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RICS APC - QS > Procurement and tendering (L1) > Flashcards

Procurement and tendering (L1) Flashcards

1
Q

How would you define/ describe procurement?

A
  • Procurement is the overall act of obtaining goods from external sources.
  • It involves deciding on a strategy on how those goods are to be obtained, by reviewing the client’s requirements in terms of time, cost and quality as well as their attitude to risk.
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2
Q

Can you name 5 procurement routes?

A
  • Traditional
    -Design and Build
  • Construction Management
  • Management Contracting
  • PFI
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3
Q

How would you characterise a Traditional procurement route?

A
  • By its separation of responsibility for design and construction of a project and
  • Its sequential nature (Brief, Design, Competition, Construction)
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4
Q

When would you use a Traditional procurement route?

A

A Traditional route is suitable for:
- When there is no urgency to start on site quickly
- Cost certainty
- Projects where quality is a prime objective
- All clients, including inexperienced and occasional construction clients

It is not suitable for:
- Fast track projects

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5
Q

What are the advantages of a Traditional procurement route?

A
  • Competitive fairness (all contractors bidding on the same scope of work)
  • Client has direct influence and control over design
  • Early cost certainty (if minimal cost changes)
  • Public accountability (transparent BoQ and based upon competition)
  • Procedure is well known (ensuring confidence in those involved throughout the supply chain)
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6
Q

What are the disadvantages of a Traditional procurement route?

A
  • Slow to start on site (due to sequential nature of the strategy, construction cannot start until completion of the design, meaning no parallel working)
  • No buildability (as contractor is not involved in design or planning)
  • Adversarial potential (due to strategy being based upon price competition)
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7
Q

What are the client risks under a Traditional procurement route?

A
  • Design
  • Accuracy of quantities in the BoQ if used
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8
Q

What are the Contractors risks under a Traditional procurement route?

A
  • Construction
  • Price
  • Programme
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9
Q

How would you characterise a Design and Build procurement route?

A
  • By the contractor taking responsibility for both the design and construction of a project and
  • Overlap between design and construction
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10
Q

When would you use a Design and Build procurement route?

A

A Design and Build route is suitable for:
- All clients, including inexperienced clients and those requiring distance from the project
- Cost certainty
- A quicker start on site (not all design needs to be complete)

It is not suitable for:
- Uncertain or developing client brief and
- Where quality is a prime objective

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11
Q

What are the advantages of a Design and Build procurement route?

A
  • Single point of contact (reducing the need for client resource to appoint designer and contractors separately)
  • Single point of responsibility ( contractor responsible for both design and construction meaning client risk is reduced)
  • Buildability (due to contractor involvement in design and planning)
  • Cost certainty (provided employers requirement are specified and no changes are introduced)
  • Reduced total project time due to overlapping of design and construction
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12
Q

What are the disadvantages of a Design and Build procurement route?

A
  • Client has to commit before the detailed design is complete
  • No design overview unless consultants are appointed
  • Bids difficult to compare (each design will be different)
  • Client driven changes can be expensive
  • Quality maybe compromised as client surrenders control to the design and build contractor
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13
Q

What are the client risks under a Design and Build procurement route?

A

o Client has to commit before the detailed design is complete
o No design overview unless consultants are appointed
o Bids difficult to prepare (each design will be different)
o Client driven changes can be expensive
o Quality maybe compromised as client surrenders control to the D&B contractor

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14
Q

What are the Contractors risks under a Design and Build procurement route?

A
  • Design
  • Construction
  • Financial
  • Performance against programme
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15
Q

What Design and Build variants are you aware of?

A
  • Package Deal
  • Develop and Construct
  • Novated Design and Build
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16
Q

What is a Package Deal, Design and Build Procurement Route?

A
  • It is where the client has little involvement in the design development or procurement process
  • Effectively it is a complete hands off approach
  • Most often used for repetitive projects of relatively simple construction such as retail parks
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17
Q

What is a Develop and Construct, Design and Build Procurement Route?

A
  • It is where the client appoints designers to prepare the concept design, before the Contractor assumes responsibility for completing the detailed design and constructing the works
  • Main characteristic of this variant is the extent to which the client has developed the design before inviting tenders
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18
Q

What is a Novated, Design and Build Procurement Route?

A
  • It is where the concept design developed by the clients consultants (and sometimes the design consultant themselves) are transferred by way of novation to the successful contractor
  • The contractor will therefore assume responsibility for the design work carried out to date (concept design), the detailed design and construction of the project
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19
Q

How would you characterise a Management Contracting procurement route?

A
  • A management contractor is engaged to manage the whole of the building process
  • They are paid a fee on top of the construction costs for doing so
    -Construction works are carried out by firms employed by the management contractor, referred to as ‘works contractors’
  • Client employs a design team and work packages are let as design is complete
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20
Q

When would you use a Management Contracting procurement route?

A

A Management Contracting route is suitable for:
- Fast track projects
- Complex buildings (enables input into the design)
- A developing brief

It is not suitable for:
- Inexperienced clients
- Cost certainty
- Clients wanting to pass risk to the contractor

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21
Q

What are the advantages of a Management Contracting procurement route?

A
  • Reduced overall project duration due to overlapping of design and construction
  • Buildability potential
  • Changes in design can be accommodated provided works packages it affects have not been let
  • Work packages are let competitively
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22
Q

What are the disadvantages of a Management Contracting procurement route?

A
  • Poor price certainty as cost will not be known until all work packages are let
  • There maybe gaps in works contractor packages that would normally be picked up by a traditional contractor
  • Design must be closely managed to ensure package procurement is kept on programme
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23
Q

What are the client risks under a Management Contracting procurement route?

A

o Cost
o Design
 Including design team delaying construction due to late provision of design information

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24
Q

What are the Contractor’s risks under a Management Contracting procurement route?

A
  • Performance of works contractors
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25
Q

How would you characterise a Construction Management procurement route?

A
  • It is similar to management contracting except that the client has a direct contractual relationship with the trade contractors
  • The client does not allocate risk and responsibility to a single contractor
  • It appoints a design team to design and a construction manager to manage the programme, co-ordinate the design and construction activities
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26
Q

When would you use a Construction Management procurement route?

A

A Construction Management route is suitable for:
- Fast track projects
- Complex buildings (enables input into the design)
- A developing brief

It is not suitable for:
- Inexperienced clients
- Cost certainty
- Clients wanting to pass risk to the contractor

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27
Q

What are the advantages of a Construction Management procurement route?

A
  • Reduced overall project duration due to overlapping of design and construction
  • Buildability potential
  • Changes in design can be accommodated provided works packages it affects have not been let
  • Role, risk and relationships for all participants are clear
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28
Q

What are the disadvantages of a Construction Management procurement route?

A
  • Poor price certainty as cost will not be known until all work packages are let
  • Requires a pro-active client to operate such strategy
  • Relies upon the client selecting a skilful and committed team
  • Design must be closely managed to ensure package procurement is kept on programme
29
Q

What are the client risks under a Construction Management procurement route?

A
  • Design
  • Design team delaying construction due to late provision of deign information
  • Construction risk
  • Poor cost certainty
30
Q

What is tendering?

A
  • Tendering is an important part of the procurement process, but procurement involves much more than simply obtaining a price.
  • Tendering is:
  • The bidding process to obtain a price and
  • How the contractor is usually appointed
31
Q

Can you name 3 tendering strategies?

A
  • Single-stage
  • Two-stage
  • Negotiated
32
Q

How would you characterise a single-stage tendering strategy?

A
  • It involves obtaining a price for the whole of the construction works
  • Competing contractors all bid for the project based on identical tender documents (which is detailed)
  • Contractors are given predetermined time in which to return tenders
  • These are the analysed and a single contractor is declared preferred bidder
33
Q

What are the advantages of a single-stage tendering strategy?

A
  • Competition
34
Q

What are the disadvantages of a single-stage tendering strategy?

A
  • No early start (as tendering doesn’t overlap with design)
  • No contractor input into the design (if used with traditional procurement route)
35
Q

How would you characterise a two-stage tendering strategy?

A
  • Two-stage tendering aims to obtain the benefits of competition, contractors buildability and an earlier start on site
  • Used where time is constrained (enables design and tendering to overlap) and
  • If design would benefit from contractor input
36
Q

Can you describe the stages of a two-stage tendering strategy?

A

First stage involves :
- Selecting contractor on the basis prelims price, overhead and profit and quality of teams
- Preferred contractor then joins the design team to help complete the design using a pre-construction services agreement (PCSA)
- It is important for parties to define procedures should the second stage fail (e.g. payment)

Second stage involves:
- Negotiation with the preferred contractor
- The design should be at a stage to be tendered to contractors sub-contractors
- Client and contractor will then negotiate the cost of the sub-contractors tender returns until an agreement is reached

37
Q

What are the advantages of a two-stage tendering strategy?

A
  • Competition during the first stage
  • Contractor input into the design
  • Earlier start on site (enabling design and tendering to overlap)
38
Q

What are the disadvantages of a two-stage tendering strategy?

A
  • Lack of competition during the second stage
  • Negotiating during the final stage may fail
39
Q

How would you characterise a negotiated tender strategy?

A
  • It 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
  • Used where client has worked with the contractor before (excluding public and government)
40
Q

What are the advantages of a negotiated tendering strategy?

A
  • The speed at which a price can be obtained
41
Q

What are the disadvantages of a negotiated tendering strategy?

A
  • No competition which may lead to higher costs
  • Difficult to prove value for money has been achieved
42
Q

What is meant by ‘selection of tendering contractors’?

A
  • Determining who the clients wants returning tenders
43
Q

What the main types of selection of tendering contractors techniques?

A
  • Open tendering
  • Selective tendering
  • Single contractor selection
44
Q

What is open tendering?

A
  • Allows anyone to express an interest to tender
  • PQQs are sent to interested contractors
  • PQQ’s are analysed and contractors are shortlisted
  • Only shortlisted contractors are able to submit a tender
45
Q

What is selective tendering?

A
  • A shortlist is drawn up by the design team
  • Key difference between selective and open tendering is that selective tendering is not open to everyone and the list of suitable contractors is chosen by the project team
46
Q

What is single contractor selection?

A
  • This works hand in hand with a negotiated tender strategy
  • A single contractor is selected and then the negotiation process begins
  • It is basically a short list of one
47
Q

How could you reduce the number of tenderers down?

A
  • Issue contractors with Pre-Qualification Questionnaires
  • This will provide the client with information on contractors experience, capability and financial standing
  • Contractors can then be shortlisted and invited to tender
48
Q

What determines the procurement route?

A
  • Clients attitude towards risk and
  • Their key drivers in terms of time, cost and quality
49
Q

How would you establish the clients key drivers?

A
  • You could ‘play back’ what you believe the client is trying to achieve from prior discussions
  • Use of Appendix A from the RICS guidance note on developing a construction procurement strategy
  • This provides a set of checklists that enables the objectives and priorities of the client to ascertained in some detail
50
Q

What is Direct Procurement for Customers?

A

o It was introduced by Ofwat the water regulator
o It involves water companies competitively tendering and procuring more aspects of an infrastructure project including the design, construction, financing, operation and maintenance
o Resulting in the selection of a third-party competitively appointed provider (CAP)
o Ofwat believes that outsourcing delivery of infrastructure projects using DPC can achieve significant benefits for customers such as:
 Lower costs of capital
 Reduced works and maintenance costs and
 Greater innovation

51
Q

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

A

o Sequence
 Traditional - is sequential with no parallel working
 D&B - overlapping over design and construction
o Design
 Traditional – Client responsible for design
 D&B – Contractor responsible for design
o Buildability
 Traditional – Contractor not involved in design so no build ability
 D&B – Contractor involved in design and planning stages so offers buildability
o Quality
 Traditional – Used where quality is a prime objective
 D&B – Quality maybe compromised as client surrenders control to the Contractor
o Tendering
 Traditional – all contractors bidding on same scope of work
 D&B – bids maybe difficult to compare due to varying designs

52
Q

How does 2-stage procurement work

A

o First stage involves:
 Selecting a contractor on the basis of prelims price, overhead and profit and quality of teams
 Preferred contractor then joins the design team to help complete the design using a pre-construction services agreement (PCSA)
o Second stage involves:
 Negotiation with the preferred Contractor
 The design should be at a stage to be tendered to Contractors sub-contractors
 Client and Contractor will then negotiate the cost of the sub-contractors tender returns until an agreement is reached

53
Q

What is Construction Management?

A

o It is a procurement route where the client appoints a
 Design team to design and a
 Construction manager to manage the programme, co-ordinate the design and construction activities

54
Q

How does this differ from Management Contracting?

A

o The client has a direct contractual relationship with the trade contractors

55
Q

How do you ascertain the suitability of potential tendering parties?

A

o Selection of tendering contractors may initially be on the basis of:
 Previous experience,
 Word of mouth or from
 Meetings and presentations from contractors looking to secure new work
o You can use supply chain accreditations such as Achillies or
o Through the use of a formal contractor pre-qualification process such as:
 A short interview or
 Pre-qualification questionnaire (PQQ)

56
Q

How does procurement by partnering generally work?

A

o It is a concept that can be applied to many procurement routes, it is not, itself, a procurement route
o It is based on negotiation rather than competitive tendering
o Partnering is a co-operative relationship between business partners
o It is considered as a set of collaborative processes which emphasise the importance of common goals
o It can be implemented independently of the contract or
o Reinforced in a contract to enforce a partnering arrangement
o It can be adopted for a one-off project, or can be a long term relationship over a number of projects

57
Q

How does this differ from a framework arrangement?

A

o A framework arrangement provides a flexible, pre-approved system for engaging contractors over time for a variety of projects whereas
o Partnering is focused on collaborative processes which emphasise the importance of common goals

58
Q

What would you say is the most common form of procurement at the moment?

A

o Design and Build

59
Q

Why do you think this is the case?

A

o Client’s not having the in-house design capability and wanting a single point of responsibility

60
Q

Tell me about the direct procurement for customer you refer to, what are the benefits of this?

A

o It was introduced by Ofwat the water regulator
o It involves water companies competitively tendering and procuring more aspects of an infrastructure project including the design, construction, financing, operation and maintenance
o Resulting in the selection of a third-party competitively appointed provider (CAP)
o Ofwat believes that outsourcing delivery of infrastructure projects using DPC can achieve significant benefits for customers such as:
 Lower costs of capital
 Reduced works and maintenance costs and
 Greater innovation

61
Q

What legislation governs Public Utility Procurement activity in the UK?

A

*Currently the Utilities Contracts Regulation 2016
*However this will be replaced by the Procurement Act 2023 in February 2025

62
Q

What are the current Utility Contract Regulation 2016 thresholds?

A

*Works - £5,372,609
*Service and Supplies - £429,809
Inclusive of VAT

63
Q

What happens if the proposed project exceeds to the procurement threshold?

A

*You must advertise the opportunity of the public sector Find a Tender Service (>£139,668k) and on Contract Finder (>£12,000) UNLESS you are using an existing compliant Framework Agreement

64
Q

What is a Form of Tender?

A

*Prepared by the Client and signed by Contractor as part of their tender return
* Formal acknowledgement that the tenderer understands and accepts the T&Cs of the tender documentation

65
Q

What are mid-bid reviews?

A

*Commonly used on larger more complex projects
*Typically carried out on-site
*Have many advanatages such as:
- Oppotuniuty to assess progress of each of the tenderes to date and
- Reaffirm commitment to the tender from both parties
* Important that any information disclosed is formalised and issued as a tender query or a tender addendum to all tenderers - such that all are in receipt of the same information

66
Q

What is a tender addendum?

A

*A change to the tender documentation e.g. enlarged kiosk on Yew Tree Farm

67
Q

What is a mini-competition?

A

*A competition between framework contractors to secure an individual call-off contract under a Framework Agreement
*Benefits include:
-Increased competition
- Additional cost savings
- Better value for money

68
Q

What are the advantages of Framework Agreements?

A

*Efficiency - reduces repetitive tendering speeding up procurement
*Cost savings - achieved through economies of scale
*Consistency - ensures quality and standardisation across projects
*Flexibility - allows for quick response to new projects without starting procurement from scratch
*Collaboration - Builds trust and long-term relationships

69
Q

What are the disadvantages of Framework Agreements?

A

*Reduced competition- leading to potentially higher costs
*Rigidity - may not adapt well to market changes or innovation
*Lock-in risk - pre-set terns might become unfavourable
*Complexity - Requires robust management to ensure compliance
*Exclusion - Smaller contractors may face barriers to entry

RICS APC - QS (33 decks)

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