Procurement and Tendering Flashcards
What does traditional procurement involve?
Client maintains contract responsibility of design
Contractor responsibility of works
What does D&B procurement involve?
works on the basis that the main contractor is responsible for undertaking both the design and construction work on a project, for an agreed lump-sum price
Why is a lump sum contract used?
The main purpose of a lump sum contract is to give the client certainty by fixing the price of the works
Why is a remeasurement contract used?
Design information may be incomplete meaning works can’t be priced on lump sum
Nature of work maybe more suited to remeasurement if quantity cant be defined
Why is a remeasurement contract used?
Design information may be incomplete meaning works can’t be priced on lump sum
Nature of work maybe more suited to remeasurement if quantity cant be defined
What are the difference between single, two stage and negotiated tenders?
Single - Signle stage of tendering where works priced on design info
Two stage tender - First stage prelims and quality submission second stage desing reviewed with contractor and price of works formulated
Negotiated - Preferred contractor selected and sum is negotiated
What are the fundamentals of e-tendering?
E-Tendering lets bidders submit required information in response to a formal request for proposal (RFP) by a deadline, generates and exchanges documents with e-signatures and messaging, and evaluates bidding suppliers for the procurement opportunity.
How are subcontractors selected for tender?
Previous experience preferred contractor list
Rated on cost quality and time
What is the process to ensure tenders are like for like?
Compared against CPs and ERs and inclusions to ensure cost is like for like
Put into a subcontractor comparison analysis
What is discussed in the pre let interview?
- Particulars
- Compliance
- Basis of tender quotation
- Scope of works
- Attendances
- Programme
- Health and safety
- Quality
- Defect rectification
- Commercial
- Tax and insurance
- Data Protection
How do you approach tender clarifications?
Review queries
- Formulate a response
- Relay to all tenderers
How is your subcontractor recommendation put together?
- Tender budget
- Subcontractor comparison
- Quotation
- Payment terms
- Insurances
- Programme
- DLA
What is procurement?
- The overall process of obtaining construction goods and services
What are the main factors that would determine procurement route selection?
- Client objectives and key drivers, risk allocation
- Must consider and balance the client’s priorities, as you usually find that one procurement route won’t satisfy everything the client wants.
- Cost, time, control, quality, risk
- Higher risk usually means cost premium
Which procurement route poses the least risk to the employer?
- D&B - the design risk is transferred to the contractor (single point responsibility)
Which procurement route is the riskiest for the employer?
- Construction management - the employer places individual contracts direct with each trade contractor, construction manager has no risk (except professional negligence)
How to identify client requirements before recommending procurement route?
- Detailed discussions with client and design team - identify priorities especially in time, quality, risk, control and experience
What are clients’ key drivers when procuring a building project?
- Cost
- Time
- Quality
- Risk
What is traditional procurement?
- Design and construction separate - employer appoints consultants for design then contractors submit tenders on fully developed scheme (apart from CDP - the consultants are retained by employer and will review and approve these).
Contractor is responsible for construction and client for the design (& design team performance)
Advantages and disadvantages of traditional procurement?
:)
- (Excluding significant design changes) Reasonable certainty of construction costs before commencement if design is robust.
- Employer retains control of design, knows exactly what they’re getting and potential for higher quality
- Minimal risk priced in costs from contractor
- Design changes reasonably easy to arrange and value
:(
- Longer project duration (less overlap with design and construction)
- Limited contractor buildability input
- Employer retains design risk
- Dual point of responsibility - employer = design, contractor = construction
- Price competition requirements can lead to adversarial relations
Where might traditional procurement be appropriate?
- Specific / detailed design requirements - client wishes to retain control of design and spec - design, cost and programme certainty
- Cost certainty before construction = priority compared to programme
- Quality - client retains control
- Competitive tender analysis more fair
- Established - most linear and commonly used method of construction
What is design and build?
- Contractor responsible for completing design and executing construction phase, inc planning, organisation and work according to ERs.
- Under JCT - employer’s team produce employer’s requirements (ERs), then the contractor responds with contractor’s proposals (CPs) which include price.
- Design risk transferred to contractor when they’re appointed for a job- in some cases the original employer’s design team may be novated to contractor for continuity, or the contractor appoints their own design team (internal or separate design company)
What is novation?
- Used in D&B to transfer benefits and obligations of contractual agreement from client to the contractor- terms and conditions the same except parties in agreement.
- Benefits and obligations transferred (i.e. responsibility of payment)
Advantages and disadvantages of novation?
- Advantages - continuity, accountability, assurance on quality for client, reduces risk of post contract changes / disputes, less likely to price in design risk, contractor doesn’t commit as much time/resource to reviewing / validating design
- Disadvantages - Contractor unlikely to be familiar with architect- risk of non-beneficial working relationship, architect underperformance = contractor responsibility, inc prior to their involvement - could be unfair
Alternatives to novation?
- Option to assign design team, contractually retained by client (not as good for risk averse)
How much design input will the contractor have under D&B?
- Depends on design work already completed by the Contractor’s appointment
- Can range from full design to production info and coordination only
How does D&B establish cost certainty?
- Lump sum submitted for whole of works provides cost certainty in single stage tender
- Design development responsibility is contractor’s so risk transfer with it
Advantages and disadvantages of design and build procurement?
:)
- Single point of responsibility for design and construction (contractor) - they maintain risk
- Earlier commencement on site possible - faster programme if design and construction can be overlapped
- Buildability incorporated into design (contractor’s experience)
- More cost certainty overall than traditional procurement, early price certainty may be increased
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- Design is only as good as employer’s requirements - employer may not have a sufficiently comprehensive brief
- Client may have to commit to concept designs early
- More complex to compare tender returns
- Employer changes difficult to value, often more expensive
- Less employer control over aesthetics and quality
- Risk premiums cost in tender return
Where might D&B procurement route be appropriate?
- Earlier start on site required, quicker programme
- When employer wants to minimise risk profile
- Contractor’s buildability input may help with technically complex projects
- Where retaining control of design is not priority
- Contractor assumes risk and responsbility for design
- Cost certainty required
Other consideration for D&B routes?
- Additional insurances - Professional Indemnity Insurance (PII) might be needed as the contractor has design responsibility
- Employer usually pays a premium as contractor is taking on the design risk, so usually there is an allowance (sum of money) in exchange
Typically, what stage would contractor’s be taken on board?
Stage 3 - further design development to still get benefit from contractor
What’s in a novation agreement?
- Relinquishes consultant from client
- Contractor takes responsibility for all design done before their involvement
- Payment terms
- New parties
- Terms and conditions
What is construction management?
- Employer directly appoints multiple subcontractors (trade contractors) instead of single main contractor - individual contracts with separate specialist trade contractors
- Construction manager expertise to coordinate and supervise works for employer, but they have no contractual link to trade contractors - construction manager has no vested interest in financial outcome and carries no risk
What is the construction manager’s role?
- Preparation of programme
- Determine requirements for site facilities
- Breaking project up into suitable packages
- Obtaining and evaluating tenders
- Coordinating and supervising works
- Requires a lot of upfront buildability knowledge
Advantages and disadvantages of construction management procurement?
:)
- Speed (early start on site), overlap with design and construction
- Construction manager can contribute to design and project planning processes
- Easy to facilitate changes in design
- Prices may be lower due to direct contracts with trade contractors (not paying contractor’s premium)
- Employer has means of redress with trade contractors through direct contractual links
- Clear / direct roles, risks and relationships
:(
- No price certainty until last trade package is let
- Needs informed, experienced, proactive employer
- Lots of consultants and contractors for employer to manage
- Changes to packages could adversely affect already let packages
Where might construction management be appropriate
- Experienced employer with sufficient resource to manage project
- Employer wants early start on site
- Flexibility for minor changes in design / spec / construction strategy throughout, with minimal impact on time / finances
- Large, technically complex job needing specialist consultants and trade contractors
- Price certainty before commencement not a key driver
- Repetitive work where structure / works is quite similar
What is management contracting?
- Employer appoints management contractor to manage entire building process
- Management contractor appoints trade contractors with competitive open book tender to carry out construction works
- MC paid fee % / management fee based on construction costs
- MC has direct contractual link with trade contractors - responsible for overall construction works
Advantages and disadvantages of management contracting procurement?
:)
- Shorter programme (overlap design and construction)
- Management contractor (MC) provides buildability input
- MC single point of responsibility
- Trade packages let competitively and transparently
- Flexibility in design - changes made throughout construction process
- Contractor contribution to design and planning process
- Works are let competitively at current market prices on firm price basis
:(
- No price certainty until last package is let
- Informed, proactive employer required
- % fee can disincentivise management contractor to minimise costs
Where might management contracting be appropriate?
- Early start on site
- Flexibility in design
- Buildability input from management contractor
- Cost certainty not priority for employer
- Changes to design of latter packages may affect packages already let
- Little incentive to MC to reduce costs
- In practice, MC has little legal responsibility for defaults of trade contractors
Difference between management contracting and construction management?
CM - Employer directly appoints multiple trade contractors to execute works - direct contractual relationships with employer not CM
MC - Employer appoints management contractor who appoints trade contractors, direct contractual employer with employer and MC only
