Procurement & Tendering Flashcards
What is procurement?
Overall process of acquiring construction work or services
What should be considered when selecting a procurement route?
- Specifics of the project
- Client objectives (cost, time, quality, risk, control)
What are the main procurement methods?
Traditional & General Contracting
Design & Build
Management Contract
Construction Management
What is traditional procurement?
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
How does Traditional Procurement work?
Contractor takes responsibility and financial risk for the construction of the works to the design produced by the client’s design team for the contract sum within the contract period
The client takes responsibility and risk for the design and design team performance
When is traditional procurement appropriate?
If the employer has had the design prepared
If the design is substantially complete at the time of contractor selection
If the client wishes to retain control over the design and specification
If cost certainty at start on site is important
The shortest overall programme is not the client’s main priority
What are the advantages of traditional procurement?
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 procurement?
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 (no buildability advice)
A strategy based on price competition can lead to adverse 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 design and build?
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 contractor responds with the ‘Contractor’s Proposals’ which include the price for the works
When is D&B appropriate?
Where there is a need to make an early start on site as there can be an 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
The Client has to commit to a concept design early
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
How much design input will the contractor have in a D&B situation?
It depends on the amount of design work the employer has already completed at time of tender
This can range from full design to production of information and coordination only
Who carries out the design for the contractor under D&B?
It can be outsourced to a separate design company (contractor retains responsibility)
They may have in-house capabilities or the client’s design team may be novated
Who carries out the design for the contractor under D&B?
It can be outsourced to a separate design company (contractor retains responsibility)
They may have in-house capabilities or the client’s design team may be notated
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 the works contractors
They have the responsibility for the construction works without actually carrying them out
Not all of the design needs to 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 is management contracting appropriate?
When the client does not want cost certainty before commencement
Where an early start on site is a priority
What are the advantages of management contracting?
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 management contracting?
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 manage the contracts
How does a CM contract work?
The trade contractors carry out the work
The construction managers supervises the construction process and coordinates the design team
The CM 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 is CM appropriate?
On large, complex projects where the advantages of CM can be utilised - e.g. using upfront buildability knowledge of the CM and their programme advice including specialist input from race 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 Construction Management?
Overall project duration is reduced by overlapping design and construction
The construction manager can contribute to the design and project planning process
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 contacts with trade contractors
The client has means of redress to trade contractors through direct contractual links
What are the disadvantages of construction management?
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 MC only
How do you identify 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, experience and control requirements
