Procurement & Tendering Flashcards
What is Procurement?
The overall act of obtaining goods and services
What are the main factors that typically govern procurement route selection
Identifying the client’s objectives and key drivers in terms of time, quality, cost, and risk.
Which procurement routes are you familiar with?
Traditional, Design & Build, Construction Management, Management Contracting
What is traditional procurement?
The traditional procurement route involves separating design from construction. The client first appoints consultants to design in detail, contractors are then invited to submit tenders based on a fully developed scheme.
What are the key advantages of traditional procurement?
- The client retains control of the design.
- The design is largely finalised before the contractors tender, which means the client knows what they are getting.
- All tenderers produce a submission based on the same information, which makes tender analysis easier.
- Assuming the design is robust, there is reasonable price certainty.
- Minimal built-in risk premium.
What are the key disadvantages of traditional procurement?
- The overall project duration can be longer than design and build procurement.
- Zero or limited buildability from the contractor.
- Design risk is retained by the client, any changes post contract will be a Compensation Event.
- Dual point of responsibility (client for design and contractor for construction).
When might traditional procurement be appropriate?
- The client may have specific or detailed design requirements.
- Cost certainty is important (traditional more so than management contracting and construction management).
- Time is not a client’s main priority.
What is design & build?
- The contractor is responsible for completing the design and executing the construction phase of the project.
- Under JCT the client’s team produces a set of client’s requirements, the contractor then responds to the ER’s via their contractor’s proposals. The original client’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.
What are the key advantages of Design & Build?
- Single point of responsibility for design and construction.
- Earlier commencement on site is possible.
- Benefit of the contractor’s experience harnessed during design.
- Design and construction risks rest with the contractor.
- Provides more cost certainty than traditional procurement.
What are the key disadvantages of Design & Build?
- The client may struggle to prepare a comprehensive brief.
- More complex to compare tenders.
- Client changes can be difficult to value and expensive.
- The client may have less control over aesthetics and quality.
- The contractor will build risk premiums into their tender return.
When might design & build be appropriate?
- When there is a need to make an early start on site.
- Where the client wishes to minimise their risk profile.
- For technical projects where the client will benefit from the contractor’s buildability input.
- Where retaining control of design is not a priority.
What additional insurance might be required under a D&B?
- The contractor and their design team will have design responsibility, so therefore it is likely they will need professional indemnity insurance.
What procurement route poses the least risk to the client?
- JCT Design and Build
- NEC Option A
Under Design & Build, who executes the design?
- The contractor may use their own in-house designers, or they can appoint external consultants. The client’s original design team can also be novated to the contractor.
What is construction management?
- The client directly appoints multiple subcontractors (referred to as trade contractors) instead of employing a single main contractor. The client places individual contracts with separate specialist trade contractors themselves.
- The client places a direct contract with each trade contractor and utilises the expertise of a construction manager to coordinate the works.
- The construction manager programmes and coordinates the works.
- The construction manager has no contractual relationship with the trade contractors.
- The construction manager has no vested interest in the financial outcome of the project, and barring professional negligence, carries no risk.
What are the advantages to Construction Management?
- Speed (Early start on site).
- The overall project duration could be reduced by overlapping design and construction.
- The 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.
- The client has a means of redress with trade contractors through direct contractual links.
What are the disadvantages to Construction Management?
- Price certainty is not achieved until the last trade package is let.
- The procurement route requires an informed, experienced, and proactive client.
- The client has a lot of consultants and contractors to manage.
When might construction management be appropriate?
- The client is experienced in construction and has suitable resources to manage the project.
- The client wants to achieve an early start date on site.
- The client wants the flexibility to make minor changes to the design/specification throughout the process with minimal impact on time or finances.
- The project is technically complex and requires detailed engagement of specialist consultants and trade contractors.
Which is the riskiest procurement route for the client?
- Construction management. This is because the client places individual contracts directly with each trade contractor and the construction manager carries no risk (barring professional negligence).
What is management contracting?
- The client appoints a management contractor to manage the entire building process, who in turn appoints trade contractors to carry out construction works.
- The management contractor is usually paid a fee percentage based on construction costs.
- The management contractor has a direct contractual link with the trade contractors and is responsible for the overall construction works.
What are the key advantages of management contracting?
- 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.
- There can be considerable flexibility in design, with changes being made throughout the construction process.
When might management contracting be appropriate?
- When an early start on site is a priority.
- Flexibility in design is required.
- Buildability input from the management contractor is required.
- Where cost certainty is not a priority for the employer.
What is the key difference between management contracting and construction management?
- Client responsibility.
- Construction management – the client directly appoints multiple trade contractors to execute the works.
- Management contracting – the client appoints a management contractor, who in turn appoints the trade contractors.
What is a framework agreement?
- A framework agreement is an umbrella agreement that a party enters with one or more suppliers to establish governing terms.
- A framework usually establishes a strategic partnership for the procurement of goods, works, or services.
- NH CPMS example
How long can a framework last for?
- Typically, a framework lasts for 4 years. However, this is determined by the client. They can range between 2-10 years.
What are the key advantages of a framework?
- Framework agreements can help to develop stronger relationships between the parties involved and encourage long term collaboration and cooperation.
- Time saving (can speed up the procurement of goods and services)
- Repeat work and continuity of delivery.
- Rates and prices are usually agreed upfront.
What are the key disadvantages of a framework?
- Contractors, suppliers, consultants can become complacent.
- Bidders will invest time and resources to be awarded a framework and potentially not receive work through it.
- May be restrictive to new suppliers who offer innovative, new solutions with the changing and evolving nature of technologies.
Why might the client choose a framework agreement to procure goods and services?
- Clients who are continuously commissioning construction work might want to reduce procurement timescales, learning curves and other risks.
- A framework allows the client to invite tenders from suppliers of goods and services on a ‘call-off’ basis as and when required.
What is the difference between a framework agreement and a contract?
- 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 quote and tailor your product or service for the specific job at hand.
What is project partnering?
- 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.