Procurement and tendering

Question 1

What is OJEU?

Answer 1

OJEU stands for the Official Journal of the European Union (previously called OJEC - the Official Journal of the European Community).
This is the publication in which all tenders from the public sector which are valued above a certain financial threshold according to EU legislation, must be published.

Question 2

What are the OJEU financial thresholds?

Answer 2

New Thresholds for 2020
The Public Contracts Regulations 2015
Supplies & Services (not subsidised services contracts)
Central Government bodies (large lots) £122,976
Others (large lots) £189,330
Supplies and services (small lots; all sectors) £70,778
Works (large lots, all bodies) £4,733,252
Works (small lots, all bodies) £884,720

Question 3

What are the different OJEU routes?

Answer 3

Open
Restricted
Competitive dialogue
Negotiated with OJEU advert
Negotiated without OJEU advert

Question 4

What would you advise a public sector client on a project where there was not enough time to carry out an open tender procedure?

Answer 4

Use a framework

Question 5

Who adopts the responsibility for obtaining statutory approvals in design and build procurement?

Answer 5

It depends on what is prescribed in the contract

Question 6

What is a framework? What are the benefits of a framework?

Answer 6

A framework is an umbrella agreement where parties (usually 4) have signed up to agreed terms & conditions / rates. The benefits of this are it provides cost certainty, it provides mass buying power, and it has been competitively tendered and reduces the overall tender process.

Question 7

What are the most commonly used procurement routes in the construction industry?

Answer 7

Traditional, DB, Construction Management, Management Contracting, Partnering

Question 8

How do you deal with errors in a tender?

Answer 8

Firstly I would refer to JCT Practice Note 2017 where there is Alternative 1 – the contractor must stand by price or withdraw, or alternative 2 – the contractor is allowed to correct genuine errors. This would need to be stated in the ITT.

Question 9

What is the standard period that a tender will remain open for?

Answer 9

90 days

Question 10

What are the advantages and disadvantages of D&B?

Answer 10

It allows for early contractor involvement and a quick start on site. It also transfers design risk from the client to the contractor.
D&B client changes can be expensive and it requires the client to commit to a concept design early on.

Question 11

Why choose Traditional procurement?

Answer 11

The most common method of procurement in the construction industry.
It is seen as the ‘least risk’ approach, as there is a level of certainty about design, cost and duration inherent in the strategy if it is properly implemented.
Under this method, design should normally be completed before competitive tenders are invited and before the construction contract is let. (There may be limited amount of contractor design as part of works specifically identified)
Construction costs can be determined with reasonable certainty before construction starts, which can be particularly attractive to clients with a strictly limited budget.
The client is responsible for the accuracy of the quantities stated in the pricing document (BoQ), although the client can transfer this risk to the contractor through the contract.
The contractor assumes responsibility and financial risk for the construction of the building works to the design produced by the clients team, for the contract sum agreed, and within the contract period.
The client takes responsibility and risk for the design and for the performance of the design team.
Advantages:
- Quality - client had direct influence on design, facilitating a high level of performance and quality
- reasonable price certainty
- competitive fairness, transparent, well known procedures
Disadvantages:
- if an effort is made to speed up the process by producing tender documents from an incomplete design, this can result in less cost and time certainty
- overall project duration may be longer than other routes, as construction cannot be commenced until design is finished
- no input on design by the contractor

Question 12

Why choose Design and Build?

Answer 12

Under this route, a contractor assumes the risk and responsibility for designing and building the project.
As this route integrates design and construction, construction can start before all the detailed design is completed, and the overall project duration is thus reduced.
It is clearly established legal duty that the contractor must provide the employer with a building that is fit for purpose, which is a significantly higher duty than required under the traditional method, which is one due skill and care.
Advantages:
- Client only has one firms to deal with, giving a single point of responsibility.
- Client risk is reduced, contractor responsible for design and construction
- Integrated constructor contribution to the design
- Price certainty is generally obtained before the construction starts
- Project duration should be reduced due to overlapping activities
Disadvantages
- Quality may be compromised as the client relinquishes control to design and build contactor
- Design liability is limited by standard documents
- May result in less aesthetic appeal where price and space dictate how the budget is spent
- Clients can face difficulty in preparing and adequate and sufficiently comprehensive brief or employer’s requirements
- Client is required to commit to a concept design at an early stage
- Bids are difficult to compare, each design will be different and programme may also vary

Question 13

Why choose Construction Management (Direct contracts with trade contractors)?

Answer 13

How it works
Under a construction management route, the client does not allocate risk and responsibility to a single main contractor. Instead, the client employs the design team with a construction manager to manage, programme and co-ordinate the design and construction activities.
Construction work is carried out by trade contractors, often specialists, through direct contracts with the client for work packages.
A package is made up of work for which one of the trade contractors is responsible: for example, foundations, concrete, electrical installation or decorating. These packages are tendered individually, for a lump sum price.
As the client bears much of the construction risk with this route, it is prudent for the client to have adequate risk management capability.
Why and why not
It has particular benefits for projects where there is a high degree of design innovations, and where design flexibility is needed throughout the project process as changes in design can be accommodated later than with some other route
Trade contractors and the construction manager are able to contribute to the design and to project planning.
There is a relative time-saving potential for the overall project time as the arrangement enables the design process to overlap with the construction process, and is therefore usually adopted when the clients primary objective is speed, the “fast track” route.
However this strategy offers little cost certainty because the cost of the trade packages will be unknown until that work is let, price certainty is not achieved until design and construction have advanced to the extent that all of the construction (trade) packages have been let.
An informed, pro-active client is required to operate such a strategy and the route relies upon the client selecting a skilful and committed team.

Question 14

Why choose Management Contracting? (MC and direct contracts with C)

Answer 14

How it works
A management contractor is engaged to manage the whole of the building process.
Construction works are carried out by firms employer by the management contractor, referred to as works contractors.
Unlike Construction Management, the management contractor has direct contractual links to the works contractors and is responsible for all the construction works.
There is no contractual link between the employer and the works contractor
The client employs the design team and, therefore, bears the risk of that team delaying construction for reasons, such as the late receipt of design information.
The design work will not be entirely complete before the first works contractors start work, although the design necessary for those packages must be finished. As design is completed, subsequent packages of work are tendered and let.
Why and why not
It has particular benefits for projects where there is a high degree of design innovations, and where design flexibility is needed throughout the project process as changes in design can be accommodated later than with some other route
As the client bears much of the construction risk with this route, it is prudent for the client to have adequate risk management capability.
Works contractors and the Management Contractor are able to contribute to the design and to project planning.
There is a relative time-saving potential for the overall project time as the arrangement enables the design process to overlap with the construction process, and is therefore usually adopted when the clients primary objective is speed, the “fast track” route.
However this strategy offers little cost certainty because the cost of the work packages will be unknown until that work is let, price certainty is not achieved until design and construction have advanced to the extent that all of the construction packages have been let.

Question 15

What guidance is available for tendering procedures?

Answer 15

RICS Blackbook has a guidance note on Tendering Strategies.

Question 16

What is the difference between Procurement and Tendering?

Answer 16

Procurement is the overall act of obtaining goods and services
Tendering is an important phase of the procurement strategy, but procurement involves much more, tendering is simply the bidding process to obtaining a price and how a contractor is appointed.

Question 17

Is the lowest tender always successful?

Answer 17

No, the most economically advantageous tender a method of assessing tenders
Most tenders will contain a quality factor of maybe 30%, while price is 70%.
Also abnormally low tenders – concern over whether the contractor could complete the work for price etc.

Question 18

What are the main tendering strategies? Describe the process.

Answer 18

Single Stage Tendering
The most common type of tendering strategy for obtaining a price for construction works.
ITT documents are issued to a number of competing contractors who are all given a chance to bid for the project.
This is usually done at RIBA Stage 4 – Technical Design, so that the tenderers receive the most detailed information to base their bid on.
The tenderers are given a pre-determined amount of time to submit their tenders.
These are then analysed, in terms of cost and quality, before a single contractor is declared the preferred contractor.
They then enter into a building contract with the client to deliver the tendered works.
Advantages:
Early commitment on price by contractor
Risk sits with contractor from the outset
Shorter overall process
Potentially earlier start date on site
Disadvantages:
Risk of the unknowns a turn off to some contractors
All bids reliant on information within initial tender at an early stage
Requires a certain depth of information early on in order to yield realistic pricing
Two Stage Tendering
The process involves:
Stage 1
Employer seeks tenders on the basis of an incomplete design, price and programme, prepared by the employer’s professional team, tender enquiry documentation being issued at RIBA Stage 2-3.
Contractors will tender in respect of the preliminary items only i.e. prelims price and overheads and profits allowances.
The successful contractor (the Preferred Contractor) will then work with the employer during the second stage of the tender prior to the main contract, usually to RIBA Stage 4.
Stage 2 (the pre-construction stage):
Employer – Preferred Contractor relationship governed by PCSA.
Preferred Contractor works with the employer, advising on the buildability of the design, the final cost estimate and other pre-construction services.
At the end of Stage Two a contractor is engaged under a main contract
Two-stage tendering – Advantages
For the employer:
Early introduction to the project of the contractor’s design skills and experience
Improved buy in and integration with the team
May attract contractors where single-stage would not
Employer can walk away at any time
Two-stage tendering – Disadvantages
For the employer:
Additional cost of the pre-construction phase
Potential prolonged tender phase
Temptation to go to market with incomplete information
May suffer from the loss of competition
Negotiated Tender
This is effectively a single stage tender with a single contractor who returns with an initial price.
This is then negotiated with the clients professional team, usually the PQS.
The benefit of this process is the speed at which a price can be obtained, however the competitive advantage of a formal bidding process is compromised.
Many public bodies will not be allowed to undertake this type of tender process.

Question 19

What should a PCSA include?

Answer 19

Pre construction services agreement
Ensure inclusion of:
- An exit strategy
- Clarity as to liability of parties in event of termination
- Copyright provisions
- Confidentiality provisions
- Detailed set of schedules

Question 20

What are the key contents on a Form of Tender?

Answer 20

This is the form that the contractor signs and returns with their proposed tender.
Some contractors many also include a different form of tender for alternative proposals, i.e. alternative design solutions or reduced programme recommendations.
The key contents are:
- Date, name, address etc.
- Acceptance of terms and conditions
- Acceptance to deliver the works as specified in the tender documents for the contract sum stated in the priced bill and again in the form of tender
- Signature

Question 21

Have you been at a tender opening?

What procedures did you follow?

Answer 21

Yes, I was at the opening for the refurbishment works for [Project Name].
The method is set out in the ITT, which states the time, date and location for tenders to be sent. It should also state the person the tender returns should be addressed to.
A tendering opening form was used and one of my colleagues was present to act as a witness to the opening.
The tender opening form included:
- Tender Price
- Proposed programme
- Comments
- Confirmation that all documents had been submitted
Once all tenders had been opened, the tender opening form was signed and dated by myself and my colleague present.

Question 22

Have you encountered ‘e-tendering’?

What is it and how does it work?

Answer 22

e-Tendering is defined as the electronic issuing and receipt of tender documentation in a electronic format as part of the procurement process.
Yes the vast majority of tender processes I have been involved with have utilised e-tendering in its various platforms.
For example, [Project Name] was managed through the e-tendersNI portal which contained all the tender documents, available for download and submission by the contractors, as well as a messaging system for clarifications etc.
While other processes, have involved email, or a hybrid, incorporating document sharing platforms such as dropbox or oneshare.

Question 23

What are the main concerns associated with e-tendering?

Answer 23

Security Issues
Technological Issues
Training costs

Question 24

What is Alternative 1 when talking about tendering procedures?

Answer 24

Alternative 1
The tenderer is given details of the errors, and is afforded an opportunity of confirming or withdrawing his tender.
If the tender is withdraw this results in assessment of the next lowest/best tender where the process is again repeated.
If the tenderer confirms their price an endorsement should be added to the priced documents to state that the rates are reduced, or increased in the same proportion as the corrected total of priced items, this endorsement should be signed by both parties.
Alternative 2
The tenderer is given the opportunity of confirming their offer, or of amending it of genuine errors. Should they elect to amend their offer with the result that the revised tender is no longer the lowest or best value tender, the offer that becomes the lowest, or best value is then examined.
If the tenderer elects not to amend his offer, an endorsement will be required, as in Alternative 1.
If the tenderer does amend his tender figure and possibly certain of the rates in his documents, he should either be allowed access to his tender figure, and possibly certain of the rates in his documents, he should either be allowed access to his original tender to insert and initial the correct details, or be required to confirm all the alterations in a letter.
If in the latter case his revised tender is recommended for acceptance, a cop of the letter should be attached to the tender acceptance letter, or form before that acceptance is sent or communicated in any way to the tenderer; the acceptance letter or form itself should only record clearly that the amended tender figure and rates in the tenderers letter are substituted for those in the original tender.

Question 25

You mention [Project Name]– what was your involvement and why was traditional advised

Answer 25

Yes, on the refurbishment works for the [Project Name], I advised the selection of traditional procurement for the project, through a report presented to the client.
The report outlined the clients objectives, mainly:
- Design quality and control
- Budget control
- Price certainty
Introduction and Review
Each procurement option (4 main ones) was reviewed and then assessed against the client’s objectives.
The criteria assessed for each option was:
- Price Certainty
- Management Control
- Quality
- Appropriateness
- Innovation & Scope for Alternatives
Methodology
In order to apply an assessment as to what form of construction best suits the project we have applied a scoring criteria to the options. The screening is based on Low Suitability = 1 and High Suitability = 5
I recommended traditional procurement for this project due to:
- The clients’ primary objectives were cost certainty and control of design
Conclusion
Detailed analysis of the procurement routes strongly suggest that traditional procurement would carry the most benefit to the Client.
This scored highest due to:
- High degree of cost certainty - It provides a tendered lump sum contract, allowing the Client to monitor their budget carefully.
- The cost control processes, inherent in utilising a Bill of Quantities, should help to ensure good budgetary control and good value for money post tender.
- Completing the design before tenders are invited should enable tendering contractors to accurately programme and price the construction work, thus providing good time and cost certainty.
- Management control- Retention of team control and management responsibility
- Quality - Helps promotion of quality and team ownership of the Clients objectives

Question 26

How did you take into account the risk factor for this client?

Answer 26

Traditional keeps the design risk with the client, but overall, we believed that this route best served the clients objectives, and allowed for a high level of cost and change control over the project.

Question 27

What is the agenda for a procurement workshop?

Answer 27

Introductions
Workshop Structure and Objectives
Procurement options - four main options
Tendering options - two stage, single stage, negotiated
Contract options
Client objectives - time, cost, quality, risk, flexibility
Market conditions
Output = Report and Scoring Matrix aligning the client’s objectives against procurement and tendering options to identify most appropriate

Question 28

What was the outcome of the procurement workshop?

Answer 28

Output = Report and Scoring Matrix aligning the client’s objectives against procurement and tendering options to identify most appropriate
Identified single stage D&B as the most suitable procurement route and tendering strategy.

Question 29

How did you tender through the clients framework? How was this different from a straight tendering procedure?

Answer 29

Prequalified contractors in each lot, no choice in contractor selection – managed through the client’s procurement portal
Private – agree contractor list, decide whether PQQ to refine the list of contractors, manage the tender process directly
Public – if OJEU compliant, manage through Public Contract Scotland procurement portal