Procurement and Tendering (Level 3) Flashcards
What is Procurement?
The overall process of acquiring construction work or services
What should be considered when selecting a procurement route?
- Project Specifics: Size, Complexity, Location
- Client Objectives: Time, Cost, Quality, Risk Attitude, Control
- Level of Design Information
- Requirement for Contractor Design
What are the 4 procurement route types?
Traditional
D&B
Management Contracting
Construction Management
What is Traditional Procurement?
The design is completed by the client’s design team before competitive tenders are invited and a main contractor is employed to build what the designers have specified.
When might traditional procurement be appropriate?
- If the design is already completed at the time of contractor selction
- Client wishes to retain control over the design
- If cost certainty at start on site is important
- Programme isn’t a priority
What are the advantages of Traditional?
- Retaining control over the design can lead to higher quality
- It offers increased levels of cost certainty before commencement
- Design changes are reasonably easy to arrange and value.
What are the disadvantages of Traditional?
- 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 adversarial 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 D&B Procurement?
Where the contractor is responsible for the design, planning, organisation, control and construction of the works to the employer’s requirements
How does D&B work?
The employer gives the tenderers the ‘Employer’s Requirements’ and the contractors 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 as there can be overlap 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 harnessed during the design
What are the disadvantages of D&B?
- Clients may find it hard to prepare a sufficiently comprehensive brief.
- 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 money is being achieved.
- Quality may be impacted as the contractor is building to a price
How much design input will the contractor have in D&B?
- This depends on the amount of design work the employer has already had 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 in 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?
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 be completed before the first works contractors start work
- The MC selects the works contractors through competitive open book tender
- The client reimburses the cost of these packages to the MC plus their management fee
When might management contracting be appropriate?
- Where the client does not want cost certainty before commencement
- Where an Early start on site is a priority
What are the advantages of MC?
- Overall project duration is shorter due to overlapping design and construction
- There is contractor contribution to the design and planning process
- Changes can be accommodated in packages not yet let if they have no further impact
- The works are let competitively at current market prices on a firm price basis
What are the disadvantages of MC?
- 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 incentive for the Management Contractor to reduce costs
- In practice, the MC has little legal responsibility for the defaults of the works contractors
What is construction management?
The employer places a direct contract with each of the trade contractors and utilises the expertise of a construction manager who acts as a consultant to coordinate the contracts
How does construction management work?
- The trade contactors carry out the work
- 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
- Their 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 CM be appropriate?
- On large, complex projects where the advantages of Construction Management can be utilisied for example using upfront buildability knowledge of the Construction Manager and their programme advice including specialist input from trade contractors
- Where an early start on site date is key
- Maintenance of flexibility in design and construction strategy
- Where price certainty before commencement is not considered a key driver
- Where the client is experienced in construction
What are the advantages of CM?
- The overall project duration is reduced by overlapping design and construction
- The construction manager can contribute to the design and project planning processes
- Roles, risks and relationships for all parties are clear
- Changes in design can be accommodated without paying a premium
- Prices may be lower due to direct contracts with trade contractors
- The Client has a means of redress to trade contractors through direct contractual links
What are the disadvantages of CM?
- Price certainty is not achieved until the last trade package is let
- Changes to packages may adversely affect packages that are already let
- The client must be proactive and hands on
- The client has a lot of consultants and contractors to deal with
What is the difference between management contracting and construction management?
- Under construction management the client is in direct contractual relationships with each of the trade contractors and the construction manager isn’t
- Under management contracting, the Main Contractor is in direct contractual relationships with the trade contractors and the client is in contract with the Main Contractor only
How do you identify the client requirements before recommending a procurement route?
Through detailed discussions with the client and design team to identify their priorities in terms of cost, time, quality, risk, control requirements and experience
If the client wishes to start on site asap, what route would you recommend?
- My recommendation would need to take into account their other requirements such as cost and quality
- If time was their overriding priority, then Construction Management or Management Contracting may offer the best solution as they can offer the fastest start on site with overlap of the design and construction
- This is because start on site is not dependent upon a long tender period however the key tradeoff is a reduction in cost certainty
What would you recommend if the client wanted an early start but also cost certainty?
- Design and build procurement may offer the best solution
- This is because it allows the design and construction to be overlapped rather than being sequential
- Design and Construction risk is transferred to the Main Contractor with their tender being based on a lump sum price to offer high levels of cost certainty
What is GMP and what does it mean to you?
Guaranteed Maximum Price
- A lump sum contract under which there is no adjustment of tender price unless design changes are requested by the client
- The contractor includes the additional risks involved in the design development process in their tender price
What is PFI?
Private Finance Initiative
A government programme launched in 1992 to bring private sector project management and expertise into the public sector
The private sector is granted a concession to finance, design & build and operate major public projects such as schools and hospitals
What are the three types of PFI projects?
Financially free-standing - Projects costs are recovered by charging users for example toll roads and bridges.
Joint Venture - Public and private sector stakeholders both invest however the private sector has overall control. Contributions and allocation of risk are clearly defined
Services Sold – The capital expenditure for the project is financed by the private sector and then sold back to the public sector. The public sector requires clear demonstration that this provides better value for money than option 1 and 2
