Procurement and Tendering

Question 1

What is procurement?

Answer 1

The overall act of obtaining goods and services for a construction project

Several routes by which the design an construction of a building can be procured

Selected procurement route should follow a strategy which fits the project criteria and objectives

Question 2

What are the main factors which typically govern procurement route selection?

Answer 2

Key to identify clients objectives and key drivers in terms of time, cost and quality.

Time
Cost
Quality
Risk

Question 3

Which procurement routes are you familiar with?

Answer 3

Traditional Procurement
Design and build
Management Contracting
Construction Management

Question 4

What is traditional Procurement?

Answer 4

Involves the separation of design from construction.

Employer appoints consultants to design the project in detail.
Contractors then invited to submit tenders based on fully developed scheme

Question 5

Explain the key points of traditional procurement route

Answer 5

• Design is completed by the employers design team before competitive tenders are invited
• Contractor appointed to build what designers have specified

The contractors tender is based on a complete design produced by the employers consultants (with exception of any CDP)

Assuming no significant design changes arise, construction cost can be determined with reasonable certainty before work begins

Employer retains design consultants during construction

Consultants prepare any additional design info and review CDP designs prepared by contractor

Question 6

What are the key advantages of traditional procurement?

Answer 6

1) Employer retains control of design
2) Design largely finalised before tendering - Employer knows what they are getting
3) All tenderers produce a full submission on same info
4) Assuming robust design - reasonable price certainty
5) minimal built in contractor risk

Question 7

What are the key disadvantages of traditional procurement?

Answer 7

1) Project duration is longer - no overlap on design and construction phases like with D&B
2) No / Limited contractor buildability input
3) Design risk is retained by the employer - any change post contract will be variation or compensation event
4) Dual point of responsibility (employer for design and contractor for construction)

Question 8

What might traditional procurement be appropriate for?

Answer 8

Employer may have specific or detailed design requirements
Cost certainty is important
if the shortest overall programme is not the employers main priority

Question 9

What is design and build?

Answer 9

The contractor is responsible for completing the design and executing construction phase of the project
Differs majorly from traditional where client appoints consultants to undertake design and then contractor is appointed to construct works

Question 10

Explain key points of design and build procurement route

Answer 10

Design risk is transferred to the contractor
contractor is responsible for the design, planning, organisation, control and construction of the works
Original employer design team may be novated to contractor for continuity
Employers team produce set of ER’s, the contractor then responds with their CP’s

Question 11

What are the key advantages of design and build?

Answer 11

1) Single point of responsibility for design and construction (contractor)
2) Earlier commencement on site possible - design and construction can be overlapped
3) Benefit of construction experience - buildability input
4) Design and construction risk rest with contractor
5) Provides more cost certainty than traditional procurement

Question 12

What are the key disadvantages?

Answer 12

1) Design is only as good as ER’s
2) More complex to compare tender returns
3) Employer changes can be difficult to value & expensive
4) Employers have less control over quality
5) Contractor will build in risk premiums into tender

Question 13

When might design and build be appropriate?

Answer 13

1) Need to make an early start on site (D&B has potential to overlap design and construction)
2) Employer wishes to minimise risk profile (design risk passed to contractor)
3) for technically complex projects - design will benefit from contractor buildability input

Question 14

What additional insurances might be needed under D&B contract?

Answer 14

Contractor and their design team will have design responsibility. Likely additional PI Insurance will be required

Question 15

What are the employer requirements?

Answer 15

Documents produced by the employer to set out its requirements in relation to the project

• Performance spec
• Drawings
• Initial designs

This is what the design and construction of works is based on

Question 16

What are the contractors proposals?

Answer 16

Prepared by the contractor which responds to the ER’s
Contractor will set out more detailed design based on ER’s which will require further development throughout the course of project

Question 17

Which procurement route poses the least risk to the employer?

Answer 17

Design and Build - this is because the design risk is transferred to the contractor

Question 18

Why does employer usually pay premium for design and build procurement at tender stage?

Answer 18

Contractor will usually factor in an allowance within their tender return in exchange for taking on design risk

Question 19

Under design and build, who executes the design for the contractor?

Answer 19

Contractor may use their own in house designers or they can appoint external consultants
OR
Employers original design team can also be novated to the contractor

Question 20

What is management contracting?

Answer 20

Employer appoints a management contractor to manage entire building process who in turn appoints trade contractors to carry out the construction works

The management contractor is usually paid a fee percentage based on construction works

Management contractor has a direct contractual link with trade contractors and is responsible for the overall construction works

Question 21

What are the key advantages of management contracting?

Answer 21

Overall project duration can be reduced by overlapping design and construction
Buildability input by management contractor
Single point of responsibility
Trade packages let competitively and transparently
Flexibility in design - changes can be made throughout construction process

Question 22

What are the key disadvantages of management contracting?

Answer 22

Price certainty not achieved till last trade package let
Requires an informed and proactive employer to be successful
Depending on how construction manager is paid, there may be built in disincentive for CM to minimise costs

Question 23

What might management contracting be appropriate for?

Answer 23

When an early start on site is priority
Flexibility in design is required
Buildability input from management contractor
When cost certainty is not a priority for employer

Question 24

What is the key difference between management contracting and construction management?

Answer 24

CONSTRUCTION MANAGEMENT
- Employer directly appoints multiple trade contractors to execute works

MANAGEMENT CONTRACTING
- The employer appoints a management contractor who in turn appoints the works contractors

Question 25

What is construction management?

Answer 25

Employer directly appoints multiple subcontractors (trade contractors) instead of employing a single main contractor.

The single feature that makes construction management unique, is that the employer places individual contracts with separate trade contractors themselves

Question 26

Key points to construction management?

Answer 26

1) Employer places direct contract with each trade contractor and utilises the expertise of construction manager to coordinate the works
2) Construction manager programmes and coordinates the work
3) Construction manager has no contractual link with trade contractors
4) Construction manager has no vested interest in financial outcome of project
5) Construction manager carries no risk except Professional Negligence

Question 27

What are the key disadvantages of construction management?

Answer 27

Price certainty not achieved until last trade package is let
procurement route requires informed, experienced and proactive employer to work
Employer has a lot of consultants and contractors to manage

Question 28

What might construction management be appropriate for?

Answer 28

if employer is experienced in construction and has suitable resources to manage the project

The employer wants to achieve an early start on site

employer wants the flexibility to make minor changes to the design / spec throughout the process with minimal impact on time and finances

Project is technically complex and requires detailed engagement of specialist consultants and trade contractors

Question 29

What’s the riskiest procurement route for the employer?

Answer 29

Construction management - employer places individual contracts direct with each trade contractor and construction management carries no risk

Question 30

What is a framework agreement?

Answer 30

umbrella agreement that a party enters with one or more suppliers to establish governing terms

Framework usually sets a strategic partnering relationship for the procurement of goods, works or services

Question 31

How long can a framework be?

Answer 31

Typically, a framework agreement lasts for 4 years. However this is determined by the buyer. They can between 2 - 10 years

Question 32

What are the key advantages of a framework?

Answer 32

Framework agreements can help to develop stronger relationships between the parties involved and encourage long term collaboration and cooperation

Time saving - can speed up procurement of goods and services

Repeat work and continuing of delivery

Rates and prices are usually agreed upfront

Question 33

What are the disadvantages of a framework?

Answer 33

1) Contractors, suppliers or consultants can become complacent
2) Bidders will invest time and money to be awarded onto a framework and then potentially not receive any work through them
3) May be restrictive to new suppliers who offer innovative, new solutions with the changing and evolving nature of tech

Question 34

Why might the employer choose a framework agreement to procure goods and services?

Answer 34

• Employers that are continuously commissioning construction work might want to reduce procurement timescales, learning curves and other risks by using framework agreement
• a framework allows the employer to invite tenders from suppliers of goods and services on a call-off basis as and when required

Question 35

Whats the difference between a framework agreement and a contract?

Answer 35

• A framework agreement rarely provides any specific commitment in terms of project and value of works. Its more focused around being an approved supplier
• A contract is usually a specific fee, with project scope and timelines allowing you to quote and tailor your product / service for the specific job at hand

Question 36

What is project partnering?

Answer 36

Partnering is a broad term used to describe a collaborative management approach that encourages openness and trust between the contracting parties

There is more opportunity for building working relationships, finding improvements and planning investment

Ownership of risk is spread between the parties and a collaborative approach is encouraged to delivering the solution and overcoming the problems

Question 37

What are the key advantages of project partnering?

Answer 37

1) Overall construction and design programme can be shortened
2) Likelihood of conflict is reduced
3) Improved communication and mutual objectives
4) Improved customer satisfaction
5) Improved value for the employer
6) Improved buildability
7) Better predictability of time and cost

Question 38

What are they key disadvantages of project partnering?

Answer 38

1) Less opportunity to understand what other contractors / potential partners have to offer
2) Difficult to find a strong partner which have the same objectives, ethics, attitude etc.

Question 39

What is tendering?

Answer 39

Tendering is the process by which the employer invites contractors to place a bid for work on a construction project.

The overall objective is to obtain a price for the works

Question 40

Whats the difference between procurement and tendering?

Answer 40

Procurement is the overall act of obtaining goods and services from external sources and deciding the strategy on how these goods are to be required

Tendering is a phase in the procurement strategy and deals with obtaining a price through a bidding process and deciding how a contractor is appointed

Question 41

What are the three main tendering options for construction projects?

Answer 41

Single stage
Two stage
Negotiated tender

Question 42

What documents were included within your tender pack?

Answer 42

• ITT including cover letter with tender return info
• Form of tender
• Contract Conditions and Employers Amendments
• Pricing document
• Project info - drawings, spec, surveys, planning info
• Tender Scoring matrix
• Pre construction info

Question 43

What is a bona fide tender?

Answer 43

• bid submitted in good faith, complete and in prescribed form which meets the conditions of the bidding requirements

Confirmation that the supplier has not colluded with another party when compiling the tender

Question 44

What is OJEU?

Answer 44

The Official Journal of the European Union (OJEU)

An online portal that houses public sector contracts that are over the stated procurement threshold

Question 45

What happens to OJEU now the UK has left the EU?

Answer 45

From 1st Jan 21 UK is not subject to EU procurement regulations and therefore no longer follow rules outlined for OJEU tenders

Tenders will now be published on a new e-tendering portal, called Find a Tender Service (FTS)

Question 46

What is a PQQ?

Answer 46

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

Question 47

What is the purpose of a PQQ?

Answer 47

A PQQ 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.

Question 48

What might the PQQ ask for?

Answer 48

• Company details
• Details of insurance
• Financial info
• Relevant experience
• Info about technical and professional ability
• Info about capacity
• Health and safety policy and records
• Quality Assurance Policy
• Environmental Management Policy
• Equal opportunities policy
• References

Question 49

A credit check is usually part of the PQQ process, where could you get a credit check from?

Answer 49

• Dun and Bradstreet Report

- Credit check agency - Experian

Question 50

What is single stage tendering?

Answer 50

Invitation to tender documents are issued to number of competing contractors who are all given the chance to bid for the project based on identical tender documentation.

Usually done at RIBA stage 4 so that the tendering contractors receive the most detailed info to base there bid on

Question 51

What are the key advantages of single stage tendering?

Answer 51

1) Employer benefits from a competitive tendering process which can lead to more competitive pricing
2) Employer can benefit from fixed price through this tendering process

Question 52

What are key disadvantages of single stage tendering?

Answer 52

1) No buildability input from contractor at point of tender
2) Price is only as good as the design information
3) Contractors may be unwilling to tender in a good economic climate (too much competition)

Question 53

If you had a £25m new build project under the design and build procurement (single stage tender), how long would you allow for the tender period?

Answer 53

The tender period is largely dependent on the complexity of the project. However, 10-12 weeks would be reasonable as it will take some time to interpret the ER’s

Question 54

What is two stage tendering?

Answer 54

Stage 1
Employer provides an outline project design and contractors then complete for preferred contractor status.

The preferred contractor is usually chosen based on quality of their bid, team, prelims and OH&P

Preferred contractor then joins design team on a consultancy basis using a pre-construction services agreement (PCSA)

Stage 2
Once the design has a sufficiently progressed, the contractor enters into a detailed contract negotiation with the employer to agree the final price, contract conditions and programme

Question 55

What are the key advantages of two stage tendering?

Answer 55

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 is possible
4) Employer involvement in subcontractor selection
5) Increase opportunity to value engineer with contractor input
6) Improved opportunity to identify project risk

Question 56

What are the key disadvantages of two stage tendering?

Answer 56

1) Contractor has less incentive to price the second stage competitively. Negotiations may be difficult
2) Additional cost of the contractors Pre construction fee
3) Potential for the negotiation stage to fail (Contract sum not agreed)

Question 57

What is a negotiated tender?

Answer 57

A negotiated tender is effectively a single stage tender carried out between the client 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

Question 58

What are the key advantages of negotiated tenders?

Answer 58

1) Simplicity
2) Speed - negotiated process can have programme advantages if undertaken in good faith
3) Employer has flexibility in terms of choosing preferred contractor
4) Time and cost savings involved in comparing and analysing multiple tender subs
5) The process can allow early contractor involvement

Question 59

What are the key disadvantages of negotiated tenders?

Answer 59

1) Possibility of delay if contract negotiations are protracted
2) Potential cost premium due to lack of competition
3) There is heavy reliance on trust between parties
4) It can be seen as anti competitive and exclusive

Question 60

How could you justify value for money in a negotiated tender?

Answer 60

Insist on an open book approach when agreeing sub contract 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)

Question 61

What is a form of tender?

Answer 61

Contractor usually signs and returns with their tender submission

Formal acknowledgment that the tenderer understands and accepts the terms of conditions of tender docs

The document also includes contractors price and programme

Question 62

What information is typically included in the form of tender?

Answer 62

1) Tender sum
2) Date until which price remains valid
3) Construction period
4) Confirmation of tender being genuine and bona fide
5) Tenderer details and signature
6) Acceptance of terms and conditions

Question 63

When seeking tenders for construction work, in addition to the actual price for the work, what additional information might be requested from the contractor?

Answer 63

• Track Record of previous experience
• Proposed team and hierarchy
• Methodology / approach
• References
• Programme
• H&S info
• VE proposals
• Logistics plan
• Diversity and inclusion policy

Question 64

What happens if a tender is submitted late?

Answer 64

• Public Sector - tender should be accepted
• private sector - to be discussed with employer - safest option is not to accept - possible collusion, bid rigging, fraud

Question 65

Once tenders have been submitted, what should be examined for compliance with the invitation to tender and tender instructions?

Answer 65

1) Arithmetical errors
2) Pricing errors
3) Pricing methods
4) Compare CP’s against ER’s for compliance (D&B only)
5) Check the form of tender is complete and signed
6) Resolve any qualifications

Question 66

Would you open a later tender submission for a school project?

Answer 66

1) Tender discarded

2) LA can decide whether to accept or not

Question 67

What is the danger of accepting a very low tender submission?

Answer 67

1) Contractor may be trying to buy the project with a view to recover their costs with variations and / or claims
2) It could indicate the contractor is in a poor financial or cashflow position and they are eager to win the project at any cost
3) Areas of the job may not be priced accurately, potential for an adversarial relationship to develop post contract

Question 68

How do you deal with qualifications within the tender submission?

Answer 68

• Procedures should be outlined in tender instructions
• if qualifications are unauthorised, might invalidate the tender
• Employer team and contractor should look to resolve qualifications prior to signing the contract
• Any outstanding matters should be documented in the contract to avoid future disputes

Question 69

How do you deal with errors identified in the tender submissions?

Answer 69

JCT have produced a tendering practice note where two options are suggested to deal with errors. One of these options us usually drafted into the tender pack.

Alternative 1
Tenderers should be given the details of the errors and afforded the opportunity of conforming or withdrawing their tender.. If they withdraw - next lowest bid wins

Alternative 2
Tenderer should be given the opportunity of confirming their offer or amending it to correct genuine errors

Question 70

What would you do if you considered a contractor submitting the lowest tender to be in financial difficulty?

Answer 70

1) Part of evaluation process, company accounts would be assesed for financial stability, if not already done so at PQQ Stage. This could lead to disqualification
2) Consider a performance bond. In the event the contractor fell insolvent, the employer would be able to call on the bond and appoint another contractor to complete the project.
3) Consider a parent company guarantee

Question 71

On what grounds would you advise the client to re-tender?

Answer 71

1) Not enough tenderers returned tenders
2) Tender process is somehow compromised
3) If tenders were not at cost level required. Retendering to different tenderers could provide result
4) Design changes or VE has been carried out that has significantly changed the design that was originally tendered

Question 72

How would you deal with front loading?

Answer 72

Front loading is generally not a pricing error

Request contractor removes front loading, if contractor refuses, this may be grounds for disqualification.

Question 73

How would you reduce the risk of contractors pulling out during the tender process?

Answer 73

• Ensuring tender info is as accurate as possible
• Ensure tender period is long enough - extend if need
• Go though PQQ to ensure correct tenderers selected
• Check the contractors have time capacity to complete

Question 74

On what grounds would you advise your client re-tender the project?

Answer 74

• Not enough tender returns

- Tender process compromised - Fraud / collusion / bid rigging

Question 75

What is the contract sum analysis document under design and build procurement?

Answer 75

CSA is an alternative pricing document to a schedule of works or bill of quants.

Often prepared in standard format by the employers team to support the tender analysis. The employer’s team usually request that all the tenders are returned on the same CSA format

Question 76

What information is typically included within a tender analysis report?

Answer 76

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

Question 77

If the tender was received on time, but the works were delayed and did not commence until a few months later, what would you check?

Answer 77

• Check the form of tender - would show how long the price (offer) is valid for. e.g 90 days

Question 78

If the contractor (in tender return) put a cost against an item marked as provisional, what would you do?

Answer 78

I would seek further information from the contractor and request this to be removed, subject to the tender instructions, this may invalidate the submission.

Question 79

If you think the delivery programme is tight, how can you give comfort to the contractor regarding liquidated damages ( to avoid them over pricing in tender sum)

Answer 79

The contract can be amended to include a liquidated damage free period. For example, damages would not be levied for the first 3 weeks or levied at 50% for a defined period.

Question 80

What is the purpose of a pre tender estimate?

Answer 80

PTE is last cost check of the project before its issued to tender

The design should be sufficiently developed at this stage, therefore, the PTE should be an accurate reflection of the works

The estimate can then be used to compare against the tender submissions

Question 81

What happens if the tender prices are higher than the pre tender estimate?

Answer 81

Could be down to market conditions or some other external factor such as COVID 19, Brexit, Inflation.

The employers team should reconcile the tenders against the PTE to identify where the major differences are.

The team could look to VE the project if the prices are over budget