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APC Project Management Revision Pack > Procurement & Tendering > Flashcards

Procurement & Tendering Flashcards

1
Q

What is Procurement?

A

The overall act of obtaining goods and services from an external source, which includes deciding on the strategy of how these goods are to be obtained by reviewing the Clients requirements.

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2
Q

What is Tendering?

A

The bidding process to obtain and price, and also the process of appointing a contractor.

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3
Q

What factors can influence the chosen procurement route?

A
  • Clients appetite for risk.
  • Budget.
  • Desired quality.
  • Timings.
  • Funding availability.
  • The type of project.
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4
Q

What is a Traditional Procurement Method?

A
  • The most common form of procurement.
  • Where a client appoints consultants to design the project, prepare the tender documents which are issued to contractors for pricing, usually on a single-stage competitive basis.
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5
Q

Who is responsible for design in a traditional procurement route?

A

• The Client is responsible for design, the contractor is only responsible for the design of their temporary works, and their Contractors Design portion.

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6
Q

What is a Contractors Design Portion?

A

• Included within a contract, whereby a contractor will take on design responsibility for a specific portion of the works.

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7
Q

What must the contractor have if they take on a Contractors Design Portion?

A
  • Takeout and Maintain Professional Indemnity Insurance.
  • Provide copyright licenses for designs to the Client.
  • Provide appropriate levels of skill, care and due diligence.
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8
Q

What types of traditional procurement routes are there?

A
  • Lump Sum.
  • Re-measurable.
  • Cost Reimbursement.
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9
Q

How do the risks differ for the Client for each traditional procurement route contracts?

A
  • Lump sum = low risk for the Client with regards to both finance and quality, unless design is incomplete.
  • Re-measurement = Higher risk to the client finance wise due to lack of agreed final price.
  • Cost Reimbursement = High Risk Financially, no incentive for contractor to cover costs.
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10
Q

What is a re-measurement contract?

A
  • Where the design can be described but the Quantity Cannot.

* Design must be detailed enough to be able to produce rates from it, based on an approximate bill of quantities.

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11
Q

Are re-measurement contracts fixed price?

A

• No, the final price is not ascertained until completion.

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12
Q

What is Design and Build?

A

• Where a single point of responsibility is created for both the design and construction of a project through the Contractor.

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13
Q

What is the Design and Build process?

A
  • Typically, Client will appoint consultants to produce concept designs and create the Employers requirements.
  • Client will then give these Concept designs and the employers requirements to the contractor, who will price to design and build the job based off these designs and requirements.
  • Typically, the Clients design team will be novated to the Contractor, to help keep design continuity within the project.
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14
Q

What is Novation?

A

• A process where the contractual benefits and burdens are transferred from one party to another.

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15
Q

Does Novation mean the Contractor is responsible for the service provided to the Client by the design team prior to novation?

A

No, unless they agree to be.

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16
Q

Can Design and Build be lump sum?

A
  • Yes, so long as the employers requirements are detailed and clear.
  • Ambiguity in these requirements will cause confusion and extra cost.
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17
Q

In D&B What takes precedence, the Employers Requirements or the Contractors Proposals?

A

Employers Requirements

• The Contractors proposals should be an indication of how the contractor intends to comply with the employers requirements; not and indication of how the contractor wishes to construct the project or allocate risk.

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18
Q

What is Management Contracting?

A

• A procurement route, where the works are broken down and contracted to ‘trade contractors’ who are contracted direct to the management contractor under works packages.

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19
Q

When would you use a Management Contracting Route?

A

• On complicated projects, where you could bring on a management contractor to help improve buildability.

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20
Q

When would you appoint a management contractor?

A

• As early as possible, to use their experience help influence design and buildability.

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21
Q

Does the Management Contractor carry out any construction work?

A

• No, they are either or a fee or get paid a percentage of the build cost, on top of the construction costs.

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22
Q

Who are the works package contracted to?

A
  • They are contracted to the Management Contractor.
  • However they will typically have some form of Warranty, usually a Collateral Warranty between each trade contractor and the Client/funder etc.
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23
Q

What services may the Management Contractor Provide?

A
  • Advising of brief development.
  • Advising on appointments.
  • Advising on feasibility, interfaces, buildability cost and programme.
  • Defining Key Performance Indicators.
  • Cost Control.
  • Tendering and Managing Works Packages/Contractors.
  • Managing Site.
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24
Q

Who undertakes the design under a Management Contracting Route?

A

The Clients Consultant team.

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25
Q

What is the Management Contractor Liable for?

A
  • Only his own negligence in relation to his services.

* Will have to maintain Professional Indemnity Insurance.

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26
Q

Is management Contracting fixed price?

A

• No, it is Prime Cost Until each package is let, then the management fee is added on top.

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27
Q

What is Construction Management?

A

• Where the works are constructed by a number of ‘Trade Contractors’ contracted direct to the Client.

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28
Q

Can you describe the Construction Management process?

A
  • Client will employ consultants to produce designs. The Construction Manager is Employed as a fee earning professional to manage programme, coordinate design and facilitate collaboration.
  • The Construction Manager will arrange and advise on ‘Trade Contractors’ for the employer to appoint.
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29
Q

Who are the Trade Packages contracted to?

A

They are contracted direct to the Client.

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30
Q

What is the Construction Manager Liable for?

A

For his construction management services.

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31
Q

What is Serial Contracting?

A

• Where a Client and Contractor work together on multiple projects. I.e. They will tender for the first and negotiate the rest.

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32
Q

What is Partnering?

A

• A concept that aims at forming a relationship between two companies to improve the performance in the delivery of a project

33
Q

What is a reimbursable contract (Cost Plus)?

A

• Where the contractor is reimbursed for the costs they incur, plus a fee.

34
Q

When would you use a Reimbursable Contract?

A

• Where the scope of works cannot be defined or the risk is too high for works to be undertaken on price.

35
Q

Who bares the risk with Cost Reimbursable?

A

• The Client as there is no contract sum.

36
Q

When do you use a single and 2 stage tenders?

A

Single stage:

  • when a full design is available
  • a competitive price is required
  • Client wants to control Quality and Cost

2 stage:

  • Early contractor appointment is needed
  • Complex Projects
37
Q

When would you consider a design and build contract?

A

If the project is complex and requires contractor input
If client wishes to commence quickly
Client wants to off-set the risk of design

38
Q

What was the tender awarded on? (why did you choose the contractor you did)

A

Tender returned had the best technical understanding and provided less lump sum figures

39
Q

How do you deal with lump sums in a tender?

A

Normalise them by reviewing the returns and taking a view on an average across the returned numbers.

40
Q

What are the main types of procurement used in Hong Kong?

A
  • Traditional
  • Design and build
  • Management contracting
41
Q

What is traditional procurement?

A
  • 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
42
Q

How does traditional procurement work?

A
  • The 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 the responsibility and risk for the design and design team performance
43
Q

When might traditional Procurement be appropriate?

A
  • If the employer has had the design 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 is important
  • The shortest overall programme is not the client’s main priority
44
Q

What are the advantages of traditional procurement?

A
  • Competitive fairness and transparent process – increase value for money
  • Design led – can ensure quality
  • Price certainty before commencement
  • Well known procedures
  • Changes are reasonably easy to arrange and value
45
Q

What are the disadvantages of traditional procurement?

A
  • Overall project duration may be longer than others – sequential process
  • No input into design and planning by the contractor
  • Strategy based on price competition – could lead to adversarial relations
  • Dual point of responsibility – design team for design and contractor for construction
  • If design not complete at time of tender, cost and time certainty are reduced
46
Q

What are Key Performance Indicators?

A

KPI’s enable all those involved in the construction supply chain to establish how they are performing on a project

  • Allow organisations to benchmark their performance in those areas that are critical to the success of projects
  • There are nationally recognised KPIs that you can measure and compare yourself against
47
Q

What are the main methods of choosing a contractor?

A

Open tendering
Selective tendering – single or two stage
Serial
Joint ventures

48
Q

What is open tendering?

A
  • Indiscriminate request for tenders
  • Advert placed in local paper/technical press inviting contractors to apply for tender docs
  • Gives characteristics of the work
  • Deposit usually required to discourage frivolous applications
49
Q

What are the advantages of open tendering?

A
  • No charge of favouritism
  • Gives opportunities for capable firms you might not have put on a list
  • Should secure max benefit from competition
50
Q

What are the disadvantages of Open Tendering?

A

Danger lowest tender is inexperienced or has made lots of errors
No guarantee the lowest is capable or financially stable
Total cost of tendering is increased

51
Q

What is selective tendering?

A

Restricts the number of tenderers by pre-selecting a limited number of contractors to tender for the work

52
Q

What are the two types of selective tendering?

A

Single Stage

Two Stage

53
Q

What is single stage tendering?

A

A structured process of receiving competitive tenders from a number of pre selected capable contractors, who provide a lump sum for the works

54
Q

What are the advantages of single stage tendering?

A
  • Ensures only capable and approved firms submit tenders
  • Tends to reduce the aggregate cost of tendering
  • Client gets a lump sum for the whole works
55
Q

What is two stage tendering?

A
  • Separates the processes involved with selecting a contractor from the processes for determining the price for the works.
  • Used when it is desired to obtain the benefits of competition and have the advantage of bringing a contractor into the planning of the project and gain an earlier commencement
56
Q

What is the purpose of the first stage of a 2 stage tender?

A

To select a suitable contractor by means of limited competition

57
Q

What is the purpose of the second stage of a 2 stage tender?

A

A negotiation process with the selected contractor on the basis of the first stage

58
Q

What do tenderers return as part of the first stage in a 2 stage tender?

A
  • Detailed build up of prices for the preliminaries items
  • Percentage additions for profit and overheads
  • A construction programme
  • Proposed sub letting of the works
59
Q

Are there any precautions you should take before entering the 2nd stage process?

A

Define procedure for either party to withdraw should 2nd stage negotiations prove abortive, what payments become due.

60
Q

What are the advantages of two stage tendering?

A
  • Early involvement of the contractor
  • Encourages collaborative working
  • Potential for earlier start on site
  • Greater client involvement in selecting the supply chain
  • Contractor can help identify and manage risk
61
Q

What are the disadvantages of two stage tendering?

A
  • Cost certainty may not be achieved before construction starts
  • Additional pre-construction fees for the contractor
  • Contractor could take advantage of second stage negotiation – increase costs
  • Potential for parties to not agree contract sum – risk – cost of retendering
62
Q

Why should you use 2 stage tendering?

A
  • Building is complex
  • Magnitude of work is unknown at time of contractor selection
  • Early completion is required
  • Design team would like to make use of contractors expertise on buildability issues.
63
Q

What is negotiated Tendering?

A

Where the client has a preference for a particular firm

64
Q

When might negotiated tendering be used?

A

Possibly when the contractor has done satisfactory work for him before

65
Q

How does negotiated tendering work?

A

There is no competition – likely to lead to a higher price
BUT client may think it is worth it for a quicker or better quality job
The contract sum is arrived at by a process of negotiation
One party usually prices a schedule of rates / bill which is used as a basis

66
Q

How would you put together a set of tender documents?

A
  1. ITT (Invitation to tender letter)
  2. Instruction to tenderers: Date and time for return, to whom, site visits, programme, visit to architect to see drawings, errors, discrepancies, NJCC alternative 1,2. Scoring matrix (quality/ price), confirmation of receipt
  3. Conditions of proposed contract
  4. Prelims, Pricing doc (SOR, BOQ)
  5. Specification
  6. Drawings
  7. ERs
  8. CPs
  9. Pre-construction H&S information
  10. Form of tender
67
Q

What information would the instructions to tenders contain?

A 
Date for return 
	Address to return to 
	Site visit details 
	Programme length 
	Confirmation of receipt of documents 
	How tender should be submitted
68
Q

What is the form of tender?

A

It is a formal acknowledgement that the tenderer understands and accepts the terms of conditions of the tender documents and any other requirements that are stipulated.

69
Q

What would you include in the pre-qualification questionnaire?

A

Details of contract particulars, in accordance with practice note 6
Turnover
Previous relevant experience and references
Company accounts
Personel
Management and organizational structure
Health and safety records
Quality systems and environmental policy
Provision of bonds / warranties / PCG
This is done through questionnaire and interview process with scoring matrix.

70
Q

When seeking tenders for construction work, in addition to the actual fee bid, what information would clients typically expect to be submitted?

A 
Track record of previous experience 
	Proposed team 
	CVs or team profiles 
	Methodology or approach 
	References 
	Programme
71
Q

Why should you as a surveyor examine tenders?

A

Check tenderer has included everything, if not to ascertain whether they are still the lowest.
Component parts of tender will be used subsequently e.g. valuing variations
Errors in SOR, BOQ need to be identified and dealt with.

72
Q

What should be examined, looked for in a tender?

A 
Arithmetical errors (comp checking) 
	Pricing errors (Items not priced, or same item but different prices in diff sections) 
	Pricing methods (front, back loading) 
	Qualifications
73
Q

What is the danger of accepting a very low tender?

A

They may have missed some of the works
The quality may be lower than some of the other tenders had allowed
Once on site they may try and recover their costs by a large no of variations / claims for EOTs and loss and expense
This could lead to adversarial relationships

74
Q

What happens if tenders are returned and are higher than cost plan, pre-tender estimate?

A

Could be market problems, need to reconcile to identify major differences, VE process could take place on those elements.

75
Q

How do you carry out a tender evaluation?

A
  • Need a breakdown of the tenders, check them to ensure they have been priced in accordance, that there are no errors, qualifications or exclusions
  • Follow NJCC procedure if errors are found
  • Compare against the pre-tender estimate to check rates are not unusually high/low
  • Ensure all amendments made during the tender period have been incorporated
  • Prepare the tender report giving a summary of the actions, costs and recommendation
76
Q

What is included within a tender recommendation report?

A 
List of tenders received 
	Initial tender return totals 
	Any qualifications identified 
	Post-tender adjustments 
	Revised tender sum 
	Issues to be resolved 
	Comparison of tender returns 
	Comparison with pre-tender estimate 
	Recommendation
77
Q

Why didn’t you choose to have a 2 stage tender when you discovered the cables?

A

Full design was already produced

Client didn’t want to loose competitive pricing

78
Q

What are contract particulars

A

The contract particulars in a construction contract (or appointment agreement) set out the aspects of the contract that are particular to the project to which the contract relates.

APC Project Management Revision Pack (20 decks)

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