Procurement & Tendering Flashcards
What is procurement?
The overall act of obtaining goods and services from external sources
What is tendering
Tendering is the bidding process to obtain a price; and how a contractor is actually appointed.
Name the types of Procurement routes?
Traditional
Design and Build
Management Contracting
Construction management
How would a procurement route be decided upon?
Formulate a procurement strategy to achieve optimum balance of risk, control and funding for a project. This would address:
a) The business case
b) Define objectives and measures for success
c) Determine procurement priorities
d) Identify main risks and who is best placed to manage them
e) Any EU rules
Differences between Procurement Strategy and Procurement Route
The procurement route sits within the overall procurement strategy.
The route delivers the project; selects and provides structure to the project team; allocates risk and responsibilities; and determines the form of contract.
The procurement strategy also addresses the Client’s business needs.
The strategy links the project to the Client’s business; balances client risk with control; and reflects client’s objectives and available resources.
What are the advantages of using Traditional Procurement?
- Competitive fairness - all tenders are based on exactly the same information, and there is no interpretation of information.
- Cost certainty - the total cost is largely known at the outset of the contract.
- Programme certainty - the time-frame is established at the outset of the contract.
- Established - this has been the most commonly used route, and is constantly refined.
- Minor changes and adaptations for a specific project are easy to implement, with an established method of valuation.
- The form is capable of conversion to a guaranteed maximum price (GMP).
- The client has a full design they approved
*Early cost certainty is possible - Fairly even split of financial risk
Explain Management Contracting?
The MC manages packages of works, this allows for works to start quickly but there is no lump sum cost provided at the offset. The contractual link sits between the main contractor and works packages.
A management contractor is appointed on the basis of a fixed management fee. The management contractor programmes, packages and obtains tenders for the works, which are each let on a competitive basis on lump-sum, firm-price contracts with the management contractor. The project is split into packages and the client enters into separate contracts with each works contractor
Explain Construction Management?
A fee earning construction manager is appointed to manage the trade packages, but the contract sits between the client and subcons.
What types of projects would a Traditional procurement route be suitable for?
Design led projects where the client is less open to having the contractors interpretation of their requirements.
How do you protect your client from copyright under a 2 stage tender?
Within the PCSA you ensure the inclusion of a copyright clause.
What would the course of action be in the instance of identifying an error in the commercial response of a tender return?
Within the ITT you would specify which alternative the contract will adopt in the instance of an error.
Alternative 1 – Standby their response or withdraw
Alternative 2 – Amend their response or withdraw
When would you advise the client to re-tender?
Consideration must be given to the number of tender responses and if it is still a competition
If you believe the tender procedures have been compromised.
If there has been drastic deviation from the design / VE exercise which significantly differs to the design tendered.
Explain traditional procurement
Client appoints a design team to complete the full design up to RIBA 4 along with the tender documents.
The project is tendered to a number of contractors and the highest scoring contractor after evaluation is appointed
A specialist works are usually tendered during construction
The contractor is responsible for the programme
Disadvantages to traditional procurement
Overall procurement time is slower
Domestic sub-cons are tendered individually so there is a lack of visibility
Contractors expertise is not incorporated into the design
The contractors relationship creates sides
Design must be fully complete before tendering
Key client risks under traditional procurement
- Overall project duration may be longer than others – sequential process
- No input into design and planning by the contractor
- Dual point of responsibility – design team for design and contractor for construction
- If design not complete at time of tender, cost and time certainty are reduced
- If the client continues to request changes to the brief there is risk of cost and programme overrun
Explain Design and build procurement
Design and build is a procurement route in which the main contractor is appointed to both design and then construct the works described in the contract.
- Client appoints a design team to develop the clients brief
- Client tenders to a number of D&B contractors
- Contractor is selected on overall tender including design programme and works
- Contractor build the building and completes it to the programme
- Emphasis in this form of procurement in time and cost. Design and construction are overlapped so the overall project duration is shorter
D&B procurement advantages
- Client has single point of responsibility
- The contractors expertise is used in the design
- Early cost certainty is possible
- Design and construction are overlapped
D&B Procurement client risks & mitigation
• Client may find it hard to prepare a sufficiently comprehensive brief
• Client has to commit to a concept design early
• Variations from the original brief are difficult to arrange and often expensive
• Harder to compare tenders – harder to determine if getting value for money
• Ease of fabrication may be prioritised above aesthetic quality
• May be less real competition due to fewer design and build firms
• End result may not be what the client wanted
When is management contracting suitable to be used?
On unique specialist buildings or where time is critical. The client is normally very experienced in developments.
Explain management contracting.
The contractor manages packages of works, this allows for works to start quickly but there is no lump sum cost provided at the offset. The contractual link sits between the main contractor and works packages.
A management contractor is appointed on the basis of a fixed management fee. The management contractor programmes, packages and obtains tenders for the works, which are each let on a competitive basis on lump-sum, firm-price .
The management contractor programmes, packages and obtains tenders for the works, which are each let on a competitive basis on lump-sum, firm-price contracts with the management contractor. The relationship is between the managing contractor and subcon.
Management contracting advantages?
- Design and construction overlap for a quicker programme.
- Each sub-contract is tendered individually ensuring full competitiveness.
- Management contractor experience is used in the design, specialist subcon also used in the design.
- MC is responsible for delivering the project on programme.
Management contracting disadvantages
- Costs are not fixed at the outset
- There is potential for conflict between subcons ie over delays
- The client involvement is high
Management contracting key risks to the client
- Costs are not fixed at the outset
- Design is not complete at the outset
- The MC is sometimes not responsible for problems with the subcons - i.e the risk of cost increases bourne by the client
- There may be a lack of PI insurance on subcons
- The management contractor is not responsible for design defects due to subcons
Risk mitigation.
- An additional design contingency to the budget to cover any cost increases and carry out due diligence
- Amend the contract so the MC is responsible for programme disputes between subcons
- For PI advisors should insist on moving some subcons into MC’s responsibility
- Ensure that a system of PI with warranties is in place to the satisfaction of legal advisors
Explain the difference between managing contracting and construction management.
Construction management the client owns the contractual relationship with the subcons, management contracting the MC owns the relationship with the subcon.