Procurement & Tendering Flashcards
WHAT IS PROCUREMENT?
As noted in the RICS Tendering Strategies Guidance Note:
Act of obtaining goods and services from external sources, i.e. building contractor.
Includes deciding the strategy on how to acquire the goods by reviewing the client requirements (time, cost, qualtiy, attitude to risk).
WHAT IS TENDERING?
As noted in the RICS Tendering Strategies Guidance Note:
Phase of the procurement strategy, includes the bidding process, obtaining a price and how a contractor is actually appointed.
WHAT ARE THE MAIN TYPES OF TENDERING PROCEDURES?
Single stage tendering
Two stage tendering
Negotiated tendering
WHAT IS SINGLE STAGE TENDERING?
Most common type, obtaining competitive tenders for the whole of the construction works.
Invitation to tender documents are issued to contractors for them to submit a bid, based on identical tender documentation.
This is usually done at RIBA Stage 4 so the tendering contractors receive detailed information for their bid.
Bidding contractors are givena predetermined time to submit their tenders, which are then analysed for cost and quality, before a single contractor is declared the preferred contractor.
Then, enter a building contract.
WHAT IS TWO STAGE TENDERING?
Used where time is constrained as it enables design and tendering to overlap, and benefits from the technical input of a contractor in the later design stages. Essentially, the early appointment of a contractor.
Tender documents issued to contractors at RIBA Stage 2 or 3.
The contractors are judged on the basis of the quality of their bid, their team and the prelims, overhead and profits allowances.
Contractor then joins the team as a consultant under a PCSA (Pre-Construction Services Agreement) to complete the design to RIBA Stage 4, before presenting a bid at this stage.
WHAT IS A NEGOTIATED TENDER
Essentially a single stage tender with a single contractor who submits an initial price, which is then negotiated by the client’s professional team (BS / QS).
This reduces timescale for receiving a cost for works, however, the competitive advantage of tendering is compromised.
Also, many public bodies and government departments will not allow negotiated tender as value for money is difficult to prove against market value.
WHAT ARE THE RIBA STAGES?
- Strategic Definition
- Preparation and Brief
- Concept Design
- Spatial Co-ordination
- Technical Design
5.Manufacturing & Construction - Handover
- Use
Recent RIBA Plan of Work 2013 recognises adoption of two-stage tender and the various times tendering can be carried out
WHAT IS EARLY CONTRACTOR INVOLVEMENT? (ECI)
ECI is a form of two stage tender with Contractors bids judged on quality of the team and bid, but emphasis put on Contractor as the Lead Designer from outset of the project.
More common in infrastructure projects where contractor affects design.
Allows contractor to form a design team, led by them.
WHAT IS THE JCT PRACTICE NOTE?
Current most recent version is 2017,
A best practice, informative and practical tool for employers, contractors, and professional advisers involved in private or public sector procurement for the letting of construction contracts in the UK.
WHAT IS BS 11000-1 COLLABORATIVE BUSINESS RELATIONSHIPS?
Impacted on large infrastructure projects, strictly related to Partnering projects.
Advises how to select and evaluate proposed partner bids.
WHAT ARE THE REASONS FOR A ROBUST TENDERING PROCESS?
Ensure positive tender results through:
- Accountability
- Auditability
- Ensuring all works are picked up
- Parity (being equal, fair)
- Help to reduce corruption claims
- Ensuring correct price is paid for proposed works
WHAT IS THE PRE-TENDER ESTIMATE? (PTE)
Pre-cursor to the tendering phase based on the minimal design work produced, the extent of which is dependent on the chosen procurement route.
Important to know the estimated project cost for two reasons:
1. For the client to know if they can afford the proposed works.
2. For a basis of comparison when tenders are returned, benefitting the later analysis phase.
Should be carried out in accordance with RICS NRM (New Rules of Measurement).
HOW DO I CHOOSE THE MOST SUITABLE TENDER STRATEGY?
Construction Management / Management Contracting project:
- Quick start on site required as design and tendering are overlapped
- Natural fit for construction management / management contracting procurement routes
Traditional project:
- Single stage tender where a greater level of design has occured before tender (unless complex and contractor input is required)
Design & Build project:
- Pass a large portion of risk and design responsibility to the contractor, therefore, two stage to benefit from a contractors experience and knowledge to influence design
- During two stage, the contractor is part of the design before an agreed contract sum is agreed, often appointed under PCSA as a consultant in the second stage of tender
WHAT ARE THE BENEFITS AND DRAWBACKS OF SINGLE STAGE TENDERING?
Advantage:
- Most competitve price
- Most linear form of tendering
Disadvantage:
- Contractor not fully understanding may allow a ‘risk allowance’
- Programme implication to tender period
- No contractor involvement (Traditional)
- May lead to high Provisional Sums and risk items on client side (Traditional)
WHAT ARE THE BENEFITS AND DRAWBACKS OF TWO STAGE TENDERING?
Advantage:
- Increased contractor involvement in design, reducing design/construction risk
- Some degree of competition
- Overlapped design and tendering, reducing programme
- Competitiveness for prelims, OHPcompared to Negotiated (Management)
Disadvantage:
- Lack of competitiveness during second stage
- Programme implication (but less so due to overlap)
- No risk mitigation incentive for contractor, risk on client (Traditional)
- Increased programme to accommodate tender period
WHAT ARE THE BENEFITS AND DRAWBACKS OF NEGOTIATED TENDER?
Advantage:
- Most contractor involvement in design, effective risk mitigation in design
- No programme implication for tendering
Disadvantage:
- Lack of competitiveness, may result in high contract offers
- Not suitable for public procurement
- No competition on prelims, OHP
WHAT RIBA STAGE FO EACH TENDERING STRATEGY NEED TO COMMENCE IN?
- Concept Design
- Single stage - D&B possible at this stage
- Two stage - First stage
- Negotiated - Anytime from Concept - Developed Design
- Single stage - D&B possible at this stage - Technical Design
- Two stage - Second stage negotiation
WHAT ARE THE TYPES OF CONTRATOR SELECTION TECHNIQUES?
Open tendering
Selective tendering
Single contractor selection
WHAT IS OPEN TENDERING?
Allows anyone to express interest to tender, often advertised in journals/websites.
Public procurement is a form of open tendering, albeit with caveats to as to suitable contractors).
WHAT IS SELECTIVE TENDERING?
A shortlist drawn up by the project / client team, or drawn from a pre-agreed framework / approved suppliers list.
Different to open tendering in that it is not open, and contractors are chosen by project team.
WHAT IS SINGLE CONTRACTOR SELECTION?
Works in hand with negotiation as a tender approach, a shortlist of one only.
WHAT IS CONSIDERED WHEN SELECTING SUITABLE CONTRACTORS FOR TENDER?
Previous experience
Word of mouth, recommedations, previous association on projects
Presentations from contractors looking to secure new work
The company size, financial standing, suitable H&S record, reputation, offer of services
WHAT IS A FORMAL PRE-QUALIFICATION PROCESS?
Short interview or pre-qualification questionnaire (PQQ) depending on size and complexity of project.
Aim is to ensure contractor has relevant experience, financial standing, good health and safety record.
HOW DO YOU ASSESS A SUITABLE TENDER PERIOD?
Varies on:
- Project complexity
- Size of project
- Time of year (e.g. Christmas period)
- Market conditions
Also common for first stage of two-stage tender to be shorter than a single stage tender as contractors only have to price preliminaries, overheads and profits.
Single stage need to price all works including awaiting costings from their supply chain.
A short tender period may cause improper pricing, programme drafting, or contractors refusing to submit a price.
WHAT ARE THE DIFFERENCES IN COMPILING TENDER DOCUMENTS FOR DIFFERENT CONTRACTS?
Traditional:
- Design information
- Schedule of works / bill of quantities
- Scheudle of rates
- Preliminaries issued
D&B:
- Employer Requirements which the contractor responds to with Contractor Proposals
WHAT ARE THE INDUSTRY STANDARD CODES OF PRACTICE?
RICS Code of Measuring Practice
WHAT ARE THE DIFFERENT INFORMATIONS REQUIRED PER CONTRACT TYPE?
Traditional - BoQ (depending on contract) or pricing document, prelims and design info.
Traditional w. CDP - As above, plus Employers Requirements for CDP.
D&B - Employer’s Requirements
Management contract - BoQ or pricing doc, prelims and design info.
NEC contract - Depends on option used, but generally works information, site information and contract data part 1
WHAT IS THE INVITATION TO TENDER LETTER?
The letter formalises the contractor being invited to tender, describes the project, confirms the return date and contact details for queries raised.
WHAT IS THE FORM OF TENDER?
Form the contractor signs and returns with their proposed tender, with price and programme.
Some include ‘alternative proposals’ for use if a contractor is able to achieve a reduced programme or alternative design solution).
WHAT IS THE INSTRUCTIONS TO TENDERERS DOCUMENTS?
Sets out what is expected to be returned by the contractor and by what date.
Also includes proposed scoring mechanism, applicable questionnaires, details for site access and tender submission.
Also notes how errors should be dealt with in line with the JCT Tendering Practice Note.
WHAT ARE THE CONTRACT CONDITIONS?
Includes commentary on proposed contract type and conditions which may be dictated by bodies other than the client (e.g. funders lawyer).
Also worth mentioning proposed contract amendments, if any.
WHAT IS INCLUDED WITHIN THE PROJECT INFORMATION?
Differs depending on contract, but the Preliminaries / Works Information / Employers Requirements include:
- Base date
- Fluctuation procedures
- Completion strategies (Partial / sectional / practical completion)
- Liquidated damages
- Payment strategy
- Guarantees strategy
- Insurance strategy
- Period of suspension
- Dispute resolution
- Collateral warranty requirements
- Joint Fire Code application
For D&B, also includes level of design responsibility required.
NEC version is known as Works Information, which sets the chosen procurement strategy.
WHAT IS INCLUDED WITHIN THE DESIGN INFORMATION?
This is the key cosultants design and spec, collated from the architect, MEP, structural engineer, as well as specialist design if necessary, i.e. acoustician/lighting specialist.
Should also include a drawing issue sheet so the tenderers have all info and revision of drawings/specs.
WHAT IS INCLUDED WITHIN THE PRICING DOCUMENTS?
Depends on the form of contract.
Traditional - BoQ (in line with RICS NRM) or specification and drawings (thereby putting responsibilty on contractor to produce the quantities).
D&B - Employer’s Requirements, contractor returns a contract sum analysis.
Term / Framework contracts - Schedule of rates to draw down work as required.
Provisional sums - Included where necessary and defined as ‘defined’ or ‘undefined’.
Two stage - Format for pricing prelims in first stage based on RICS NRM 1 for cost estimating for capital building works, or NRM 2 for detailed measurement for building works.
WHAT IS THE NEW RULES OF MEASUREMENT?
A set of standard measurement rules and guidance for cost management and maintenance works.
NRM 1 - Guidance for cost estimating to inform cost plans for budgets, including prelims, OHP, risk, inflation.
NRM 2- Guidance for detailed measurement for building works, including preparation of BoQ, SoW and SoR to obtain tender prices.
NRM 3 - Quantification and description of maintenance works, including cost estimates, plans, and procurement guidance.
WHAT SHOULD APPENDICES INCLUDE?
Concise information relating to the project only, if too much is appended, this may discourage accurate and thorough costing if submitted. Including:
- H&S info
- Key survey info
- Planning permission info
- Building control documentation
- Proposed warranty / parent guarantee / performance bond writing
- Design responsibilty matrix
- Party wall agreements
- Building condition survey
- Risk register
WHAT ARE PROJECT SPECIFIC ABNORMALITIES TO BE AWARE OF PRE-TENDER?
Examples:
- Does the client have internal procedures to be followed in the tender docs?
- Any land ownership issues?
- Non-working times / noisy works restrictions?
- Third party agreements to be aware of?
- Any concurrent activities on site that may affect the contractor’s programme?
WHAT ARE THE TYPES OF TENDER ISSUING?
Traditional issue:
Identical tenders posted at the same time, with contractors required to confirm receipt. Expensive option due to level of printing and posting.
Online e-tendering:
Ability to issue, track, query and return online. RICS guidance note E-tendering.
WHAT SHOULD I DO DURING A TENDER PROCESS?
Tender queries - relay all questions answered to all contractors for parity with a tender query document.
Tender addenda - Not desirable as it seems disorganised, may be due to new information though.
Mid-tender interviews - Opportunity to meet, raise queries, visit site together, assess progress of contractors, and reaffirm commitment to the project.
Tender withdrawals - Other work commitments, consider they will not be competitive or too risky. If more than one withdraws, you may introduce new tenderers, allow the tender to complete, or cancel and re-tender.
WHAT SHOULD I DO WHEN RECEIVING TENDERS?
Opening tenders - Submission method, time and date should have been clearly set out. Any late would be dismissed (public), or advise the client if they want to include (private). Tender opening form used with a witness to review the price, programme, key comments, exclusions. Signed and dated by those present thereafter.
Reviewing tenders - Check for errors in line with JCT Tendering Practice Note 2012, either allow contractor to correct or stand by their error (dependant on contract). Raise tender queries, gain clarification where necessary, i.e. cost considered too high/low against cost plan allowance, inc. work items/prelims/OHP (refer to NRM 1/2). Review Provisional Sums allowed for. Review risks noted for the project.
D&B contractors will include risk allowance, this should reflect the design completeness and residual risks. One contractor may have included a cost for a risk that no others have, which raises their submission, however, proves their diligence.
Post tender interview - Following queries/equalisation process, each contractor given same outline queries, discuss construction detailing, programme logic, method statements, costs understanding, and meet the project team. Agreements made in the interview are to be confirmed in writing.
FINALLY - Post tender review equalising cost sections/items, recommending a preferred contractor, then notify all tenderers of the outcome.
WHAT IS THE AIM OF A PROCUREMENT STRATEGY?
The aim of a successful procurement strategy is achieving optimum balance of risk, control and project funding.
The choice of strategy depends on a clients required balance of cost, quality and time risks.
Remember - Construction is a small stage of the building life cycle, procurement accounts for the wider picture, i.e. Sustainability is important in Public sector works.
HOW DO YOU ENSURE THE MOST APPROPRIATE PROCUREMENT STRATEGY IS SELECTED?
Identify the importance of the clients primary objectives and their attitude towards associated risk, broken down as:
- Available budget
- Quality expectations
- Timeline expectations
Every project has a business case to justify it, various factors may include:
- Funding - Availabilty of funding with regard to contractual obligations to make payments
- Time - Required completion or important milestones
- Performance - Functional performance of the product and standards of quality
- Capital vs Operational costs
- Risk - Inherent time, cost, quality risks (dependent on client’s experience in the industry)
- Legislative / Environmental factors
- Type of project
The extent of weighting of each is the clients preference based on their business case.
Public projects require value for money above anything else, unlike Private projects commonly.
‘Playing back’ the client requirements is important to ensure the project team understands what they are trying to achieve, including the stated cost, the certain size, shape, appearance and performance, and defined timescale. This is then transformed into a spec for pricing.
WHAT CAN AFFECT THE CHOICE OF PROCUREMENT STRATEGY?
Commonly:
- Clients exposure to financial uncertainty
- Cleints degree of control over the design and construction process
- Extent of design information at the time of tender
- Information required at construction works commencement
- Extent of contractor and supply chain invovlement at design stage
- Organisational arrangements distributing risk, responsibility and accountability
Often, the completion date is of great importance, which can dictate procurement route due to constrained time rather than best choice.
Cost, though, is paramount in order to provide a return on the clients investment leading to reduced project costs via VE or otherwise.
WHAT IS TRADITIONAL, LUMP SUM PROCUREMENT?
Seen as least risk due to certainty level of design, cost and duration, however, sequential nature assures low risk but means slow phases pre-construction.
Design - Completed before competitive tenders by a client appointed design team based on experience / fees.
Cost - Contractor generally selected on best value (does not always mean lowest price). If there are no changes, cost certainty is reasonable, attracting clients with limited/restricted budgets for return investment. Client is responsible for accurate quantities (BoQ) however can be transferred to contractor by contract.
Risk - Contractor assumes responsiblity and financial risk for the construction of clients design, for agreed contract sum and programme. Client takes design responsibility and design team performance.
Reduced timescale can be achieved via advance works contract, i.e. ground works, then tendering above ground works seperately but reduces cost certainty.
WHAT ARE THE MAIN ADVANTAGES AND DISADVANTAGES OF TRADITIONAL LUMP SUM PROCUREMENT?
Advantages:
- Compeitive fairness
- Design-led process, client influence facilitates high quality
- Reasonable cost certainty (subject to design changes)
- Transparent process (benefit for public)
- Changes are easy to arrange and value, i.e. client demand or technology changes (limits cost certainty)
Disadvantages:
- If usual procurement programme is reduced, i.e. incomplete design, limits cost and time certainty and may cause disputes
- Longer than other procurement due to sequential design/construction (no parallel working)
- No contractor design input
- High risk projects, i.e. city centre refurb, can include high-risk premium on costs
- Designers and contractors have little incentive to advise on beneficial factors for operational costs
WHAT IS TRADITIONAL, REMEASUREMENT PROCUREMENT?
Occasionally used, based on principle that works undertaken are measured and valued for each type of work, cost certainty only gained at works completion. Not a lump sum agreement, but managed by a BoQ effectively acts as a SoR for each unit/item.
Effective use of measurement contract - where works are substaintially designed but final detail is not yet completed, tendered via drawings and a bill of approximate quantities is satisfactory.
Time - Reduced programme for design, tendering & construction, but little cost certainty as approximate quantities reflect absence of information.
The scope of works, approximate price and prgoamme should be clear at contract stage, creating more client risk than traditional lump sum contracts but offer programme advantages.
Organisational structure is alike lump sum approach, but without the lump sum contract sum figure.
WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF TRADITIONAL REMEASUREMENT PROCUREMENT?
Advantages:
- Time savings pre-construction, later design aspects ongoing
- Competitve prices as works are tendered via approximate quantities / SoR used to value at completion
- Well known procedures, particularly civil projects
- Changes made easily, even at latter stages of design
- Parallel working possible as contractor is selected before design is complete
- May prevent client paying high-risk premium as unknowns are not within a lump sum
Disadvantages:
- Poor cost certainty, only known at completion. Value for money depends on a watertight SoR drafted at the start of the project
- No contractor / supply chain involvement early in planning & design (most expensive decisions often)
- Adversial relationships, as with all strategies that are price dependent
- Programme uncertainty as works are not fully designed
WHAT IS DESIGN AND BUILD PROCUREMENT?
A single contractor assumes risk and responsibility for designing & building in return for a fixed lump sum. This integrates design, allowing construction to commence before a detailed design is completed, reducing programme.
Client employs a design team to create Employer Requirements to outline key objectives and significant critera for a successful outcome. Alternatively, the successful contractor will have the design team novated to them to complete the design together.
Within traditional procurement, the requirement of product is to be completed with ‘reasonable skill and care’, but D&B may exclude this. Clients preference is to include a fitness for purpose obligation, stating where there is a discrepancy between the Employer Requirements and Contractor Proposals, the ER’s prevail, so long as they are clean, complete and unambiguous.
The clients design team, therefore, are to ensure the ER’s are of high standard.
Higher insurances are required by the contractor in the event they do not meet fitness for purpose.
WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF DESIGN AND BUILD PROCUREMENT?
Advantages:
- Client deals with only one firm, single point responsibility, reducing resources dealing with designers/contractors seperately
- Cleitn risk is reduced due to single point responsibility
- Contractor controls design and planning responsibility
- Price certainty generally before construction starts, providing client requirements are adequately specified and changes not introduced
- Parallel working, reduced programme
Disadvantages:
- Difficulty in preparing adequate ER’s with precise requirements
- Client must commit to a concept design at an early stage, prior to detailed design
- Bids are difficult to compare, different designs, prices and programme to consider
- No design evaluation unless seperate consultants are appointed by client
- Client changes to scope can be expensive
- Design liabiltiy is limited by standard contracts available
- Quality may be compromised as client relinquishes control of design and build
HOW DO YOU SELECT A PROCUREMENT STRATEGY?
Should be developed from an assessment of the client’s needs and the project characteristics, think objectives, risks, and design responsibility.
Two components of selection - Analysis and Choice.
Analysis - Identify relative importance of objectives and clients attitude towards risk (Developing a Construction Procurement Strategey RICS Appendix for guidance)
Choice - Considered reasoning for possible procurement options, evaluation of what is / is not appropriate, and selection of best fit.
Beneficial to review best fit at milestones, i.e. planning approval, taking account of whether the design is on programme or circumstances have changed. Alternative may be a better fit at that stage.
Client may wish to Partner with the contractor, usually only when multiple projects are expected.
