Procurement & Tendering Level 1 Flashcards
What is procurement?
The overall act of obtaining goods & services for a construction project
The selected procurement route should follow a strategy which fits the project criteria & objectives
What are the main factors that determine the selection of a procurement route?
Client objectives, such as time, cost and quality
Risk allocation
What is the relationship between time, cost and quality?
Time - greater emphasis on time / certainty of completion date may influence project costs and design development
Cost - emphasis on cost certainty / price level may have an impact on speed to completion or design quality
Quality - an emphasis on quality / performance may impact both cost and project pace
How is risk dealt with?
Risk can either be accepted by the client, reduced, shared or transferred to another party - it cannot be ignored
Risks should be held by the party best able to deal with them
Risk retention are risks which are retained by the employer but are not neccessarily controllable
What are they key risk categories?
Design development risk - allowance during design process for risks associated with design development e.g. planning requirements, environmental issues, procurement methodology
Construction risks - for use during construction process for risks associated with site conditions
Employer change risks - for use in both design & construction process for employer driven changes e.g. change in scope of works, or brief
Employer other risks - other employer risks e.g. availability of funds, early handover
What are the key stages of a procurement strategy selection process?
Analysis - identifying the importance of client objectives and client attitude to risk
Choice - consideration of potential procurement routes, evaluating these, identifying routes which are inappropriate and selecting the best route which provides best fit to the analysis
What are the main procurement routes?
Traditional Procurement,
Design & Build Procurement
Construction Management
Management Contracting
What is Traditional Procurement?
Separate design from construction
The employer appoints consultants to design the project in detail, where contractors are then invited to submit tenders based on a fully developed scheme
Allows construction costs to be determined with reasonable certainty before works begin, assuming no significant design changes arise
What are the advantages of Traditional Procurement?
Competitive fairness as all tenders are based on the same information
Cost efficiency as the cost is largely known at the outset of the project
Programme certainty as the time frame is established at the outset of the project
What are the disadvantages of Traditional Procurement?
Long pre-contract stage as it relies on full design information prior to tender
Design risk is retained by the employer, any changes post contract will be a variation or compensation event (dependent on form of contract)
If full design is not achievable, this can lead to contractor design portion supplements or provisional sums - both of which compromise the certainty of output
When might Traditional Procurement be appropriate?
The employer has specific or detailed design requirements
Cost certainty is important to the client
If time is not a client priority
What is Design & Build Procurment?
The contractor is responsible for both the design and construction phase of the project
Under JCT, the employer’s team produce Employer’s Requirements of which the contractor responds with Contractor’s Proposals and appoints their own design team OR the employer’s design team may be novated to the contractor for continuity
Design risk is transferred to the contractor
What are the advantages of D&B Procurement?
There is a single point of responsibility for design and construction - the contractor
Earlier commencement on site is possible if design and construction can be overlapped
Benefit of contractor’s buildability input
Design & construction risk with the contractor
What are the disadvantages of D&B procurement?
The design is only as good as the ER
More complex in comparing tender returns
Client has less control over aesthetics and quality
Contractor will build in risk premiums within their tender in exchange for taking on design risk
When might D&B Procurement be appropriate?
When there is a need to make an early start on site (potential to overlap design & construction)
Where the employer wishes to minimise their risk profile as design is passed onto the contractor
For technically complex projects, the design will benefit from the contractors buildability input
Where retaining control of the design is a not a priority
What is Construction Management Procurement?
Employer directly appoints multiple subcontractors instead of employing a single main contractor
Has individual contracts with each of the separate trade contractors
The construction manager programmes and co-ordinates the work with no contractual link to the trade contractors and carries no risk
What is Management Contracting Procurement?
Employer appoints a management contractor to manage the entire process who in term appoints trade contractors to carry out the works
Management contractor is paid a fee % based on construction costs
Has a direct contractual link with the trade contractors and is responsible for the overall construction works
What are the advantages of Construction Management Procurement?
Overall project duration reduced by overlapping design & construction
Construction manager can contribute to design and planning process
Prices may be lower due to direct contracts with trade contractor
What are the disadvantages of Construction Management Procurement?
Cost certainty is not achieved until the last trade package is agreed
Requires an informed, experienced and proactive client to work
Client has lots of consultants and contractors to manage
When might Construction Management Procurement be required?
Client is experienced in construction and has suitable resources to manage a project
Client wants to achieve early start on site
Project is technically complex and requires detailed engagement of specialist consultants and trade contractors
What are the advantages of Management Contracting Procurement?
Overall project duration can be reduced by overlapping design and construction
Management contractor will provide buildability input
Single point of responsibility (management contractor)
What are the disadvantages of Management Contracting Procurement?
Price certainty is not achieved until the last trade package is agreed
Required informed and proactive employer
Dependent on how the management contractor is remunerated, may be a built-in disincentive for the MC to minimise costs
When might Management Contracting Procurement be appropriate?
When an early start on site is a priority
When flexibility in design is required
Buildability input from MC is required
cost certainty is not a priority for the employer
What is partnering?
Collaborative management approach that encourages openness and trust between the contracting parties
Formed to improve performance in delivery of projects
Emphasises common objectives
Ownership of risk is spread between parties & collaborative approach is encouraged to delivering the solution and overcoming problems
What are the key advantages of partnering?
Overall construction & design programme can be reduced
Likelihood of conflict is reduced
Improved communication and common objectives
Improved customer satisfaction and value for the client
What are the disadvantages of partnering?
Less opportunity to understand what other contractors / potential partners have to offer
Difficult to find a strong partner which has the same objectives, ethics, attitudes
What is tendering?
The process by which the employer invites contractors to place a bid for construction works.
Overall objective is to obtain a price for the works
What are the main tender processes? Please explain them
Single stage tender - ITT documents are issued to a number of competing contractors who bid based on identical info (RIBA Stage 4). Once preferred contractor is appointed, they enter into a contract to delivery works
Two-stage tendering - first stage tender enquiry documentation to be issued (RIBA Stage 2 / 3). Preferred contractor is selected based on quality, team, prelims, OH&P. They then work with the team to complete the design to RIBA Stage 4, where they then produce a bid
Negotiated tendering - single stage tender with a single contractor who returns a price which is negotiated with client team.
What are the main contractor selection techniques? Please explain them
Open tendering - allows anyone to express an interest in a tender, advertised online or via portals / journals
Selective tendering - a short list can be drawn up by the project / client team or a pre-agreed framework / approved supplier list
Single contractor selection - works hand in hand with negotiation as a tendering process. Typically starts with a shortlist, then narrowed down by the pre-qualification process which can be an interview or pre-qualification questionnaire
What is a pre-qualification questionnaire (PQQ)?
Sets out a series of questions for potential tenderers to answer regarding level of experience, capacity, financial standing etc. prior to being invited to tender
Reduces number of potential tenderers to those that are genuinely appropriate for the project
What might a pre-qualification questionnaire (PQQ) ask for?
Experience, financial information, company details, insurance cover, quality assurance policy, equal opportunities policy, environmental management policy, references
What is OJEU?
Official Journal of the European Union
Online portal which houses public sector contracts that are over a certain value for procurement
Now UK are out of the EU, tenders are now published on a new e-tendering portal called Find a Tender Service (FTS)
What is Early Contractor Involvement (ECI)?
A form of negotiated tender where emphasis is put on the contractor as the lead designer from the outset of the project
Involves the creation of a designer / contractor team led by the contractor
Beginning to be seen in infrastructure projects where early appointment can significantly impact the direction of emerging design
What is your awareness surrounding the JCT Tendering Practice Note 2012?
Seen as best practice regarding tendering procedures
Preliminary enquiry - project information schedule and pre-qualification questionnaire
ITT and Tender - documents involved, criteria and guidance
Assessment & award - assessment, examination of priced documents and relation matters, notification to tenderers
Includes advice on how to deal with errors in tenders and guidance on pre-qualification
What is the relevance of BS 11000-1 Collaborative Business Relationships with regards to tendering & procurement?
It strictly relates to partnering projects
Outlines 8 eight stages of a partnership, whereby stage 4 (Partner selection) provides advise on how to select and evaluate proposed partner bids
What are the reasons for a robust tendering strategy?
Helps to ensure positive tender results through:
Accountability
Auditability
Ensuring everything has been picked up
Parity
Helping to reduce claims of corruption
Ensuring the correct price has been paid for the proposed works
