Procurement & Tendering Flashcards
What is procurement?
The overall process of acquiring construction work or services.
What should be considered when selecting a procurement route?
The specifics of the project. The Client objectives might prioritise any of the following:
- Cost
- Time
- Quality
- Control
- Risk
What are the main procurement methods?
- Traditional (and general contracting)
- Design and Build
- Management Contracting
- Construction Management
What is “Traditional” procurement?
Design is completed by the Client design team before competitive tenders are invited and a main contractor employed to construct the works.
How does “Traditional” procurement work?
- The Contractor takes responsibility and financial risk for the construction of the works designed by the Client design team, for a contract sum and within a defined programme.
- The Client takes on the risk and responsibility for the design and design team performance.
When might “Traditional” procurement be appropriate?
- When the Employer has had the design prepared.
- If the design is substantially completed at the time of contractor selection.
- When the Client wishes to retain control over the design and specification.
- If cost certainty is important.
- If the shortest overall programme is not of a high priority.
What are the advantages of “Traditional” procurement?
- Retaining control over design can lead to higher quality.
- Increased levels of cost certainty.
- Design changes are relatively easy to arrange and value.
What are the disadvantages of “Traditional” procurement?
- Overall project duration may be longer due to a lack of overlap between the design and construction phases.
- There is no input into the design and planning by the Contractor.
- A strategy based on price competition can lead to adversarial relations.
- There is dual responsibility, with design and construction teams retaining responsibility for each.
What is “Design & Build” procurement?
- It is where the Contractor is responsible for the design, planning, organisation and construction of the works to the Employers Requirements.
How does “Design & Build” procurement work?
- The Employer gives the Tenderers the Employers Requirements and the contractors respond with the Contractors Proposals, which include the price for the works.
When might “Design & Build” procurement be appropriate?
- When there is 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 which would benefit from the contractor’s expertise.
- Where the Employer does not wish to retain control over design development.
What are the advantages of “Design & Build” procurement?
- A single point of responsibility for the design, and the construction of the development.
- Earlier commencement on site.
- Early price certainty is increased.
- The Client can benefit from the contractor’s experience during the design.
What are the disadvantages of “Design & Build” procurement?
- Clients may find it difficult to prepare a sufficiently comprehensive brief.
- The Client has to commit to a design concept early in the process.
- 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 can be achieved.
How much design input will the contractor have in D&B procurement?
This depends on the amount of design work the Employer has already had completed at the time of tender. This can range from a full design, to production information and co-ordination only.
Who carries out the design for the contractor in D&B procurement?
- It may be outsourced to a separate design company (with the contractor retaining responsibility), or they may have an in-house design team capability.
- Alternatively, the Client may novate their design team over.
What is Management Contracting?
A Management Contractor is employed to contribute their expertise to the design and to manage construction with a fee being paid to them for doing so.
How does Management Contracting work?
- The Management Contractor has direct contractual links with all of 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 commence on site.
- 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 might Management Contracting be appropriate?
- Where the Client does not need 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 confirmed until the last works package has been let.
- Changes to the design of later works 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 utilizes the expertise of a Construction Manager who acts as a consultant to co-ordinate the contracts.
How does Construction Management procurement work?
- Trade contractors carry out the works
- The Construction Manager 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 works packages, obtaining and evaluating tenders, and coordinating and supervising the works.
When might Construction Management procurement be appropriate?
- Large complex projects where the advantages of construction management can be utilised. For example, using the CM’s expert knowledge on buildability and programme management.
- Where an early start on site is required.
- To maintain flexibility in design and construction strategy.
- Where price certainty before construction is not considered a key driver.
- Where the client is experienced in construction.
What are the advantages of Construction Management procurement?
- Overall project duration is reduced by overlapping design and construction.
- The CM can contribute to the design and project planning processes.
- 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 contracts with trade contractors.
- The Client has a means to redress to trade contractors through direct contractual links.
What are the disadvantages of Construction Management procurement?
- Price certainty is not achieved until the last trade package is let.
- Changes to packages may adversely affect packages that have already been 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 Management Contracting the client is in a direct contractual relationship with the main contractor only, with trade contractors forming sub-contracts with the main contractor.
- Under Construction Management the client is in direct contractual relationships with each of the trade contractors.
How do you identify the client requirements before recommending a procurement route?
- Through detailed discussions with the client and design team in order to identify their priorities in terms of cost, time, quality, risk, control requirements and experience.
If the Client wishes to start on site ASAP, which procurement route would you take?
- The recommendation would need to account for their other requirements, such as cost and quality.
- If time was their over-riding priority then either the Construction Management or Management Contracting may offer the best solution as they can offer the quickest start on site with overlaps between design and construction phases.
- However, a key tradeoff would be a lack of cost certainty due to the absence of a long tender period.
