Procurement and Tendering Flashcards
(116 cards)
What is procurement?
The overall process of obtaining construction goods and services
What are the main factors that would determine procurement route selection?
- Client objectives and key drivers, risk allocation
- Must consider and balance the client’s priorities, as you usually find that one procurement route won’t satisfy everything the client wants.
- Cost, time, control, quality, risk
What procurement options are you familiar with? / What are the 4 main types of procurement route?
Traditional
D&B
Management contracting
Construction management
Which procurement route poses the least risk to the employer?
D&B - the design risk is transferred to the contractor (single point responsibility)
Which procurement route is the riskiest for the employer?
Construction management - the employer places individual contracts direct with each trade contractor, construction manager has no risk (except professional negligence)
How to identify client requirements before recommending procurement route?
Detailed discussions with client and design team - identify priorities especially in time, quality, risk, control and experience
Client wants to start on site ASAP - what route to recommend?
- Need to consider other requirements (i.e. cost and quality)
- Time = main priority -> CM / MC -> offer fastest start on site (no long tender period) and overlap of design and construction
- Reduction in cost certainty
Client wants to start on site ASAP but also cost certainty - what route to recommend?
D&B -> design and construction overlapped, this risk transferred to main contractor based on lump sum price - offer high cost certainty
What is traditional procurement?
- Design and construction separate - employer appoints consultants for design then contractors submit tenders on fully developed scheme (apart from CDP - the consultants are retained by employer and will review and approve these).
- Contractor is responsible for construction and client for the design (& design team performance)
Key advantages of traditional procurement?
- (Excluding significant design changes) Reasonable certainty of construction costs before commencement if design is robust.
- Employer retains control of design, knows exactly what they’re getting and potential for higher quality
- Minimal risk priced in costs from contractor
- Design changes reasonably easy to arrange and value
Key disadvantages of traditional procurement?
- Longer project duration (less overlap with design and construction)
- Limited contractor buildability input
- Employer retains design risk
- Dual point of responsibility - employer = design, contractor = construction
- Price competition requirements can lead to adversarial relations
Where might the traditional route be appropriate?
- Specific / detailed design requirements - client wishes to retain control of design and spec - design, cost and programme certainty
- Cost certainty before construction = priority compared to programme
- Quality - client retains control
- Competitive tender analysis more fair
- Established - most linear and commonly used method of construction
What is design and build?
Who executes the design for the contractor under D&B procurement?
- Contractor responsible for completing design and executing construction phase, inc planning, organisation and work according to ERs.
- Under JCT - employer’s team produce employer’s requirements (ERs), then the contractor responds with contractor’s proposals (CPs) which include price.
- Design risk transferred to contractor when they’re appointed for a job- in some cases the original employer’s design team may be novated to contractor for continuity, or the contractor appoints their own design team (internal or separate design company)
What is novation?
- Used in D&B to transfer benefits and obligations of contractual agreement from client to the contractor- terms and conditions the same except parties in agreement.
- Benefits and obligations transferred (i.e. responsibility of payment)
Advantages and disadvantages of novation?
- Advantages - continuity, accountability, assurance on quality for client, reduces risk of post contract changes / disputes, less likely to price in design risk, contractor doesn’t commit as much time/resource to reviewing / validating design
- Disadvantages - Contractor unlikely to be familiar with architect- risk of non-beneficial working relationship, architect underperformance = contractor responsibility, inc prior to their involvement - could be unfair
Alternatives to novation?
Option to assign design team, contractually retained by client (not as good for risk averse)
What are employer’s requirements (ERs)?
- Document(s) produced by employer to set out project requirements, including performance specifications, drawings, initial designs, for the contractor to base their works on.
- Details level of design, structure and spec info to be provided by tenderers
What are the Contractor’s proposals?
Document(s) produced by contractor to respond to ERs- detailed design info for client to consider at tender review, requiring further development through course of project. Often include plans, elevations, sections and typical details, specification etc.
How much design input will the contractor have?
- Depends on design work already completed by the Contractor’s appointment
- Can range from full design to production info and coordination only
How does D&B establish cost certainty?
- Lump sum submitted for whole of works provides cost certainty in single stage tender
- Design development responsibility is contractor’s so risk transfer with it
Key advantages of D&B procurement?
- Single point of responsibility for design and construction (contractor) - they maintain risk
- Earlier commencement on site possible - faster programme if design and constructioncan be overlapped
- Buildability incorporated into design (contractor’s experience)
- More cost certainty overall than traditional procurement, early price certainty may be increased
Key disadvantages of D&B procurement?
- Design is only as good as employer’s requirements - employer may not have a sufficiently comprehensive brief
- Client may have to commit to concept designs early
- More complex to compare tender returns
- Employer changes difficult to value, often more expensive
- Less employer control over aesthetics and quality
- Risk premiums cost in tender return
Where might the D&B route be appropriate?
- Earlier start on site required, quicker programme
- When employer wants to minimise risk profile
- Contractor’s buildability input may help with technically complex projects
- Where retaining control of design is not priority
- Contractor assumes risk and responsbility for design
- Cost certainty required
Other consideration for D&B route?
- Additional insurances - Professional Indemnity Insurance (PII) might be needed as the contractor has design responsibility
- Employer usually pays a premium as contractor is taking on the design risk, so usually there is an allowance (sum of money) in exchange