Procurement & Tendering Flashcards

1
Q

What is Procurement?

A

The overall act of obtaining goods and services

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2
Q

What are the main factors that typically govern procurement route selection

A

Identifying the client’s objectives and key drivers in terms of time, quality, cost, and risk.

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3
Q

Which procurement routes are you familiar with?

A

Traditional, Design & Build, Construction Management, Management Contracting

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4
Q

What is traditional procurement?

A

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.

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5
Q

What are the key advantages of traditional procurement?

A
  • 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.
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6
Q

What are the key disadvantages of traditional procurement?

A
  • 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).
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7
Q

When might traditional procurement be appropriate?

A
  • 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.
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8
Q

What is design & build?

A
  • 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.
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9
Q

What are the key advantages of Design & Build?

A
  • 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.
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10
Q

What are the key disadvantages of Design & Build?

A
  • 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.
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11
Q

When might design & build be appropriate?

A
  • 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.
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12
Q

What additional insurance might be required under a D&B?

A
  • The contractor and their design team will have design responsibility, so therefore it is likely they will need professional indemnity insurance.
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13
Q

What procurement route poses the least risk to the client?

A
  • JCT Design and Build
  • NEC Option A
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14
Q

Under Design & Build, who executes the design?

A
  • 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.
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15
Q

What is construction management?

A
  • 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.
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16
Q

What are the advantages to Construction Management?

A
  • 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.
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17
Q

What are the disadvantages to Construction Management?

A
  • 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.
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18
Q

When might construction management be appropriate?

A
  • 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.
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19
Q

Which is the riskiest procurement route for the client?

A
  • 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).
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20
Q

What is management contracting?

A
  • 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.
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21
Q

What are the key advantages of management contracting?

A
  • 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.
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22
Q

When might management contracting be appropriate?

A
  • 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.
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23
Q

What is the key difference between management contracting and construction management?

A
  • 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.
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24
Q

What is a framework agreement?

A
  • 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
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25
Q

How long can a framework last for?

A
  • Typically, a framework lasts for 4 years. However, this is determined by the client. They can range between 2-10 years.
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26
Q

What are the key advantages of a framework?

A
  • 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.
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27
Q

What are the key disadvantages of a framework?

A
  • 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.
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28
Q

Why might the client choose a framework agreement to procure goods and services?

A
  • 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.
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29
Q

What is the difference between a framework agreement and a contract?

A
  • 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.
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30
Q

What is project partnering?

A
  • 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.
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31
Q

What are they key advantages of partnering?

A
  • The overall construction and design programme can be shortened.
  • The likelihood of conflict is reduced.
  • Improved customer satisfaction.
  • Improved value for the client.
  • Improved buildability.
32
Q

What are the disadvantages of partnering?

A
  • 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.
33
Q

What is tendering?

A
  • Tendering is the process by which the client invites suppliers to place a bid for work on a project. The overall objective is to obtain a price for the works.
34
Q

What is the difference between procurement and tendering?

A
  • Procurement is the overall act of obtaining goods and services from external sources and deciding the strategy for how these goods are to be acquired.
  • Tendering is a phase in the procurement strategy that deals with obtaining a price through a bidding process.
35
Q

What are the three main tendering options?

A
  • Single stage tender.
  • Two stage tender.
  • Negotiated tender.
36
Q

What documents would you include in a tender pack?

A
  • Form of tender.
  • Construction drawings.
  • Tender return information.
  • Instructions to bidders.
  • Tender scoring matrix.
  • Invitation to tender.
  • Pricing document.
  • Quality questions
37
Q

What is a bona fide tender?

A
  • 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.
38
Q

What is OJEU?

A
  • The Official Journal of the European Union.
  • An online portal that houses public sector contracts that are over the stated procurement threshold.
39
Q

What happens to OJEU now that the UK has left the European Union?

A
  • It has been replaced with ‘Find a Tender Service’
40
Q

What is the threshold for Construction Works under the Public Contracts Regulation?

A
  • £5,336,937 (£5.3m)
41
Q

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

A
  • Tendering strategies, 1st edition
42
Q

What is a pre-qualification questionnaire ?

A
  • A pre-qualification questionanaire sets out a series of questions for potential tenderers to answer regarding their level of experience, capacity, financial standing, etc. prior to being invited to tender.
43
Q

What is the purpose of a PQQ?

A
  • The PQQ has the effect of reducing the number of potential tenderers to those that are genuinely appropriate for the project. This saves a great deal of time
44
Q

What has replaced PQQ’s?

A

Selection Questionnaire (SQ)

45
Q

What might the PQQ ask?

A
  • Company details.
  • Details of insurance cover.
  • Relevant experience.
  • Information about technical and professional ability.
  • Information about capability and capacity.
  • Quality assurance policy.
  • Environmental management policy
  • Health & Safety policies and records.
46
Q

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

A
  • Dun & Bradstreet.
  • Credit agency such as Experian.
47
Q

What is single stage tendering?

A
  • Tender documents are issued to several competing contractors, who are all given the chance to bid for the project based on identical tender documentation.
48
Q

What are the key advantages to a single stage tendering?

A
  • The client benefits from a competitive tendering process, which can lead to competitive pricing.
  • The client can benefit from a fixed price through this tendering process.
49
Q

What are they key disadvantages of single stage tendering?

A
  • No buildability input from the Contractor.
  • The price is only as good as the design information.
  • Contractors may be unwilling to tender in a good economic climate (too much competition).
50
Q

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

A
  • The tender period is largely dependent on the complexity of the project, however 12 weeks would be reasonable.
51
Q

What is two stage tendering?

A
  • Stage 1 – The client provides an outline project design and contractors then compete for preferred contractor status. The preferred contractor is usually chosen based on the quality of their bid, the quality of their team, prelims and OH&P. The preferred contractor then joins the design team on a consulting basis using a pre-construction services agreement.
  • Stage 2 – Once the design has sufficiently progressed, the contractor enters into detailed negotiation with the employer to agree on the final price, contract conditions and programme.
52
Q

What are the key advantages of a two-stage tender?

A
  • Early appointment of the contractor to work in parallel with the design team.
  • Early involvement of the contractor to benefit from buildability input.
  • An earlier start on site is possible.
  • Client involvement in subcontractor selection.
  • Increased opportunity to value engineer with contractor’s input.
  • Improved opportunity to identify project risk.
53
Q

What are the disadvantages of two-stage tendering?

A
  • The contractor has less incentive to price the second stage competitively, negotiations may therefore be difficult.
  • Additional cost of the contractor’s pre-construction fee.
  • Potential for the negotiation stage to fail (contract sum not agreed).
54
Q

What is a negotiated tender?

A
  • A negotiated tender is effectively a single-stage tender carried out between the client and just one contractor of their choice to submit a tender response for the project.
55
Q

What are the key advantages of a negotiated tender?

A
  • Simplicity.
  • Speed. A negotiated tender can have programme advantages if undertaken in good faith. The client has flexibility in terms of choosing their preferred contractor.
  • Time and cost savings involved in comparing and analysing multiple tender submissions.
  • The process can allow early contractor involvement.
56
Q

What are the key disadvantages of a negotiated tender?

A
  • Possibility of delay with contract negotiations.
  • 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.
57
Q

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

A
  • 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.
58
Q

What is a ‘form of tender’?

A
  • It is typically a one page document which a contractor signs and returns with their proposed tender price and 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.
59
Q

What information is typically included in the form of tender?

A
  • Tender sum.
  • The date until which the price remains valid.
  • Construction period.
  • Confirmation of the tender being genuine and bona fide.
  • Tenderer details and signature.
  • Acceptance of the terms and conditions.
60
Q

When seeking tenders for construction work, in addition to the actual price for the work, what additional information might be requested from the contractor?

A
  • Track record of previous experience.
  • Proposed team and hierarchy.
  • Methodology and approach.
  • Programme.
  • References.
  • H&S information.
  • Value engineering proposals
  • Logistics plans
  • Social value strategy.
  • Diversity and inclusion policy.
61
Q

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

A
  • Arithmetical errors.
  • Pricing errors (items not priced).
  • Pricing methods (front loading).
  • Check the form of tender is complete and signed.
  • Resolve any qualifications.
62
Q

What happens if a tender is submitted late?

A
  • Public sector project – the documents should not be accepted.
  • Private sector project – the matter should be discussed with the client to understand if they would like to accept. The safest option is not to consider
63
Q

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

A
  • The tender should be discarded on the basis that the project is funded by the public sector.
64
Q

What is the danger of accepting a very low tender submission?

A
  • The contractor may be trying to ‘buy’ the project with a view to recovering their costs with Compensation Events.
  • It could indicate that the contractor is in a poor financial condition and is eager to win the work at any cost.
  • Areas of the project may not be priced accurately, creating the potential for an adversarial relationship to develop post contract.
65
Q

How do you deal with qualifications in the tender submission?

A
  • Procedures associated with qualifications should be outlined in the tender instructions.
  • If the qualifications are unauthorised, it may invalidate the tender.
  • The client and contractor should look to resolve the qualifications prior to signing the contract. Any outstanding matters should be clearly documented in the contract to avoid future disputes.
66
Q

How would you deal with errors identified in the tender submission?

A
  • JCT has produced a tendering practice note where two options are suggested to deal with errors.
  • Alternative 1 – The tenderer should be given the details of the errors and afforded the opportunity to confirm or withdraw their tender. If they withdraw the next lowest bid is considered.
  • Alternative 2 – The tenderer should be given the opportunity to confirm their offer or amend it to correct genuine errors.
67
Q

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

A
  • As part of the evaluation process, the company accounts would be reviewed to assess the financial stability of the contractor (if not already complete at the PQQ stage). This could lead to disqualification if the contractor is having financial difficulty.
  • Consider a performance bond. In the event the contractor fell into insolvency, the employer would be able to call on the bond and appoint another contractor to complete the project.
  • Consider a parent company guarantee.
  • Raise the concern with the client.
68
Q

How would you deal with a front-loaded tender?

A
  • Request that the contractor removes the front loading, if the contractor refuses, this may be grounds for disqualification.
69
Q

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

A
  • Not enough tenders returned.
  • The tendering procedure is compromised for some reason.
  • If tenders were not at the cost level required and it was believe that re-tendering to different tenderers would provide a different result.
  • Design changes or value engineering have significantly changed the design that was originally tendered.
70
Q

What information is typically included within a tender analysis report?

A
  • List of tenders received.
  • Initial tender return totals.
  • Any qualifications identified.
  • Post-tender adjustments.
  • Revised tender sum.
  • Comparison of tender returns.
  • Comparison with the pre-tender estimate.
    Recommendation.
70
Q

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

A
  • Ensure the tender information is as accurate as possible.
  • Ensure the tender period is long enough.
  • Go through the PQQ to ensure the correct contractors are selected.
  • Check that the contractors have the time and resource capacity to complete the tender.
70
Q

What is the contract sum analysis document under the design and build procurement?

A
  • A contract sum analysis is an alternative pricing document to a schedule of works or bill of quantities. It’s often prepared in a standard format from the client’s team to support the tender analysis. The client team usually requests all tenders to be returned in the same contract sum analysis format.
71
Q

If you think the delivery programme is tight, how could you give comfort to the contractor regarding delay damages (to avoid excessively pricing in their tender sum?)

A
  • The contract can be amended to include a delay damage free period. For example, damages would not be levied for the first 3 weeks or levied at 50% for a defined period.
71
Q

If the tender was received on time, but the project was delayed for a few months, what would you need to check?

A
  • Check the form of tender; this would show long the price was valid for.
72
Q

If the contractor (in their tender return) put a cost against an item and marked it provisional, what would you do?

A
  • I would seek further information from the contractor and request that it is removed; subject to the tender instructions, this may invalidate the submission.
73
Q

What happens if the tender prices are higher than the pre-tender estimate?

A
  • This could be due to market conditions.
  • The client team should reconcile the tenders against the pre-tender estimate to identify where the major differences are.
  • The team could value engineer or look for cost savings if the prices are over budget.
74
Q

What is the purpose of a pre-tender estimate?

A
  • The pre-tender estimate is the last cost check of the project before it is issue to tender. The design should be sufficiently developed at this stage, therefore, the pre-tender estimate should be an accurate reflection of the works.
  • The estimate can then be used to compare against the tender submissions.