Procurement & Tendering Flashcards
What factors may influence the type of procurement route selected?
- Cost Risk / Budget
- Time Risk / timings
- Design Risk
- Market Conditions
- Type of project
- Availability of tenders
Name the 5 different procurement routes
- Traditional
- Design & Build
- Management Contracting
- Construction Management
- Partnering
What is traditional procurement?
one of the most common types of procurement route, this is when the client appoints a design team to complete the design in full before tendering the works.
Who is responsible for the design under traditional procurement?
The client unless stated otherwise in any CDP items
When is it good to use traditional procurement?
- if the design is already prepared by the employer
- if client wishes to retain control over design and specification
- If programme is not the primary concern but cost is
Name 4 advantages to the traditional procurement route.
- Price certainty before commencement
- Client control
- Variations post contract easy to price
- Simple transparent process
Name 4 disadvantages to the traditional procurement route
- Longer process as its sequential
- No specific design input from the contractor
- Design risk lays with the client
- Contractors may use strategy to win tender based solely on price.
What is Design & Build procurement route?
This is when a contractor is appointed to design and construct the project. The client undertakes initial design in the form of employer requirements, then the contractor submits contractors proposals
When may you recommend using Design & Build Procurement Route?
- when the client wants to start on site quickly
- When client wants to minimise their risk by removing responsibility for the design
- projects that may involve technical expertise
Name 4 Advantages to Design & Build
- Single point of responsibility for both design and construction
- Client may benefit from contractors design input
- Speed - design and construction can overlap meaning quick commencement on site
- Cost certainty if early contractor involvement
Name 4 Disadvantages to Design & Build
- Potential conflicts between employers requirements and contractors proposals.
- if the client is inexperienced they may struggle to provide a brief of the quality required for accurate design and price
- Variations can be harder to price
- Contractor may compromise on quality for buildability purposes.
What is Management Contracting?
This is when the employer hires a management contractor to oversee works for an agreed fee and then sub-contracts packages. The management contractor is still technically the ‘principle contractor’ so hold responsibility for work they sub contract out.
When may management contracting be used?
During complex or specialist projects with a number of packages which can then be appointed to best suited sub-contractors
Name 3 advantages of Management Contracting
- Speed - can start on site if not all packages designed
- Can benefit from expert advice and knowledge in different areas
- Allows for flexibility in design until the package is let out
Name 3 disadvantages of management contracting
- No cost certainty until all packages tendered
- Little incentive for the principle contractor to minimise costs
- Changes can be expensive once the package is tendered
What is Construction Management procurement
Where the works are conducted by various trade contracts made directly with the client but a construction manager is appointed to co-ordinate all works and act as a consultant.
Name 3 advantages to construction management
- Can provide cost saving as client places each order direct with trade
- high quality as each ‘package’ is tendered to specialist in that area
- Hands on client involvement
Name 3 disadvantages to construction management
- If client is inexperienced maybe more risk as they have to appoint directly
- Greater chance of discrepancy as not one overall contract
- Most time management procurement route.
What is Partnering?
also known as alliancing is a collaborative approach where one or more organisations work together to achieve shared goals and objectives
Name 3 advantages of partnering
- Encourages collaborative working
- Greater source of expertise and knowledge can lead to better quality and buildability
- Creates an environment for innovation
Name 3 disadvantages of partnering
- high management involvement which can be time exhaustive and costly
- higher risk of conflict of interest
- Loss of Autonomy
What are the 5 contract options for pricing
- Lump Sum
- Measurement or re-measure
- Cost reimbursement
- Target cost
- Guaranteed maximum price
Name 4 advantages to lump sum contracts
- less risk for client as it provides a fixed price with greater cost certainty
- Widely accepted and understood
- Change orders minimised
- management for client is minimised
Name 4 disadvantages to lump sum contracts
- Due to increase risk to contractor they may factor this into their tender
- Careful change order documentation required to keep track of lump sum amount
- Preparing tender maybe more expensive for the contractor
- Disputes may change from change order requests
What is a lump sum contract?
When the contractor provides a single price for all works which is agreed before works commence. This is then only altered by variations, provisional sums, fluctuations or relevant events.
What is measurement contract?
When the works are described in reasonable detail but the quantity cannot necessarily be determined at the time.
Name 3 advantages to measurement contract
`1. Design doesn’t need to be complete to go to tender
- quick start on site
- competitive tenders as the client carries more risk
Name 2 disadvantages to measurement contract
- Little cost certainty until completion
2. Client takes risks on unknown items
What is cost reimbursement contract
Also known as cost plus pricing this is where the contractor is reimbursed for the actual costs they incur plus an agreed percentage for OH&P
Name 2 advantages of cost reimbursement contracts
- Allows for quick start on site
2. Can choose specialist contractor to carry out the works
Name 2 disadvantages of cost reimbursement contracts
- No cost certainty
2. No incentive to carry out the works cheaply
What are target cost contracts?
The target cost is agreed early on in the project and then the client and contractor share the pain or gain.
Name 3 advantages to target cost contracts
- Allows for collaborative working
- Incentive for contractor to decrease costs
- Easy to agree variations
Name 2 disadvantages to target cost contracts
- Agreeing the risk allocation can be difficult
2. Contractors risk is also shared
What is guaranteed maximum price contract?
A contract sum is agreed and it is agreed that the contract will not exceed this figure.
Name 3 advantages to guaranteed maximum price contracts
- Cost certainty
- Transfers risk to contractor
- quicker settlement of the final account
Name 3 disadvantages to guaranteed maximum price contracts
- Contractor may price in high allocation for risk
- changes to client design will be expensive
- agreeing what is design development and client change can cause conflict
What was the purpose of the RICS Tendering note 2017
Seeks to enhance knowledge and understanding of the tendering and negotiation process involved within procurement. Guidance note also looks at practical issues of producing invitation to tender.
According to RICS tendering note what goes into a tender report
- List of tenders received
- Initial tender returns and totals
- Qualifications
- Post tender adjustments
- Revised tender sums
- Issues to be resolved
- Comparison of returns
- Comparison against Pre Tender Estimate
- Recommendations
When was RICS Tendering note published
2017
What is an open tender?
This allows anyone to submit a tender to supply goods or services
What is selective tendering?
Only allows companies to submit tenders by invitation. This is a pre selected list
What is negotiated tendering?
Once contractor is appointed and then the price is negotiated between them and the client
What is Serial Tendering?
This is a standing offer of series of work all placed and priced on a bill from the first project.
What is framework tendering?
This is where the client selects suppliers, and sets terms and prices for a period of time.
What is single stage tendering?
This is a more traditional route, whereby a contractor’s submit a tenders and the successful one is then selected and appointed.
Name 4 advantages to single stage tendering
- provides greater cost certainty early on
- Design is complete before contractor appointed giving client greater design control
- Pricing templates simplify process
- Client benefit from competitive tender process which lead to competitive prices
Name 4 disadvantages to single stage tendering
- Market conditions may not allow for single stage tendering
- No early contractor involvement
- variations maybe costly
- Fixed price is only as good as the design information
What is two stage tendering?
Two stage process. in first stage project is tendered on competitive basis with incomplete design, the contractor will provide headline items such as prelims, programme, method statement etc. Then during the second stage the preferred contractor negotiates with the client contract sum.
Name 3 advantages to two stage tendering
- Early involvement of contractor
- collaborative working between contractor and design team
- Potentially early start date
Name 3 disadvantages to two stage tendering
- cost certainty not achieved until contractor appointed
- additional pre construction fees
- contractor could take advantage when through to second stage and increase costs.
What is included within JCT Tender Documentation
- Invitation to tender
- Instructions to tender
- Preliminaries
- Pricing Document
- Drawings
- Specification
- Contract (including amendments)
- Employers requirements
- Contractor proposals
- Pre construction H&S Documents
- Form of tender
How would you deal with errors found in a tender?
Option 1 = Confirm agreement of the error, standby / withdraw
Option 2 = Confirm agreement of the error, amend / withdraw
What is procurement?
The overall act of obtaining goods and services from external source
What is tendering?
The bidding process to obtain a price and process of appointing a contractor.
What is CDP?
Contractors Design Portion is where the contractors takes responsibility for specific portions or parts of the design. This will be stated within the contract
What must contractor have for CDP?
- Professional Indemnity Insurance
- Copy right licences for design to client
- appropriate skill, care and due diligence
How can good tendering ensure positive tender results?
Through:
- Accountability
- Auditability
- Ensuring everything is picked up
- Parity
- Help to reduce claim of corruption for proposed works.
Why do a pre tender estimate?
- allows client to understand if they can afford the project
- gives a basis of comparison for tender returns
According to the RICS Tendering Note what do you do when you receive tenders back?
- Open tenders, preferably with witness present, and fill our tender opening form with key details
- Check tenders for errors or conflicts
- Raise relevant tender queries
- Normalisation process
- Tender report
