Procurement & Tendering Flashcards
What is procurement?
The overall process of delivering the design and construction of a project
What is it important to consider when procuring a project on behalf of a client?
Clients attitude to: Time Quality Cost Risk
What is the traditional procurement route?
Fully developing the design prior to tendering to a main contractor.
Client retains design team as well as the risk of the design.
What is the traditional procurement route?
Fully developing the design prior to tendering to a main contractor.
Client retains design team as well as the risk of the design.
Why might the client wish to procure the works traditionally?
Retain control of the design
Most economic price as design is fully developed
e.g. D&B can be tendered at stage 2/3 where contractor takes risk in completing design
Advantages of traditional?
- Retains control of the design/quality
- Most economical at tender stage (contractor is provided with full outline of client requirements)
- Quicker than D&B for tender review as scope of work is clear and can easily be compared.
Disadvantages of traditional?
- Long program duration (long pre-contract period)
- No engagement with contractor on the design (design and construction are separate)
- Dual point of contact for the client; contractor and design team
- Client retain risk for the design (cost certainty depends on design adequacy)
Contracts for traditional procurement?
JCT minor building contract
Intermediate BC
Standard BC with / without Quantities
What is D&B?
Client Develops Design typically to Stage 3
Employer’s Requirements details how remaining aspects of design should be developed.
The Contractor takes over the design (remaining) and build it with their own (or novated) design team.
Who carries out the design for the contractor?
Typically the Architect and Structural Engineer would be novated to the Contractor.
The Contractor would appoint remaining consultants e.g. M&E engineer
What are advantages of D&B?
- Cost certainty – design risk is passed to the Contractor
- Single point responsibility for design and construction
- Quicker start on site than traditional (design doesn’t have to be fully developed for tender)
What is novation?
A contract which transfers the rights and obligations of one contractual party to a new third party
i.e. design rights and obligations of architect transferred from the client to the contractor.
What are disadvantages of D&B?
- Slower tender analysis compared to traditional
- Harder to compare tender’s dependent on the degree to which the design has been developed
- Contractor is prone to look at ways to reduce costs for the ER proposals – issues with quality dependent on design and ER’s
- Less competition at tender so higher pricing (compared to traditional where the design is fully developed). (Typical number of contractors at tender -Traditional; 5/6, D&B 3/4)
What is management contracting?
- Management Contractor appointed on a fixed management fee (usually a percentage based of the prime cost of the project)
- Early to advise on design, programming & buildability.
- Programme, package and obtain tenders for the works.
- Trade Contractors are in Contract with the Management Contractor.
- Typically associated with complex (untested design) and/or high value projects that may be perceived as too risky for a sole main contractor
Advantages of MC?
- Quick program as design and construction overlaps
- MC technical input alongside design
- Flexibility in making changes to the design before trade packages are let (unlike a lump sum contract)
Disadvantages of MC?
- High level of cost uncertainty until all the packages are let
- Little incentive for MC to reduce costs
How does the MC process work?
- Client appoints MC
- MC develops programme
- MC directs design
- MC selects the trade contractors through competitive tender (direct contractual relationship).
What contract could be used for MC and Trade Contractors?
JCT Management Contract
JCT Trade Contract agreements
What is construction management?
- Similar to MC but key difference is the Client will enter into Contracts with trade Contractors directly
- Client coordinates trades with their own in-house team - e.g. House builders undertaking similar type of works (i.e. repetitive with low risk designs)
What does the CM do?
- Client takes full responsibility for trade contractors (i.e. no third party MC to manage on their behalf)
- Prepare the programme, tender the works packages co-ordinate/supervise the works.
Why might an employer use CM? Ads? Disadvantages?
- Economic (existing trade contract relationships)
- Control program
Dis:
Risk of trade performance
Hold programme risk
What is partnering / framework agreements?
Partnering is a general term covering practices that are designed to promote greater co-operation between all project team participants.
- Collaborative relationships to minimize conflict and promote open communication
-That contract could be between the main contractor and employer, or it could be a multiparty contract embracing the design team and key members of the supply chain.
JCT Constructing Excellence; all parties to encourage collaborative working; risk registers, risk allocation and KPIs
Why might you use a framework agreement?
E.g. Council who need to undertake development works but who do not benefit from in-house teams.
Various consulting parties are qualified to submit a bid which reduces repetition of tendering processes and also facilitates competition e.g. multiple parties can bid which will likely result in overall value to the client
What is a lump sum contract?
Lump sum, fixed priced based on fixed period and fully detailed design.
Why might a lump sum contract final account vary from the contract figure?
Lump Sum pricing can be achieved through having a clear set of information that allows in theory the agreed price subsequently also be the final account figure although in practice this is rarely the case.
What is a re-measurement contract?
Defined works / specification & design / agreed schedules of rates – works re-measurable during the Contract.
Where would a re-measurement contract be used?
E.g. Infrastructure works such as roads where quantities are agreed upon interim measurement of works
Why would a re-measurment contract be adopted?
Should only be used where it is not possible to identify quantities pre contract. Approximate quantities should provide some cost assurance but ultimately the cost is subject to re-measurement so is dependent on the quality of design information.
What is a cost re-reimbursable contract?
Contract sum on basis of prime cost of labour/plant/ materials with additional amount for overheads and profit)
- Prime Cost Building Contract (PCC)
Why would you use a cost reimbursable contract?
- Urgent works such as fire damage, water/flood damage whereby the building and/or area in question must continue to be used.
- Highly trafficked spaces whereby the commercial loss of closure would far outweigh the cost of the construction works.
- e.g. airports, hotels.
What is a target cost contract?
Contractor commits to GMP for project as long as no variations instructed. Can utilise “pain & gain” shares.
Where might a target cost contract be used?
Cost saving/expenditure can be shared between client and contractor. Promotes collaboration.
What are the pros and cons of target cost contracts?
- Can promote transparency and collaboration
approach however success hinges on the starting point. i.e. is the target cost realistic relative to the project risk. If the target cost was never going to be achieved then the entire process is undermined.
What is a management contract?
Large scale projects that are often too high value and/or complex for a single contractor to accept the risk. The benefit of an MC tends to ve that works can commence early and the employer gains additional advice on how the design should be developed.
JCT Construction management agreement (CM/A) contract and construction management trade contract (CM/TC).
JCT Management Contract
When would an MC be used?
Typically used on bespoke projects whereby the design is unique/untested, the environment is very challenging or the value of works is so high that a single contractor would be reluctant to commit to it.
E.g. the shard (high value, challenging site) or grand central birmingham (live train station)
MC Pros and Cons?
ADS - Quick to start, benefit from technical input, design change flexibility
DIS - Low cost certainty, no incentive for MC to reduce cost as fee based on % of works.
What are the standard rules of tendering – codes of practice?
Tender Queries - Should be welcomed as shows contractor engagement and can pick up aspects that weren’t clear. Responses should be made to all contractors to ensure same information is provided to all.
Errors - allow the contractors to correct their error or for the contractors to stand by their price.
Equalisation - Average/Highest Price/Cost Plan to identify disrepancies/potential errors.
Risk - Contractor should include allowance as necessary and include a risk register identifying any client retained risks.
How would you open a tender?
Confirm Price OHP Programme Exclusions Alternative tenders conf. all documents have been submitted
Why are tender rules important for the client?
Tender Opening - Clear audit trail of process. Protection from claim of mispractice.
Late submission - Potential collusion.
OJEU - Open process not subject to bias. Strict process to promote tenders on their own merits, unethical means of wining work.
What is Single/two-stage tendering – competitive/negotiated?
Single:
Cost is agreed prior to entering into contract
Two Stage:
Separates process of selecting a contractor and determining a price for works. First stage; quality of team, prelims price, OHP. Second stage; PCSA to complete design as consultant. Trade contractors make up contract price
Negotiated – Suitable contractor is identified and negotiated with directly.
Competitive - Multiple parties invited to submit tenders
How would you undertake the different types of tendering?
Open - Publicly advertised on OJEU website.
Selective - Selected by project team.
Negotiated - Shortlist of one.
Two stage - Selective or negotiated
What are the pros and cons of the different types of tendering?
Open - Complies with public/OJEU requirements
Selective - Most competitive
Negotiated - Existing relationship. QS is able to demonstrate tender return is good value.
Two Stage - Contract input on design and design/construction overlap
What is electronic tendering?
a. Information all online (no post or printing)
b. Secure logins
c. Changes are made clear (old info removed and clear where new info is)
d. Be notified when each party has opened documents (are they actually interested/do they have capacity)
Advantages
- Reduce time to post documents
- Reduction in administrative costs
- Faster to respond to all parties
- Clear audit trail of parties
How would you compile tender documents?
- Invitation to tender letter - Formal invitation to contractor describing the project, confirms the return date and the contact details for any queries
- Form of tender - contractor signs and returns with their proposed tender, in terms of both price and programme.
- Contract conditions - D&B 16 with proposed amendments,
- Instructions to tenderers - what is expected to be returned by the contractor and by when. Proposed scoring mechanism, any questionnaires, details for site visits and submitting tender queries. How errors are dealt with.
- Preliminaries / Employers Requirements - LDs, retention, bonds, PCG, draft warranty, completion dates,
- Design Information - Arch, SE, ME
- Pricing Document - BoQ, CSA, SoR, SoW
- Appendices - PCI, Surveys, Planning permission, Warranties
What is the purpose of tender documents?
- Provide clarity to prospective contractors of what works are required.
- If the project is clearly detailed it will result in best value for the client as the contractors won’t have to price risk into the job.
What is a tender list?
- A tender list identifies potentially suitable contractors for the proposed works.
- The list may be compiled in order for a PQQ to be enacted to establish 4 suitable contractors out of an initial tender list of say 10
How would you carry out a pre-qualifying tender list?
I would carry out a Prequalification process to ensure the right contractors were selected for the tender list.
The criteria that I would use when assessing the contractors would include:
1) the contractors financial standing (key metrics)
2) experience of similar sector and sized projects
3) H&S record
4) quality assurance procedures
5) current workload & availability of resources.
I would score this information & input into a pre-determined scoring matrix.
Why use a PQQ?
Contractors situation can change quickly.
Shows if interested / too busy.
Assess range of contractors.
Aids next stage in avodiing unsuitable contractors
e.g. avoiding only having 1 or 2 contractors to pick from.
What is a Pre and Post tender estimate?
The pre-tender estimate (PTE) is the final estimate of the likely cost of the works that are described in completed tender documents prepared to seek tenders (offers) from prospective suppliers.
A post tender estimate is ‘…a cost estimate carried out after the evaluation of tenders to corroborate the funds required by the employer to complete the building project.
How have you evaluated a tender?
Whilst ideally the pre-tender estimate should accurately reflect market prices sometimes there may be a change in the market or other external factors that could sway the tender returns hence why a post tender estimate is often required to reflect actual contractor “offers” for construction of the project.
What is a tender analysis?
Identifies how the tender returns have responded to the tender invitation and makes a conclusion on which contractor is preferred.
How would you do a tender analysis?
- Reviewing a tender – Most attractively priced tender return may have excluded key work or made incorrect assumptions.
- Checking a tender - Comply with basic instructions. Pricing errors, duplications and omissions. Pricing weights; is it front loaded. Exclusions and assumptions (design changes; price based on a superseded design?)
Dealing with errors and qualifications
What is a tender report?
Confirmed tender returns inc SUM Any qualifications identified Post-tender adjustments e.g… Comparison of tender returns Recon with PTE Recommendation
What would you advise the client on in a tender report?
Record of Tender Receipt” template; Contractor name - Price £££ - Programme X weeks - Exclusion, Omissions, Assumptions - Rank (1/2/3) - Alternative Tender (Revised Programme (quicker/slower with revised cost))
- Signed by 2 attendees (ideally at least one Chartered)
- Late tenders are excluded (public), however private procedure will be to the Clients decision if they wish to include
- Ask if the client and lead designer would like to accompany
What is a framework agreement?
- Framework Agreement – Select group of contractors/consultants must qualify through initial process.
- Used by clients such as local council/government who need ongoing work but typically don’t benefit from in-house development teams so don’t want constantly re-tender for work.
E.g. Perfect Circle; AECOM, Gleeds, - Nuneaton
Benefits of serial tendering and competition and avoid repeat of OJEU admin
What tender queries did you get on the Derby Demo project?
If a live cable is encountered would this constitute a variation?
All services are to be disconnected by the client prior to the commencement of the works. Should unknown services be identified then this would constitute a
What is tendering?
Tendering is the process in which a contractor is appointed to deliver the construction works.
What are the main methods?
a. Open
b. Selective
c. Negotiated
d. Serial
What is open tendering?
a. Typically advertised online by public bodies
b. Enables any contractor to potentially apply although typically there is an initial PQQ process to filter applications
What are the advantages of open tendering?
a. No bias as contractors apply and are not selected for invitation by the QS or any other consultant party to the works
b. Can encourage parties who may be very capable but might not have been considered otherwise
What are the disadvantages of open tendering?
a. Likely to receive applications that are simply unsuitable
b. Time and cost of tendering process is very high
c. The “open” nature may discourage contractors from seriously engaging in the process due to high number of applications
What is two stage tendering?
a. Separates process of selecting a contractor and determining a price for works.
b. First stage; quality of team, prelims price, OHP
c. Second stage; PCSA to lead design development as consultant. Trade contractors make up contract price
