Procurement & Tendering Flashcards
What is your definition of procurement?
The overall process of acquiring construction work or services.
In every project the concerns of the client will focus on time, cost, and performance or quality, in relation both to design and to construction of the building.
What is your definition of tendering?
Tendering – An important phase in the procurement strategy but procurement involves much more than simply obtaining a price. Tendering is:
o The bidding process to obtain a price; and
o How a contractor is actually appointed
QS Role / Minimum level of Service
The QS is expected to fulfil the following duties, notwithstanding the details terms of any appointment or contractual obligation:
- Take initial brief from the employer in order to understand their requirements for tendering
- Choose a suitable tendering strategy with the project team
- Collate and produce the invitation to tender documents and issue them in an appropriate manner
- Deal with tender queries and ensure they are answered in a timely manner
- Open and analyse tender returns, collate tender queries from the design team and produce a tender report, which should include recommendations of preferred contractor status, agreed by the whole project team
- Advise the client on more complex tendering issues, as appropriate
To review the trade packages and ensure they align with the client’s budget. As there are many trade packages the QS’s day-to-day involvement can be quite lengthy.
Types of Procurement
- Traditional o Lump sum o Re-measurement - Design & Build - Construction Management - Management Contracting - Measured Term - Serial Contracting - Private Financial Initiative (PFI)
What is a tender?
A tender is a submission made by a prospective supplier in response to an invitation to tender. It makes an offer for the supply of goods or services.
What is a procurement strategy?
Identifying a procurement route and contract strategy that will best meet the client’s needs taking into account project risks, and any constraints (fundamental implementation of the project – defines the interfaces and relationships between parties – key ingredient to a successful project).
What is a procurement route?
The procurement route delivers the procurement strategy. It includes the contract strategy that will best meet the client’s needs.
Strategy – links the project to the client business. Reflects client objectives and available resources (T,C,Q)
The Route – Delivers the project, selects & provides structure to the project team, allocates risk and responsibilities.
What do you need to consider before choosing a procurement route?
Dependent on a number of criteria: the project type and size, the time available, the cost certainty required Responsibility for design. Experience of Client These criteria will often be in conflict with one another, and the most suitable procurement strategy will therefore represent a balance between them.
How do you select a procurement route?
Formulate a procurement strategy (optimum balance of risk, control and funding for a project)
- Business case
- Define objectives and measures for success (what the client needs)
- Procurement priorities (T,C,Q,R)
- Project characteristics
- Identifying the apportionment of risk
- Overlap of design to be considered?
- Any EU Rules – OJEU?
Key drivers : Cost, programme, Quality, Risk, Ability to change
Size, location, complexity, any novel obligations
To finalise the procurement route I would arrange a procurement workshop with the key parties having gathered relevant information on possible procurement routes beforehand: examples, references, guides etc.
The workshop would focus on Client’s key drivers and matching a procurement route to these criteria.
What type of procurement routes do you know of?
- Traditional
- Design and Build
- Construction management
- Management contracting
Traditional (design / bid / build)
- Design and Construction completed separately
- Client has high input into the design (control over design)
- Design risk lies with Client ; Construction risk lies with Contractor
- Can be done with or without quantities
- Completed design = cost certainty
- Appropriate for complex bespoke projects
- Suitable for both experiences and inexperienced Clients
- Full drawings and specification
What is the difference between a JCT Framework Contract and a standard one?
- It has a ‘call off’ provision that is the act of awarding a contract under a framework agreement; it does not need to be advertised and tendered.
Differences between MC and CM?
- In legal terms the management contractor is acting as a principal whereas the construction manager is acting as an agent.
- MC – Client only has to administer one contract
- MC – Client may want warranties from works contractors so they can make a direct claim against them (e.g. if the MC becomes insolvent).
How does D&B differ from Traditional Two Stage Tender?
- Similar concept in terms of appointing the Contractor at an earlier stage resulting in the Contractor being able to contribute to the design & input on buildability & quicker start on site.
- However they are different in terms of the 1st stage of the 2 stage tender appointing the Contractor on limited information therefore there is limited cost certainty with 2 stage.
- The second stage of 2-stage tendering is based on negotiation with the contractor.
What can you tell me about partnering?
What can you tell me about partnering?
- Partnering is a structured management process to facilitate the whole team working across contractual boundaries.
- It can be one of two types:
o ‘Strategic’ partnering which is a long-term relationship developed between any or all of a main contractor, client, designer/consultant or subcontractors to the benefit of each of the parties over the course of a series of projects. These parties will then work together to meet agreed targets which will have been formalised in a binding or nonbinding partnering agreement. There will not necessarily be a guarantee of specific work.
o ‘Project’ partnering, in contrast, comprises free-standing binding or non-binding ‘partnering charters’ for single projects.
- Latham & Egan reports promoted its use.
- It’s fundamental characteristics are:
o Mutual Objectives.
o Continuous Improvements.
o Common Approach to Problem Solving.
- Advantages:
o Increased cost effectiveness.
o Shorter timescales.
o Increased stability / structured / well managed.
- Disadvantages:
o Amount of upfront time / money / commitment.
o Minimal / sketchy history in terms of track record, client use, and legal cases.
o Can be overly bureaucratic.
- Contracts include:
o ACA’s (Association of Consultant Architects) PPC 2000 – the key stakeholders of the project – client, contractor, consultants – sign one single, integrated contract.
o NEC 3 Option X12 – partnering contract BUT does not create a multi-party contract.
o JCT Constructing Excellence 2011 – partnering contract.
o NEC 3 Framework Contract – strategic partnering contract.
PPP – Public Private Partnerships
- Umbrella term. Board range of partnerships and business structures involving both public and private sectors.
- Joint venture: where the public and private sectors collaborate for some form of mutual benefit.
- PPP schemes seek to transfer much of the development and financing risk on the private sector.
- PFI is the most common form of PPP. Education, housing, waste, street lighting and hospital PFI schemes.
- 3 categories: PFI, Concession Contracts, Institutional PPP
What are the advantages & disadvantages of Traditional?
Advantages:
- Appointment of a contractor is commonly by competitive tender.
- The client has control over design, specified quality and standards etc through his appointed consultants. Generally there is no design responsibility on the contractor.
- There is for the client reasonable certainty on construction costs, because a contract figure is usually known at the outset, although this may need to be adjusted later
- Administrative matters relating to valuations and payments are in the hands of the client’s consultants. Some element of financial control.
- Completion within the contract period is an obligation, although the contract administrator may need to revise the date for completion to take account of delays due to reasons listed in the contract
- Speculative risks are balanced as between the parties, more in the client’s favour on a lump sum contract, but less so with a measurement contract. The traditional lump sum approach in terms of cost, design and quality is a relatively low risk procurement option for the client, but the time needed for the project overall is likely to be relatively longer than that of other procurement methods
- Traditional procurement, however, can be used in a wide range of situations, whether the basis for pricing results in a lump sum contract, a measurement contract or a cost plus contract, and whether the project is a single one-off project, or part of a programme under a specific term or other form of serial or continuity contract.
Disadvantages:
- Because design and construction are separate sequential processes, the overall programme for the project tends to be relatively long
- Design changes are possible during construction of the work, but usually at a price in terms of direct and related costs and extra time. Changes can be costly.
What are the advantages & disadvantages of Design & Build?
Advantages:
- Quick start on site – overlap with design & construction
- Single point of contract for design & construction stage
- Buildability input from Contractor
- Design risk lies with Contractor (for CDP)
- Lump sum contract – cost certainty
Disadvantages:
- Low quality risk – Compliance Monitoring Team can be appointed to overcome this.
- Client changes can be expensive to implement
- Little client involvement in design development
What are the advantages & disadvantages of Construction Management? Advantages:
Advantages:
- Greater control for the client in terms of appointments and is involved in directing the project.
- High degree of input, can lead to project success depending on experience.
- Can lead to reduced costs by appointing individual contractors if managed well.
Disadvantages:
- Greater risk for the client than management contracting due to the reduced risk undertaken by the contractor.
- A lack of experience by client can lead to project problems.
What are the advantages & disadvantages of Management Contracting?
Advantages:
- Reduced risk than construction management because contractor assumes greater responsibility.
Disadvantages:
- Reduced control over works appointments and directing of project.
What are the advantages and disadvantages of a Framework?
Advantages:
- Pre-agreed terms & conditions, prices & quality levels with framework suppliers.
- Enables long term relationship between Client & Contractor/Consultant.
- Allows the use of KPIs and continuous improvements of delivery & efficiency.
- Captures knowledge, experience & best practice.
- Allows integration of supply chains.
- Cash savings: simplified procurement, greater efficiency & VE.
- Open book approach to cost management.
- Reduced overall procurement costs.
- Contractors can retain project teams with a secure workload.
- Prices can adjust to supply & demand.
- Gives clients in the public sector a means of fulfilling OJEU requirements by using existing frameworks without running their own selection process: Buying Solutions. No need for PQQs.
Disadvantages:
- Appointing on basis of capability & capacity often seen to overlook smaller firms.
- Client needs to have credible & accurate workload forecasts.
- Takes significant time & resources to establish.
- Over-onerous T&Cs and prices won’t get the level of interest needed.
- Having too many participants can induce price competition.
- New suppliers can’t be added once it is in progress.
What are the ways in which a Contractor can form a tender price?
BQ / SPEC / DWGS - Production Cost = High. - But If No BQs. Contractor can obtain from BCIS. APPROX BQ / SPEC / DWGS - Where Exact Quantities Not Known. - Fully Re-Measurable. CONTRACT SUM ANALYSIS / SPEC / DRAWINGS - CSA, Not a Contract Document. - Used To Price Variations / Valuations. - Indicative Quantities Usually Required. SPEC / DWGS - Onus Completely On Contractor. - Longer Tender Period. - Difficult To Price Variations, Carry Out Valuations.
What are the main methods of choosing a contractor?
- Open tendering
- Selective tendering – single or two stage
- Nomination / negotiation
- Serial
- Joint ventures
What is open tendering?
- Indiscriminate request for tenders
- Allows anyone to submit a tender to supply the goods or services that are required.
- Generally an advert will be placed giving notice that the contract is being tendered, offering an equal opportunity to any organisation to submit a tender.
- Can either be used single / two stage.
- Deposit required to discourage frivolous applications
Adv/ Disadv
No favoritism
Give opportunity to capable firms not usually invited
Maximum benefit from competition
Lowest tender could be inexperienced or made errors
No guarantee lowest is capable or financially stable
Total cost of tendering is increased
Selective tendering
- Allows only suppliers to submit tenders by invitation.
- Client will pre-select list of possible Contractors.
Serial tendering
- Involves the preparation of tenders based on a typical notional (approx.) bill of quantities or schedule of works.
- The rates can be used to value works over a series of similar projects, often for a fixed period of time.
- Used where a client has a regular programme of works (likely to be undertaken by a single contractor, minor works, repetitive works – housing / maintenance works)
- Tender documents: will define the buildings covered by the works, period of when works will be required, estimate of the likely total value of the works likely to be required.
- Appointment based on a schedule of rate – related to categories of works likely to be required.
Can reduce tender costs
May encourage suppliers to submit low rates to secure ongoing programme of works
May be seen as anti-competitive
JV – Joint Venture
Commercial alliance between two or more separate entities that enables them to share risk and reward. A new business is created to which each party contributes resources such as land, capital, intellectual property, skills, credentials or equipment.
Commonly used:
- Gain local knowledge in overseas markets.
- To share risks and costs
- Enable a larger company to acquire new resources or expertise from a smaller company.
- Enable a smaller company to benefit from the credibility and financial stability of a larger company.
Continuity tendering
Continuity tendering is a variation on selective tendering, where subsequent work is negotiated following successful completion of a preliminary contract.
Negotiated Tendering
Negotiated tendering occurs when the client approaches a single supplier based on their track-record or a previous relationship and the terms of the contract are then negotiated.
May be a limited number of potential suppliers/ extending the scope of an existing contract.
Can reduce tender costs
Can reduce programme time
Can allow early involvement
anti-competitive
adversarial – carrying out the negotiation in the absence of competition, so that both parties think it is fair can be complex and time consuming.
There is a lack of accountability
When is 2-stage appropriate?
- When cost is not the key driver
- When tight programme of works
- Adequate info at 1st stage to allow prelims / programme / MS to be produced by the contractor
- Client has adequate resources to engage in negotiations during 2nd stage
How does each stage of a 2 stage tender conclude?
- 1st stage: Appointment of the preferred contractor – a pre-construction service agreement (JCT)
- 2nd stage: Agreement of a contract lump sum
- The client may have the right to withdraw from the 2nd stage and revert back to single stage.
E-tendering
- Web based tendering
- Improves efficiencies and eliminates waste
- Audit trail of communication
- Simple, user friendly
- Quicker than posting documents
- Option to evaluate tenders on screen
- Reduced tendering costs
What’s included in a request for proposal?
- Project description & background – location, client, vision, sustainability statement, procurement route, other consultants
- Brief
- Budget
- Scope of services
- T&C of appointment
- Evaluation criteria – scoring matrix
- Instructions
How did you evaluate tender returns?
Tenders checked for compliance with the ITT
Arithmetical checks carried out
Any non-compliant tenders treated in accordance with the ITT (specs / technical info)
- Fees
- Proposed team
- Experience
- Resource schedule/commitment
- PI cover
- Financial standing
- Reputation/References
- Understanding of project brief
- Understanding of client brief
- Qualifications, exclusions & assumptions
- Attitude to sustainability/waste management
How do you make a tender recommendation?
- Report: Tender history
- Summary of tender returns
- Aligned tenders
- Scoring of tenders against technical and commercial criteria
- Recommendation on what tender represents overall best value for money
How would you evaluate tender returns and make recommendation to the client?
Tender Evaluation:
- Tender returns checked for compliance with the invitation to tender.
- Arithmetical checks carried out on cost components.
- Any non-compliant tenders treated in accordance with the conditions outlined in the Invitation to Tender.
- All tenders aligned on a like for like basis and compared with each other and the pre-tender estimate.
- Analysis undertaken of resource levels committed by each contractor and on the merits of the team proposed.
- Post-tender interviews carried out with short listed tenderers.
- Tenders scored against the pre-determined selection criteria.
Tender Recommendation Report prepared and presented to client, including:
- Tender history.
- Summary of tender returns.
- Aligned tenders.
- Scoring of tenders against technical and commercial criteria.
- Recommendation on what tender represents overall best value for money.
- Outline of future actions and contracting approach.
What are the different requirements and deliverables of the PQQ & ITT stages?
The aim of the PQQ is to select a shortlist of firms who are equally capable of delivering the project using only minimal project information. Key criteria include:
- Legal capability:
o Insurances – PII, EL & PL.
- Financial capability;
o Insurances they have in place and their liability limits;
o Confirm they’ve met all obligations to pay creditors and staff during the last year;
o Do they have any claims pending against them from within the last 3 years;
o To sign a permission form to ask their bank for a reference.
o Due diligence – e.g. credit check (Dun & Bradstreet)
- Technical capability:
o Past experience – size / type;
o Project Team;
o H&S competence.
The aim of the ITT is to select the Principal Contractor who offers the lowest price or the most economically advantageous tender and that the Client can be certain the firm are capable of delivering the full technical & contractual requirements. Bids based on full tender documentation, key criteria include:
- Form of Tender
- Technical responses:
o delivery,
o programme,
o logistics,
o quality management,
o resources,
o proposed team,
o health & safety, competence assessed by CDM Advisor.
- Commercial response:
o Contract Sum Analysis (D&B) / schedule of rates / bill of quantities.
- An understanding of the brief and scope of the project.
- Focused more on firm & individual’s future performance on the project and how this will be achieved.
How can you review the commercial element of tenders?
- Lowest price gets awarded the contract.
- Scoring - Lowest price gets highest score, the others get a lower score.
- Establish an ‘exceed budget’ showstopper mechanism.
How would you decide on a procurement route?
- I would formulate a Procurement Strategy to achieve optimum balance of risk, control and funding for a project. This would address:
o The business case
o Define objectives & measures for success
o Determine procurement priorities
o Identify main risks and who is best placed to manage them
o Any EU rules - Key drivers of the procurement route are the Client’s requirements for:
o Cost
o Programme
o Quality
o Risk
o Ability to change - To finalise a procurement route, I would arrange a procurement workshop with the key parties having gathered relevant information on possible procurement routes beforehand: examples, references, guides etc.
- The workshop would focus on deciphering the Client’s key drivers and matching a procurement route to these criteria.
What was contained within the PQQ?
- Project description
- Client objectives
- Description of PQQ process
- Project team details
- Cost range of project
- Scope of works
- Contract details
- Tender details
- Some basic drawing information.
- General questions for contractor details
- Confirmation of contractor’s insurances
- Selection criteria
What are the principles of the Employer’s Requirements?
- They provide a description of the client’s requirements, including; the specification for the building, the scope of services required from the contractor and an allocation of risk for unknown items.
- Contractor’s proposals are then prepared in response to the ERs. These present the contractor’s suggested approach for designing and constructing the building, along with their price.
- The Employer has control over any design elements of the project that are included in their requirements.
- Once the contract is let responsibility over design passes to the contractor; the employer has no direct control over the contractor’s detailed design.
Typically used on Design and Build projects (such as JCT D&B 05 or on a traditional contract where the contractor has to design discrete parts of the works).
Description of the Client’s requirements - specification for the building,
- the scope of services required from the Contractor
- allocation of risk for unknown items.
Once the Contract is let the responsibility over design passes over to the contractor (the employer has no control over the contractors detailed design)
Contractors Proposals are prepared in response to the ER’S. Contractors suggested approach for designing and constructing the building, along with their price. - The brief
- Specification
- Drawings
- Surveys
- Site constraints document
- Design report that provides the essence of the ‘design intent’
What level of information / detail would you expect to see in the Employer’s Requirements?
- Can vary depending on:
o Level of client experience
o The extent of the contractor’s design responsibility and how much initial design is included in the employer’s requirements. - Can range from a very simple specification to a fully developed performance specification and design.
- The level of design responsibility and input from the contractor is much greater on design and build projects than a traditional contract with a contractor’s designed portion.
- Adequate time must be allowed to prepare the employer’s requirements, as well as time for the contractor to prepare their proposal and tender price.
What happens when you have a discrepancy between the ERs & the CPs?
Procedure to outline discrepancies outlined in clause 2.14 in JCT D&B.
- Within CPs: Contractor must give notice to the Employer along with proposed amendment to remove it; Employer can choose between options at no additional cost.
- Within ERs: The CPs prevail without adjustment of the Contract Sum. Contractor proposes amendment to remove it which shall be treated as a variation.
What takes precedence; the ERs or CPs?
The Employer’s Requirements.
Are Contractor’s Proposals necessary for design & build projects?
- No; if the ERs are sufficiently detailed then the Contractor may provide a statement saying it intends to fully comply with the ERs rather than submit a full Contractor’s Proposals package.
- Conversely, the Contractor may wish to provide a list of derogations where it intends from the ERs, possibly due to a better product or method of working.
Does D&B lead to lower quality?
- Not necessarily but it is more likely due to the client have less involvement in design.
- Compiling a comprehensive set of ERs and selecting the right contractor who is fully entwined with the Client’s objectives is much more important.
- Other safeguards such as
o novating the design team,
o employing a CMT and
o requiring samples and benchmarks of key materials/areas, Specifying suppliers / materials can also help deliver quality.
How is the Contractor’s Design monitored?
- Procedure for Contractor’s Design Submission outlined in Schedule 1 of JCT D+B.
- Contractor submits Contractor’s Design docs to Employer in required format & in sufficient time for comments to be made prior to being used for procurement / carrying out the works.
- Employer has 14 days to review – marks as:
A. Approved (default if no response received from Employer)
B. Continue in line with Employer’s comments
C. Incorporate comments & resubmit - If contractor disagrees with the Employer’s comments:
A. Contractor must notify Employer within 7 days that compliance would give rise to a change.
B. Employer then has 7 days to confirm / withdraw comments.
Schedule 1 of Standard Building Contract XQ -
Contractor submits design to Architect / CA (by the format stated in the ER’s or CP’s) in sufficient time to allow any comments on the document prior to procurement or and/or carrying out of the CDP works.
Within 14 days, the Architect / CA must return the drawings to the contactor marked Status A, B or C.
(B&C are where the Architect/CA does not believe the drawing is in accordance with the Contract).
What is a procurement strategy?
- Links the project back to the business.
- Outlines strategic goals – identifies best way of achieving objectives for best Value for Money
- Considers constraints, risks, funding into account.
- Is delivered by the selected procurement route.
What is a contract strategy?
- Determines relationship / integration of client / contractor + design, construction & maintenance
- Supports the project objectives – time, cost, quality
- Define form of contract to be entered
- Defines roles & responsibilities
What are the differences between a Procurement Strategy and a Procurement Route?
- The procurement route sits within the overall procurement strategy which also addresses the Client’s business needs.
- The Strategy:
o Links the project to the client business.
o Balances client risk with control.
o Reflects client’s objectives & available resources (T/C/Q). - The Route:
o Delivers the project.
o Selects & provides structure to the project team i.e. who will be involved & how will they work together.
o Allocates risk & responsibilities.
o Determines the form of contract – acts as a legal mechanism for assigning risk.
What was the function of the Preliminary Invitation to Tender?
Ultimately to shortlist two panel members to proceed to the ITT stage. To assist selection, panel members were required to provide:
- confirmation of its supply chain members and their availability and capacity to deliver the project.
- how each Panel Member intends to approach the Scheme and develop the designs;
- the Panel Members’ understanding of the key local issues to be addressed;
- the Panel Members’ ability to deal with local interface issues, for example working with an existing ICT partner or integrating with an existing ICT procurement and interface with FM providers such as catering providers.
- Outline proposals for taking forward future schemes (the details of the supply chain are not required at this stage)
What is contractor design portion?
Associated with JCT contracts.
CDP is an agreement for the Contractor to design specific parts of the works.
The contractor appoints their own consultants to design; they could also novate over the client teams.
What is novation?
- Process whereby contractual rights and obligations are transferred from one party to another.
- Where a contract is transferred from one party to another.
- Via a Novation Agreement (An agreement that has the effect of substituting one party for another party without changing the rights and obligations under the original agreement is called a novation).
- Design consultants are initially contracted to the client, but are then ‘novated’ to the contractor. This is common on design and build projects where the design team are appointed by a client to carry out initial studies or prepare a concept or detailed design, but then when a contractor is appointed to carry out or complete the design and construct the works, the design team (or part of it) is novated to work for them.
- It is important that any novation documentation is properly drawn up and that it makes clear which services consultants performed for the client and which they will now perform for the contractor
- Client may require collateral warranties from novated designers.
Maintains continuity of design pre and post tender
What do you see as the key issues when a design team is novated?
- Whether the new party has the right to take action against the novated party for breaches that occurred before novation.
- Ensuring that the design team responsibilities are adequately transferred to the Contractor in order to establish a duty of care through novation agreements.
- Obtain all relevant collateral warranties
- Ensure that the Contract is signed before the design is continued as precedents suggested LOI cannot be relied on to establish the Contractor’s responsibility for design.
- Employ a CMT to monitor and review quality – if none can be arranged seek agreement from Contractor to self-certify.
