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Procurement & Tendering Level 2 - Coggle Diagram
Procurement & Tendering Level 2
Level 1 Hooks
Types of Procurement route
Design & Build (D&B)
Definition
- The contractor is responsible for completing the design and executing the construction phase of the project. This is a completely different approach to delivering a project via traditional procurement, where the client appoints consultants to undertake the design and then a contractor is appointed to construct the works.
Key points
1) Under JCT contracts, the employer's team produce a set of employer's requirements (ERs), the contractor then responds to the ERs with their contractor's proposals (CPs)
Employer Requirements Definition
- The expression employer's requirements is used to describe the documents produced by the employer to set out its requirements in relation to the project which will include performance specifications, drawings, initial drawings etc. This is what the design and construction works are based on.
Contractors Proposal Definition
- CPs are prepared by the contractor which responds to the employer's requirements.
In these documents, the contractor will set out a more detailed designed which are based on the employers requirements. These will require further development throughout the course of the project
2) The original employer's design team may be novated to the contractor for continuity, or the contractor may appoint their own design team
3) The contractor is responsible for the design, planning, organisation, control and construction of the works
4) Design risk is transferred to the contractor
Advantages
1) Single point of responsibility for design and construction (Contractor)
2) Earlier commencement on site is possible if design and construction can be overlapped
3) Benefit of contractor's experience harnessed during design with buildability input
4) Design and construction risk rest with the contractor
5) Provides more cost certainty than traditional procurement
Disadvantages
1) The design is only as good as the employer's requirements
2) More complex to compare tender returns
3) Employer changes can be difficult to value and expensive
4)The employer may have less control over aesthetics and quality
5) The contractor will build in risk premiums into their tender return
When might D&B be appropriate?
1) Where there is a need to make an early start on site as D&B has the potential to overlap design and construction
2) Where the employer wishes to minimise risk profile (design risk is passed onto the contractor)
3) For technically complex projects , the design will benefit from the contractors buildability input
4) Where retaining control of the design is not a priority
Construction Management
Definition
- The employer directly appoints multiple subcontractors instead of employing a single main contractor.
Key Points
1) The employer places a direct contract with each trade contractor and utilises the expertise of a construction manager to coordinate the works
2) The construction manager programmes and coordinates the works
3) The construction manager has no contractual link with the trade contractors
4) The construction manager has no vested interest in the financial outcome of the project and barring professional negligence, carries no risk
Advantages
1) Speed to get to site
2) Overall project duration reduced by overlapping design and construction
3) The construction manager can contribute to the design and project planning processes
4) Changes in the design can be accommodated without paying a premium
5) Prices may be lower due to direct contracts with trade contractors
6) the employer has means of redress with trade contractors through direct contractual links
Disadvantages
1) Price certainty not achieved until the last package has been let
2) The procurement route requires an informed, experienced and proactive employer to work
3) The employer has a lot of consultants and contractors to manage
When might construction management be appropriate?
1) The employer is experienced in construction and has suitable resources to manage the project
2) The employer wants to achieve an early start on site
3) The employer wants the flexibility to make minor changes to the design/specification throughout the process with minimal impact on time or finances
4) The project is technically complex and requires detailed engagement of specialist consultants and trade contractors
Which is the riskiest procurement route for the employer?
Construction management. This is because the employer places individual contracts direct with each trade contractor and the construction manager carries no risk barring professional negligence.
Management Contracting
Definition
- The employer appoints a management contractor to manage the entire building process who in turn appoints trade contractors to carry out the construction works.
Key points
1) The management contractor is usually paid a fee percentage based on construction costs
2) The management contractor has a direct contractual link with the trade contractors and is responsible for the overall construction works
Advantages
1) Overall project duration can be reduced by overlapping design and construction
2) The management contractor will provide buildability input
3) Single point of responsibility (management contractor)
4) Trade packages are let competitively and transparently
5) There can be considerable flexibility in the design, with changes being made throughout the construction process
Disadvantages
1) Price certainty not achieved until the last trade package is let
2) Requires an informed and proactive employer to be successful
3) Depending on how the construction manager is paid for their services, there may be a built-in disincentive for the construction manager to minimise cost
When might management contracting be appropriate?
1) When an early start on site is a priority
2) Flexibility in design is required
3) Buildability input from the management contractor is required
4) Where cost certainty is not a priority for the employer
Traditional
Definition
- The traditional procurement route involves separating design from construction. The employer first appoints consultants to design the projects in detail, contractors are then invited to submit tenders based on a fully developed scheme.
Key points
1) Design is completed by the employer's design team before competitive tenders are invited. The contractor is then appointed to build what designers have specified
2) The contractors tender based on a complete design produced by the employer's consultants with the exception to Contractor's Design Portion (CDP)
3) Assuming no significant design changes arise, construction costs can be determined with reasonable certainty before works begin
4) The employer retains the design consultants during construction. The consultants prepare any additional design information and review CDP designs prepared by the contractor
Advantages
1) Employer retains control of the design
2) The design is largely finalised before the contractors tender for the build, this means the employer knows exactly what they are getting
3) All tenderers produce a submission based on the same information therefore tender returns are much easier to compare
4) Assuming the design is robust, reasonable price certainty is achieved at contract award
5) Minimal built-in contractor risk premium unlike design and build
Disadvantages
1) The overall project duration may be longer than design and build procurement as there is limited opportunity to overlap the design and construction phases
2) Zero or limited contractor buildability input
3) Design risk is retained by the employer, any changes post contract will be a variation/compensation event
4) Dual point of responsibility, employer for design and contractor for construction
When might traditional procurement be appropriate?
1) The employer may have specific or detailed design requirements
2) Cost certainty
3) The shortest overall programme is not the employer's main priority
Main factors which govern procurement route selection
Client objectives and key drivers in relation to
1) Time
2) Cost
3) Quality
4) Risk
5) Client experience
JCT Tendering practice Note 2017
1) Preliminary Enquiry (Pre shortlisting)
Contractor sent initial enquiry letter
The basis, criteria and weighting of the pre-selection
How errors in priced tenders are dealt with
Project Information Schedule
The project and estimated value
The Employer, the professional team and contact point
The tendering procedure
The programme of the tender process
The requirements of Contractor's design
Any applicable BIM requirements
The form of contract to be used
Completed contract particulars - Collaterial Warranties, Third Party Rights, bonds and Contractors insurances, PCGs
Any amendments or modifications of the contract or its conditions
Mode of execution (Deed or simple contract)
Pre-Qualification Questionnaire
1) Basic Factual Particulars
2) Financial and good standing
3) Regulatory and compliance matters
4) Technical Capacity
2) The Invitation to tender and tender itself
Documents to be issued to contractor
Drawings & Specification
Bill of Quantities
Work schedules
Employers Requirements
Invitation to Tender and Tender Form
RICS guidance note “Tendering Strategies
Tendering
Single Stage tendering
Definition
- Invitation to tender documents are issued to a number of competing contractors who are all given the chance to bid for the project based on identical tender documentation. This is usually done at RIBA stage 4 so that the tendering contractors receive the most detailed information to base their bid on
Advantages
1) Employer benefits from a competitive tendering process which can lead to more competitive pricing
2) The employer can benefit from a fixed price through this tendering process
Disadvantages
1) No buildability input from the contractor at the point of tender
2) The price is only as good as the design information
3) Contractors may ne unwilling to tender in a good economic climate as too much competition
Two Stage tendering
Definition
-
Stage 1
The employer provides an outline project design and contractors then compete for preferred contractor status. The preferred contractor is usually chosen based on quality of their bid, the quality of their team, preliminaries and OH&P allowances. The preferred contractor then joins the design team on a consultancy basis using a pre-construction services agreement (PCSA)
Stage 2
Once the design has sufficiently progressed, the contractor enters into a detailed contract negotiation with the employer to agree the final price, contract conditions and programme
Advantages
1) Early appointment of the contractor to work in parallel with the design team
2) Early involvement of the contractor to benefit from buildability input
3) Earlier start on site if possible
4) Employer involvement in subcontractor selection
5) Increase opportunity to value engineer with the contractor's input
6) Improved opportunity to identify project risk
Disadvantages
1) The contractor has less incentive to price second stage competitively, negotiations may therefore be difficult
2) Additional cost of the contractor's pre-construction fee
3) Potential for the negotiation stage to fail (contract sum not agreed)
Negotiated tender
Definition
- This is effectively a single stage tender carried out between the client employer and just one contractor. Negotiated tenders are obtained by the client, inviting one contractor of their choice to submit a tender response for the project.
Advantages
1) Simplicity
2) Speed, a negotiated process can have programme advantages if undertaken in good faith
3) The employer has flexibility in terms of choosing their preferred contractor
4) Time and cost savings involved in comparing and analysing multiple tender submissions
5) The process can allow early contract involvement
Disadvantages
1) Possible delay if contract negotiations are protracted
2) Potential cost premium due to the lack of competition
3) There is heavy reliance on trust between the parties
4) It can be seen as anti-competitive and exclusive
How could you justify value for money in a negotiated tender?
Insist on an open book approach when agreeing subcontract packages and a minimum of 3 quotes to be provided for each element of the works. This would need to be agreed upfront with the contractor.
Contract Strategy
Contract Strategy
1) Determines relationship/ integration of client/ contractor and design, construction and maintenance
2) Supports the project objectives in terms of time, cost and quality
3) Defines form of contract to be entered
4) Defines roles and responsibilities of parties on the project
Types of contract
Guaranteed Max price contract
Contract will not exceed X amount
Lump Sum Contract
This is a fixed price but is agreed before construction commences and is based on the information that has been provided to date. This is the most common in construction
Measurement contract
Where the contract sum cannot be determined when the contract is entered into, the fee is measured as the works progress
Prime cost contract
The nature of scope of works cannot be defined at the outset and the risks are high.
This is a cost plus options where there is no contract sum when works start and can be often used where immediate repair works are required
Prime contract
Where a client enters into a relationships with a contractor who provides a single contract for a supply chain to deliver one or more projects.
Pre-Qualification Questionnaire (PQQ)
Definition
- A pre-qualification questionnaire sets out a series of questions for potential tenderers to answer regarding their level of experience, capacity and financial standing etc. prior to being invited to tender
Purpose of a PQQ
The pre-qualification questionnaire has the effect of reducing the number of potential tenderers to those that are genuinely appropriate for the project. This saves a great deal of time for potential tenderers who would not have any realistic chance of winning the contract
What might the PQQ ask for?
1) Company details including legal status
2) Details of insurance cover
3) Financial information such as company accounts
Credit Check
1) Dun & Bradstreet report
2) Credit agency such as Experian
4) Relevant experience
5) Information about technical and professional ability
6) Information about capability and capacity
7) Health and safety policy records
8) Quality assurance policy
9) Environmental management policy
10) Equal opportunities policy
11) References
Invitation to tender (ITT)
What documentation was included in the invitation to tender?
1) Information to tender (ITT) including cover letter with tender return information
2) Form of tender
3) Contract conditions and employer's amendments
4) Instructions to bidder including how errors are dealt with
5) Tender scoring matrix
6) Project information, drawings, specifications, surveys, planning conditions etc
7) Pricing document
8) PCI (pre-construction information)
9) Quality questions such as experience and methodology
10) Receipt of tender
How did you manage the mid-tender questions?
A date was set through the middle of the tender process where questions could be sent to us for answering. Once the deadline had passed, we issued out all of the questions raised by each contractor with the answers. These were issued out to all parties tendering to ensure a fair tender process
collating questions for interviewing the contractors
Tender Analysis Report
What was included in the tender analysis report?
1) List of tenders received
2) Initial tender sum totals
3) Any qualification identified
4) Post-tender adjustments
5) Revised tender sum
6) Issues to be resolved
7) Comparisons of tender returns
8) Comparison with pre-tender estimate
9) Recommendation
Tender Evaluation matrix
What is a tender evaluation matrix? What parameters were the contractors scored against?
The tender evaluation matrix is the system on which tenders are scored against. Although broken up into lots of subsections the main 2 elements to both consider is
Price - 30% Weighted
Quality - 70% weighted
Quality
Environment
Service Delivery
Social Value
Technical