost negotiations take place.
- Negotiated – contractor is selected based on experience or previous usage. Design is procured and a cost negotiated on the design with the selected contractor
What is Procurement?
The overall process of acquiring construction work or services.
How the building works are obtained
Main routes - traditional, Design and Build, Management Contracting and Construction Management.
What is tendering?
A phase in the procurement strategy. The bidding process, to obtain a price and how a contractor is actually appointed.
How the successful contractor is selected.
What is single stage tendering, why would it be used , why wouldn’t it be used?
Process where the tedner is completed in a single action.
The ITT are issued and the competing contractors compete against one another, a preferred contractor is selected and is awarded the contract.
Suitable when information in ER’s is developed enough for contractor to calculate a realistic price and carry out design work in tender period.
Would not use if design a scope was not well defined. A two stage tender would be beneficial if early contractor involvement required.
What is two stage tendering, why would it be used , why wouldn’t it be used?
Initial tenders recieved based on outline spec and contractor is appointed. Detailed design is undertaken and further cost negotiations take place.
Where ERs are not sufficiently developed for the contractor to calculate a realistic price. If required, contractor will tender first stage with a schedule of rates which can be used to establish the construction price in the second stage.
What is negotiated tendering, why would it be used , why wouldn’t it be used?
Negotiated Tendering is a procurement method where a buyer selects a supplier based on their industry track record or previous relationship, and then negotiates the contract terms.
It’s often used for specialist contracts with limited suppliers, allowing the buyer to tailor the process to the project’s needs. This method can be more efficient and cost-effective than open or closed tendering, facilitating direct communication and collaboration. It’s commonly used in the private sector, especially in construction and engineering.
However, it can be seen as exclusive and unfair due to potential ‘cosy’ relationships, making it difficult for smaller businesses to compete. The lack of competition may lead to higher costs, favouritism, or collusion among contractors. The design could be influenced by the selected contractor, and it can be challenging for new firms to secure work.
What are Employer’s requirements (ERs)?
They set out the client’s requirements including the function, size, accommodation and quality requirements of the project.
Their level of detail depends on how much design development has been carried out prior to tender.
They normally include the current state of planning permission
It should also detail the level of design structure and specification information to be provided by the tenderers.
What are the Contractor’s Proposals?
The Contractor’s response to the ERs
Key documentation for the client to consider at the tender review
They often include plans, elevations, sections and typical details
Layout drawings and specifications for materials and workmanship are also provided.
What is a PQQ?
Pre-qualification questionnaire. This stops time wasting. As uncapable contractors don’t tender, and
less tenders need to be assessed.
The document will likely include financial status, legal status, relevant experience, available
resources, performance history (H&S, claims), demonstrate project understanding.
Details of contract particulars, Company turnover, previous relevant experience and references, company accounts, management and organisational structure, H&S records, quality systems and environmental policy, provision of bonds, warranties & PCGs.
What should be considered when selecting a procurement route?
- The specifics of the project
- The client objectives regarding:
- Cost
- Time
- Control
- Quality
- Risk
- Whether MMC is to be used? Require manufacturer early in the project.
What are the Main Procurement Methods?
Traditional
Design & Build
Management Contracting
Construction Management
What is traditional procurement?
Design is competed by the client’s design team before competitive tenderers are invited and a contractor is awarded the project (usually with the lowest price).
How does traditional procurement work?
The contractor takes responsibility and financial risk for the construction of the works to the design produced by the client’s design team. The client takes the responsibility and risk for the design and design team performance.
When might the traditional procurement route be appropriate?
If the employer has had the design prepared, if the design is substantially completed at time of tender.
The client wishes to retain control over the design and the spec.
If cost certainty at start on site is important
The shortest overall programme is not the client’s main priority.
What are the Advantages of traditional Procurement?
Retaining control over the design can lead to higher quality.
It offers increased level of cost certainty before commencement.
Design changes are reasonably easy to arrange and value.
What are the Disadvantages of traditional Procurement?
The overall project duration may be longer than others due to lack of overlap between design and construction
There is no input into design and planning by the contractor
A strategy based on price competition can lead to confrontational relations.
There is a dual point of responsibility with the design team controlling the design and the contractor retaining responsibility for the construction.
What is Design and Build?
Where the contractor is responsible for the design, planning, organisation, control and construction of the works to the ERs.
How does Design and Build work?
The employer gives the tenderers the Ers and the contractor responds with the contractor’s proposals which include the price for the works.
When might D&B be appropriate?
Where there is a need to make an early start on site (overlaps between design and construction.
Where the client wishes to minimise their risk as they transfer design responsibility to the main contractor.
For technically complex projects requiring the contractor’s expertise.
Where the employer does not want to retain control over design development.
What are the advantages of D&B?
There is a single point of responsibility for the design and construction.
There is earlier commencement on site
Early price certainty is increased
The client can benefit from the contractor’s experience harness during the design – improve buildability.
What are the Disadvantages of D&B?
Clients may find it hard to prepare a sufficiently comprehensive brief.
The client has to commit to a concept design early.
Variations from the original brief are difficult to arrange and are often expensive.
It is harder to compare tenders and harder to determine whether value for month is being achieved.
Variations may come up or reworks if the ERs are not clear, concise or missing vital information.
How much design input will the contractor have on D&B?
Depends on the amount of design work the employer has already completed at time of tender.
This can range from full design to production information and coordination only.
Who carries out the design for the contractor (on D&B)
It may be outsourced to a separate design company (contractor retains responsibility).
They may have in house design capabilities or the client’s team may be novated.
What is Management Contracting ?
Contractors are managed by and contracted to a management contractor. Similar to traditional but
rather than a fixed price the MC is reimbursed a % of the amount paid to the contractors
A management contractor is employed to contribute their expertise to the design and to manage construction with a management fee being paid to them for doing so.
How does Management Contracting Work?
The management contractor has direct contractual links with all of the works contractors.
They have the responsibility for the construction works without actually carrying them out.
Not all of the design need to be completed before their first works contractors start work.
The MC selects the works contractors thought competitive open book tender.
The client reimburses the cost of these packages to the MC plus their management fee.
What is competitive open book tender?
Competitive Open Book Tendering is a procurement method where the buyer approaches multiple suppliers and negotiates the terms of the contract with each of them. The suppliers provide a detailed breakdown of costs in their tenders, including labour, materials, overheads, profit, and contingency provision. This transparency allows the buyer to understand the real costs of a service and ensures they are not being overcharged.
Why it would be used:
* It ensures a competitive price is obtained.
* It’s useful when services are difficult to specify precisely up front.
* It allows the buyer to see into the supplier’s business and understand their pricing and margins.
* It can include incentives (and penalties) calculated as a percentage of the difference between the real cost of the project and an estimate provided up front.
Why it wouldn’t be used:
* It requires a high level of monitoring and involvement on the buyer’s side.
* It can be challenging to isolate the cost variables for which the contractor will accept sole responsibility.
* It can be counterproductive if it results in less effective contract management.
* A saving in the management fee can quickly be lost if the result is less effective operational management or failure to respond to the changing needs of the customer.
* It may not guarantee value for money. Simply knowing how supply chain costs are made up does not necessarily mean that they will be minimised.
When might management contracting be appropriate?
Where the client does not want cost certainty before commencement. Where an early start on site it a priority.
What are the advantages to Management Contracting?
Overall project duration is short due to overlapping design and construction
There is contractor contribution to the design and planning process.
Changes can be accommodated in package not yet let if they have no further impact.
The works are let competitively at current prices on a firm price basis.
What are the disadvantages to Management Contracting?
- The price for the works is not received until the last package has been let.
- Changes to the design of later packages may affect packages already let.
- There is little inventive for the Management Contractor to reduce costs.
- In practice, the MC has little legal responsibility for the defaults of the work contract.
What is Construction Management?
Contractors are contracted to the client, but managed by a construction manager. They administer and coordinate the works
The employer places a direct contract with each of the trade contractors and utilises the expertise of a construction manager who acts as aa consultant to coordinate the contracts.
How does Construction Management work?
- The trade contractors carry out the works.
- The construction managers supervises the construction process and coordinates the design team.
- The construction manager has no contractual links with the trade contractors or members of the design team.
- The role includes preparation of the programme, determining requirements for site facilities, breaking down the project into suitable works packages, obtaining and evaluating tenders, co-ordinating and supervising the works.
When might Construction Management be appropriate?
- On large, complex projects where the advantages of CM can be utilised, e.g. using upfront buildability knowledge of the construction manager and their programme advise including specialist input from trade contractors.
- Where an early start on site date is key.
- Where price certainty before commencement is not considered a key driver
- Where the client is experienced in construction.
