Procurement & Tendering Flashcards
1). What is procurement?
– The overall process of acquiring construction work or services
2). What should be considered when selecting a procurement route?
– The specifics of the project – The key client objectives regarding: Cost, Time, Control, Quality, and Risk
3). What are the main procurement methods?
– Traditional – Design & Build – Management Contracting – Construction Management
What is traditional procurement?
– The 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.
4). How does traditional procurement work?
– The contractor takes on the 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 the responsibility and risk for the design and the design team performance.
5). When might it be appropriate to consider a traditional route?
– If the employer has already had the design fully prepared. – If the design is substantially completed at time of contractor selection. – The client wishes to retain control over the design and specification – Cost certainty at start on site point is important to the client. – The shortest overall programme is not the client main priority.
6). What contracts might be used for traditional procurement?
– JCT: Minor Works – JCT: Intermediate – JCT: Standard Building Contract with Bill of Quantities
7). What are the advantages of traditional procurement?
– Quality Control; Design led so can ensure the design is up to the client’s expectations before tender. – Cost Certainty; as design already complete gives a much better position for cost certainty. – Well known procedure / most simplistic procurement route. – Suitable for clients with limited construction experience. – Offers a transparent process as all tenderers pricing the same design and spec. – Offers competitive fairness due to the transparent process (pricing same design information). – Changes are relatively easy to arrange and value (known starting point).
8). What are the disadvantages of traditional procurement?
– Time; overall project duration may be longer than other routes – sequential process – Buildability; No input into design and planning by contractor – Strategy based on price competition – could lead to adversarial relations – Dual point of responsibility; client & design team for the design and contractor for the construction. – If design is not complete at time of tender then cost and time certainty is significantly reduced.
9). What is design & build?
– This is where the contractor is responsible for the design, planning, organisation, control and construction of the works to the employer’s requirements.
10). How does a design & build route work?
– The employer gives the tenderers the Employer’s Requirements, and the contractors respond with the Contractor’s Proposals, this will often include the price for the works.
11). When might it be appropriate to consider a D&B route?
– Programme; when there is a need to start on site as soon as possible (overlap design & construction) – Risk; if the client wants to minimise their risk – transfer of design risk to the contractor. – Technically complex projects – will get the benefit of buildability advice from the contractor. – Where the client does not wish to retain control over the design development.
12). What contracts might be suitable for a D&B route?
– JCT Design and Build 2011 – JCT Design & Build 2016
13). What are the advantages of a D&B procurement route?
– Programme; allows earlier start on site as you can overlap design & construction. – Risk; Single point of responsibility, the contractor is responsible for the design and the construction. – Buildability; Benefit of early contractor engagement and advice around buildability, logistics, site management etc. – Cost Certainty; Single stage lump sum design and build can give early point of cost certainty (potentially after Stage 2).
14). What are the disadvantages of a D&B route?
– Quality Control ; detailed design will be carried out by the main contractor not the client’s design team. – Client Brief Requires a sufficiently comprehensive brief to ensure the Employer’s Requirements match client expectations. – Client will have to commit to a concept design earlier in the process. – Change; Variations from the original brief are often hard to arrange and often expensive. – Harder to compare tenders – harder to normalise and determine if you’re getting value for money. – Ease of fabrication / construction may be prioritised over aesthetic quality. – Reduced competition as there are less companies capable of delivering under design & build.
15). How much of the design input will the contractor have?
– This will depend on how much design information is available at the point of tender. – This can range from Stage 2 (concept design), Stage 3 (developed design / partially coordinated), Stage 4 (Technical Design, fully coordinated and specified). – Even if the design is well developed the contractor will still be taking on the risk and responsibility for the design.
16). Who carries out the design for the contractor?
– This will be covered in the Employer’s Requirements or the Contractors Proposals. – The contractor will always retain responsibility of the design under D&B though. – This can be in the form of: > Outsourcing the design > Novating / the main contractor retaining the Client’s Design Team (transfer of rights and obligations) > Using in–house design team
17). What is novation?
– A new contract that transfers the rights and obligations of one contractual party to a new third party. – In this case it would be the design rights and obligations of the architect transferred to the contactor.
18). If the design team is novated, what should the client put in place?
– A collateral warranty between the client and the design team to give them remedies for breach of contract. – This is because once rights and obligation shave been transferred under novation, the client no longer has a contractual relationship with designer. – This gives the employer (now a 3rd party to the Contractor & Designer contract) the right to enforce contract terms.
19). What is management contracting?
– A management contractor is employed to contribute their expertise to the design and to manage the construction on site, and is paid a fee to do so.
20). How does management contracting work?
– The management contractor has direct links with all the works contractors. – The have the responsibility for the construction of the works without actually carrying them out. – Not all the design needs to have been completed before the first works contractors start on site. – The MC selects the works contractors through competitive open book tenders. – The client reimburses the cost of these packages to the MC plus their fee. – The MC’s role is low risk – get prime cost plus a fee.
21). When might it be appropriate?
– Time; when an early start on site is a priority – Cost Certainty; when cost certainty is not a top priority for the client. – Quality; when the client wants to retain control of the design. – Risk; if the client is not concerned with carrying design risk.
22). What contract might be used?
– JCT Management Contract 2011, 2016
23). What are the advantages of Management Contracting?
– Time; can reduce overall project duration as can overlap design and construction. – Buildability; Early contribution on design from the contractor around buildability, logistics, etc. – Changes; can be accommodated in packages not let yet (as long as they do not have an impact on other aspects). – Competition; The works packages are let competitively at current market prices on a firm basis.
24). What are the disadvantages of Management Contracting?
– Cost Certainty; project cost certainty is not known until the last package has been let. – Changes to the design of later packages may impact earlier packages – and will therefore be expensive. – There is little incentive to for the Management Contractor to reduce costs. – My become a ‘post box’ system / not great value for money. – Risk; design risk remains with the client. – Defaults; MC has little legal responsibility for the defaults of the works contractors.
25). What is Construction Management?
– The employer places a direct contracts with each trade contractor and utilises the expertise of construction managers who act as a consultant to coordinate the contracts.
26). How does it work?
– The trade contractors / package contractors carry out the works. – The CM appointed to supervise the construction process and coordinate the design. – The CM has no contractual links with the trade contractors or members of the design team. – The role of the CM includes: > Programme Preparation > Determining Requirements for Site Facilities (Fixed & Time related Prelims) > Breaking down the project into suitable works packages > Obtaining and Evaluating Tenders > Co–ordinating and supervising works. > Usually role of Contract Administrator to ensure sub–contractors are carrying out works in accordance with the contract.
27). When might it be appropriate to use a Construction Management route?
– On large complex projects were advantages of CM can be taken advantage of; buildability expertise, early programme advice, specialist input from works contractors. – Time; when early start on site is a priority. – When Flexibility in the design, procurement and construction strategy is important. (Refurb) – Where cost certainty is not a key priority. – Where the client is experienced in construction.
28). What contracts might be used for Construction management?
– JCT Construction Management Agreement (CM/A) – Construction Management Trade Contract (CM/TC) – Bespoke Construction Management Contract
29). What are the advantages of Construction Management?
– Time; overall duration of the project can be reduced as can overlap design and construction. – Buildability; Early engagement with Construction Manager / Contractor for buildability. – Risk Relationships; Roles, risks, and relationships between all parties are clear. – Change; variation in design can be accommodated without paying a premium (will depend on what has already been procured though). – Cost; Prices for works packages might be lower as direct contract with the employer. – Client has means of redress to trade contractors through direct contractual links.
30). What are the disadvantages?
– Price Certainty; will not be achieved until last package is let. – Changes to later packages might adversely affect packaged already let – expensive – Client Experience; The client needs to have good experience, be proactive and informed. – Client has a lot of consultants and contractors contracted directly, so may incur additional fees. – Risk; Greater level of client risk as take responsibility for the design. Have to make sure contractual terms with package contractors are correct.
31). What is the difference between management contracting and construction management?
– Under construction management the client is in a direct contractual relationship with the works contractors. – Under management contracting the main contractor is in contract with the works contractors.
32). How do you identify the client requirements before recommending a procurement route?
– Hold detailed discussions with the client and design team. – Make sure the client is clear when prioritising key objectives; Time, Cost Certainty, Quality, Risk, Control, and Experience . – Make sure the design team is aligned to these priorities.
33). If the client wishes to start on site as soon as possible what route would you recommend?
– It would depend on other priorities as well, such as cost, quality, and risk. – If time was the overriding priority then CM or MC offer the fastest route to start on site date. – This is because the start on site date is not dependant upon a long tender period. Overlap design and construction. – But this will have consequential disadvantages in terms of cost certainty and risk.
34). What if the client wanted an early start on site date but also cost certainty?
– Then Single Stage D&B (Lump Sum Contract) route might be more appropriate. – This would allow the design and construction to overlap rather than being sequential. – But would also offer greater cost certainty from the main contractor. – Tender based on the provision of all services so the client gets a lump sum price. (Depending on design, may include prov sums). – This route would also reduce risk, but also decrease control over quality, and expensive.
35). What is GMP?
– Guaranteed Maximum Price.
36). What does it mean to you?
– This is a lump sum contract under which there is no adjustment of tender price unless the client alters the scope. – The contractor includes the additional risks involved in the design and construction processes in the tender.
37). What are the advantages of this?
– Cost Certainty; contractor takes on risk of design development and unforeseen occurrences. – Greater control over spending; its in the contractor’s interest to alert the design team to expensive items. – Quicker settlement of the final account.
38). What are the disadvantages?
– Might not be as competitively priced. – Client may end up paying too much as the contractor will price in the risk. – Scope changes are likely to be very expensive and may not be possible. – Can be adversarial; trying to clarify if alterations are design development or scope change.
39). What is PFI?
– Private Finance Initiative. – A government programme bring private sector project management and expertise into the public sector. – This allows the private sector to be granted a concession to finance, design, build and operate a public project.
40). What are the types of PFI projects?
– 3 types – Financially Free Standing; undertaken with PFI and costs recovered by charging users; Toll Bridges. – Joint Venture; public and private contributions to funding with private maintaining overall control. Contributions, services and allocation of risk are clearly defined. – Services Sold; a project which is significantly funded by capital expenditure by the private sector and is then sold back to the public sector. The public sector requires clear demonstration that this options provides better value for money than FFS, and JV approaches.
41). What are the benefits of PFI?
– Encourages the allocation of risks to those most capable of managing them. – Allows the delivery of assets which might be difficult to finance conventionally. – Encourages delivery to time and price; private sector is not paid until the asset has been delivered. – PFI are fixed priced contracts with financial consequences for late delivery. – Encourages a greater focus on whole life costing during the design phase. – Incentivises performance by specifying service levels and applying penalties if those are not met.
42). What are the disadvantages of PFI?
– Higher cost of finance than other public procurement routes (Government Gilt rate approximately half PFI). – PFI does not always encourage a challenging approach to evaluating whether this route is value for money. – Reduced contract flexibility with long service contracts which may be difficult to alter. – Increased costs associated with the risk transfer.
43). What is the potential role of a QS in a PFI scheme?
– Would act for the contractor, providing advice normally given to the client. – Become part of the Special Purpose Vehicle, that acts as the end user representative.
44). What sort of projects might PFI be used for?
– Its use is recommended when it can be clearly demonstrated that it offers good value for money. – Considered more appropriate on larger complex projects. – Greater capital costs as well as associated ongoing maintenance requirements. – Projects that will clearly benefit from the expertise of the private sector.
45). What are some of the problems associated with PFI Schemes?
– High bidding costs and takes longer to procure than traditional projects. – Doesn’t always offer good value for money. – Doesn’t always lead to initiative design / challenging design process. – PFI client (government) tries to maintain close control over the project. – Difficult to agree on concessions.
