Procurement and Tendering (L3)

Question 1

What is procurement?

Answer 1

The overall act of obtaining goods and services for a construction project

Question 2

Main factors that govern procurement route selection?

Answer 2

Client’s objectives and drivers in terms of: time, cost & quality (as well as risk allocation)
It’s unusual to satisfy all elements with one procurement route, consideration must be given to the client’s list of priorities to identify the most appropriate procurement route.

Question 3

Which procurement options are you familiar with?

Answer 3

Traditional
Design & Build
Management Contracting
Construction Management

Question 4

What is Traditional procurement?

Answer 4

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 (with the exception of Contractor’s Design Portions).

Question 5

Advantages of Traditional procurement?

Answer 5

Employer retains full control of the design
Design largely finalised before construction, improving certainty for the employer
Tender returns are based on the same information (much easier to compare)
Assuming design is robust, reasonable cost certainty is achieved
Minimal risk premium build in by the contractor (unlike D&B)

Question 6

Disadvantages of Traditional procurement?

Answer 6

Overall project duration may be longer than design and build procurement
Zero or limited contractor buildability input
Design risk is retained by the employer (risk of Change)
Dual point of responsibility (employer for design and contractor for construction)

Question 7

When may Traditional procurement be appropriate?

Answer 7

Employer may have specific or detailed design requirements
Cost certainty is important (better than construction management or management contracting)
Shortest overall Programme is not the employer’s main priority

Question 8

What is Design & Build Procurement?

Answer 8

A procurement route whereby the contractor is responsible for completing the design and executing the construction phase of the project.

• Under JCT contracts, the employer’s team produces a set of employer’s requirements (ER’s), the contractor then responds with their Contractor’s Proposals (CP’s).
• 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

Question 9

Advantages of Design and Build Procurement?

Answer 9

Single point of responsibility for design and construction (contractor)
Earlier commencement on site is possible (design and construction can overlap)
Benefit of the contractor’s experience being harnessed regarding buildability input
Design and construction risk rests with the contractor
Provides more cost certainty than traditional procurement

Question 10

Disadvantages of Design and Build Procurement

Answer 10

Design is only as good as the employer’s requirements
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 return

Question 11

When may Design and Build Procurement be appropriate?

Answer 11

Where there is a need to make an early start on site
Where the employer wishes to minimise their risk profile
For technically complex projects, where buildability input is desired from the contractor
Where retaining control of design is not a priority

Question 12

What additional insurance may be required under a D&B contract?

Answer 12

The contractor and their design team will have design responsibility, therefore it is likely that additional professional indemnity insurance will be required to reflect this.

Question 13

What is the Construction Management Procurement route?

Answer 13

A procurement route whereby the employer directly appoints multiple trade contractors instead of employing a single main contractor, and utilises the expertise of a construction manager to coordinate the works

• Construction manager programmes and coordinates the works
• Construction manager has no contractual relationship with the trade contractors
• Construction manager has no vested interest in the financial outcome of the project and, barring professional negligence, carries no risk.

Question 14

Advantages of Construction Management Procurement route?

Answer 14

Speed (early start on site)
Overrall project duration could be reduced by overlapping design and construction
Construction manager can contribute to the design and project planning processes
Changes in design can be accommodated without paying a premium
Prices may be lower due to direct contracts with trade contractors
Employer has direct contractual link with trade contractors

Question 15

Disadvantages of Construction Management Procurement route?

Answer 15

Price certainty is not achieved until the last package is let
The procurement route requires an informed, experienced and proactive employer/client to function efficiently
The employer has a lot of consultants and contractors to manage

Question 16

When may Construction Management be an appropriate route?

Answer 16

Employer is experienced and has suitable resources to manage the project
Employer wants to achieve an early start on site
Employer wants flexibility and control of the design
Project is technically complex and requires detailed engagement of specialist consultants and trade contractors

Question 17

Which is the riskiest procurement route for the employer?

Answer 17

Construction Management.

Because the employer places individual contracts directly with each trade contractor and the construction manager carries no risk (barring professional negligence).

Question 18

What is the Management Contracting Procurement route?

Answer 18

A procurement route whereby the employer appoints a management contractor to manage the entire building process, who in turn appoints trade contractors to carry out the construction works.
Management contractor is usually paid a fee percentage based on construction costs
Management contractor has a direct contractual link with the trade contractors and is responsible for the overall construction works.

Question 19

Advantages of Management Contracting Procurement route?

Answer 19

Overall project duration can be reduced by overlapping design and construction
The management contractor will provide buildability input
Single point of responsibility (management contractor)
Trade packages are let competitively and transparently
Considerable flexibility in the design

Question 20

Disadvantages of Management Contracting Procurement route?

Answer 20

Price certainty is not achieved until the last trade package is let
Requires an informed and proactive employer to be successful
Depending on how the construction manager is remunerated, there may be a built-in disincentive for the construction manager to minimise costs.

Question 21

When may Management Contracting be appropriate?

Answer 21

When an early start on site is a priority
Flexibility in design is required
Buildability input is required from contractor
Where cost certainty is not a priority for the employer

Question 22

Key difference between Management Contracting and Construction Management?

Answer 22

With Management Contracting, the employer appoints a management contractor, who in turn appoints the works contractors, whereas with Construction Management, the employer directly appoints multiple trade contractors to execute the works, supervised by a construction manager.

Question 23

What is a framework agreement?

Answer 23

An umbrella agreement that a party enters with one or more suppliers to establish governing terms.

Question 24

How long can a framework be?

Answer 24

Typically, a framework agreement lasts 4 years. However, this is determined by the buyer. They can range between 2-10 years.

Question 25

What are the key advantages of a framework agreement?

Answer 25

Help develop a stronger relationship between the parties involved to encourage long term collaboration.
Time saving (can speed up procurement)
Repeat work and continuity of delivery
Rates and prices are usually agreed upon upfront

Question 26

What are the key disadvantages of framework agreements?

Answer 26

Contractors, suppliers or consultants can become complacent
Bidders invest time and money to be awarded a framework, and may not receive any work through it

Question 27

Why may an employer choose a framework agreement to procure goods and services?

Answer 27

To reduce procurement timescales, learning curves and other risks
Allows the employer to invite tenders from suppliers on a call off basis as and when required

Question 28

What’s the difference between a framework agreement and a contract?

Answer 28

A framework agreement rarely provides any specific commitment in terms of project or value of work. It is more focused on being an approved supplier.
A contract is usually a specific fee, with project scope and timelines allowing you to quite and tailor your product or service for the specific job at hand.

Question 29

What is project partnering?

Answer 29

Partnering is a broad term used to describe a collaborative management approach that encourages openness and trust between the contracting parties.
There is more opportunity for building working relationships, finding improvements and planning investments.
Ownership of the risk is spread between the parties, and a collaborative approach is encouraged to delivering the solution and overcoming problems.

Question 30

Advantages of partnering?

Answer 30

The overall construction and design programme can be shortened
The likelihood of conflict and disputes is reduced
Improved communication and mutual objectives
Improved customer satisfaction
Improved value for the employer
Improved buildability
Better predictability of time and cost

Question 31

Disadvantages of partnering?

Answer 31

Less opportunity to understand what other contractors or potential partners have to offer. It is difficult to find a strong partner who shares the same objectives, ethics, attitude, etc.

Question 32

What is tendering?

Answer 32

The process by which the employer invites contractors to place a bid for work on a construction project. The overall objective is to obtain a price for the works.

Question 33

What is the difference between procurement and tendering?

Answer 33

Procurement is the overall act of obtaining goods and services from external sources and deciding the strategy for how these goods and services are to be acquired.
Tendering is a phase in the procurement strategy that deals with obtaining a price through a bidding process and deciding how a contractor is appointed.

Question 34

What are the three main tendering options for construction projects?

Answer 34

Single stage tender
Two stage tender
Negotiated tender

Question 35

What documents would you include within a tender pack?

Answer 35

Invitation to tender, including cover letter and tender return info
Form of tender
Contract conditions and the employer’s amendments
Instructions to bidders, including how errors will be dealt with
Tender scoring matrix
Project information (drawings/specification/surveys/planning/KPI’s)
Pricing document
Quality questions (experience and methodology)

Question 36

What is a bona fide tender?

Answer 36

A bid submitted in good faith, complete and in prescribed form that meets the conditions of the bidding requirements.
Confirmation that the supplier has not colluded with another party when compiling the tender.

Question 37

What is OJEU?

Answer 37

The Official Journal of the European Union
An online portal that houses public sector contracts that are over the stated procurement threshold

Question 38

What happens to OJEU now that the UK has left the EU?

Answer 38

From Jan-21, the UK was no longer subject to EU procurement regulations and therefore will no longer follow the rules outlined for OJEU tenders.

Question 39

Are you aware of any guidance issued by RICS associated with tendering strategies?

Answer 39

Tendering strategies, 1st edition guidance note.

Question 40

What is a PQQ?

Answer 40

A pre-qualification questionnaire sets out a series of questions for potential tenderers to answer regarding their level of experience, capacity, financial standing etc. before being invited to tender.

Question 41

What is the purpose of a PQQ?

Answer 41

To reduce and refine the number of potential tenderers to those that are generally appropriate for the project. This saves a great deal of time for potential tenderers, who would not have any realistic time of winning the contract.

Question 42

What might the PQQ ask for?

Answer 42

Company details
Details of insurance cover
Financial information
Relevant experience
Info about technical and professional ability
Information about capacity and capability
Health and safety policies and records
Quality assurance policies
Environmental management policies
Equal opportunities policy
References

Question 43

A credit check is usually part of the PQQ process. Where could a business get a credit check from?

Answer 43

Dun & Bradsheet report
Credit agency such as Experian

Question 44

What is single stage tendering?

Answer 44

Tender documents are issued to several competing contractors (usually based on RIBA Stage 4 design info), who are all given the chance to bid for the project based on identical tender documentation.

Question 45

Advantages of single stage tendering?

Answer 45

Employer benefits from a competitive tendering process
The employer can benefit from a fixed price through this process

Question 46

Disadvantages of single stage tendering?

Answer 46

No buildability input from the contractor (at point of tender)
The price is only as good as the design info provided
Contractors may be unwilling to tender (too much competition)

Question 47

If you have a £25m new build project under D&B procurement (single stage tender), how long would you allow for the tender period?

Answer 47

The tender period is largely dependent on the complexity of the project, 12 weeks would be reasonable as it will take some time to interpret the employer’s requirements.

Question 48

What is two stage tendering?

Answer 48

Process involves a first stage tender enquiry being issued to tendering contractors (usually at RIBA Stages 2 or 3), a preferred contractor is then chosen based on the quality of their bid (experience/team/prelims/OHP allowances) who then joins the design team on a consulting basis under a PCSA.

Once the design has sufficiently progressed (usually to RIBA Stage 4), the contractor enters into a detailed contract negotiation with the employer to agree on the final price, contract conditions and Programme.

Question 49

Advantages of two stage tendering?

Answer 49

Early appointment of the contractor to work with design team
Early involvement of contractor to benefit from buildability input
An earlier start on site is possible
Employer involvement in subcontractor selection
Increased opportunity to value engineer with contractor’s input
Improved opportunity to identify project risk

Question 50

Disadvantages of two stage tendering?

Answer 50

Contractor has less incentive to price 2nd stage competitively
Additional cost of the contractor’s pre-construction fee
Potential for the negotiation stage to fail (contract sum not agreed)

Question 51

What is a negotiated tender?

Answer 51

Effectively a single-stage tender with a single contractor who returns with an initial price. This is then negotiated with the client’s professional team (usually the professional quantity surveyor (PQS)).

Question 52

Advantages of a negotiated tender?

Answer 52

Simplicity and speed.
Employer has flexibility to choose preferred contractor.
Time and cost savings involved in comparing multiple submissions
The process can allow Early Contractor Involvement (ECI)

Question 53

Disadvantages of a negotiated tender?

Answer 53

Possibility of delay of contract negotiations are protracted
Potential cost premium due to the lack of competition
There is a heavy reliance on trust between the parties
It can be seen as anti-competitive and exclusive

Question 54

How would you justify value for money in a negotiated tender?

Answer 54

Insist on an open book approach when agreeing subcontract packages and a minimum of 3 quotes to be provided for each element of the works.

Question 55

What is a ‘form of tender’?

Answer 55

The contractor usually signs and returns it with their proposed tender submission.
It is a formal acknowledgement that the tenderer understands and accepts the terms and conditions of the tender documents and any other requirements that are stipulated. The document also includes the contractor’s price and programme.

Question 56

What info is typically included in the form of tender?

Answer 56

Tender sum
Date until the price remains valid
Construction period
Confirmation of the tender being genuine and bona fide
Tenderer details and signature
Acceptance of the T&C’s

Question 57

Once tenders have been submitted, what should be examined for compliance with the invitation to tender and tender instructions?

Answer 57

Arithmetical errors
Pricing errors (items not priced)
Pricing methods (front loading)
Compare the contractor’s proposals against the employer’s requirements
Check that the form of tender is complete and signed
Resolve any qualifications

Question 58

What happens if a tender is submitted late?

Answer 58

Public sector project - the documents should not be accepted
Private sector project - the matter should be discussed with the employer to understand if they would like to accept. The safest option is not to consider (potential fraud/bid rigging).

Question 59

Would you open a later tender submission for a school project?

Answer 59

The tender should be discarded on the basis that the project is funded by the public sector

Question 60

What is the danger of accepting a low tender submission?

Answer 60

Contractor may be trying to ‘buy’ the project with a view to recovering their costs with variations and/or claims
It could indicate the contractor is in a poor financial or cash flow position and is eager to win the work at any cost
Areas of the project may not be priced accurately.

Question 61

How do you deal with qualifications within the tender submission?

Answer 61

Procedures associated with qualifications should be outlined in the tender instructions.
If the qualifications are unauthorized, it may invalidate the tender.

Question 62

How would you deal with errors identified in tender submissions?

Answer 62

JCT has produced a tendering practice note where two options are suggested to deal with errors:

Option 1 - Tender should be given the details of the errors and afforded the opportunity to confirm or withdraw their tender.

Option 2 - Tenderer should be given the opportunity to confirm their offer or amend it to correct genuine errors.

Question 63

What would you do if you believed the contractor submitting the lowest tender was in financial difficulty?

Answer 63

As part of the evaluation process, the company accounts would be reviewed to assess the financial stability of the contractor, which could lead to disqualification.
Consider a performance bond
Consider a parent company guarantee
Raise the concern with the client

Question 64

On what grounds would you advise the client to re-tender the project?

Answer 64

Not enough tenders returned
The tender procedure is compromised for some reason
If tenders were not at the cost level required and it was believed that re-tendering to different tenderers would provide a different result
Design changes or value engineering undertaken have significantly changed the design that was originally tendered

Question 65

How would you deal with a front loaded tender?

Answer 65

Front loading is generally not a pricing error
Request that the contractor remove the front loading, if the contractor refuses, this may be grounds for disqualification

Question 66

How could you reduce the risk of contractors pulling out during the tender process?

Answer 66

Ensure the tender info is as accurate as possible
Ensure the tender period is long enough
Go through the PQQ to ensure the correct tenderers are selected