Case Study - Two Stage Tender

Question 1

What is the benefit of appointing a contractor to manage VE/Scope Reduction?

Answer 1

• Leverage contractor’s market knowledge/supply chain
• Offer practical and realistic cost-saving opportunities more efficiently

Utilizing a contractor can enhance the effectiveness of cost-saving strategies.

Question 2

Explain the impact on competitive pricing by switching from Single to Two-Stage.

Answer 2

Unliked a single-stage where works are competitively tendered upon completion of design.
There is an element of reduced competitiveness, as contractor is already engaged.

Competitveness is replaced by negotiation.

Intention would be to still use open book tendering 3 suppliers per package.

Two-stage tendering often leads to negotiation rather than competitive tendering.

Question 3

Would you share the cost plan with the contractor if appointed?

Answer 3

• My would intention would be to share cost plan and benchmarking data. RICS Guidance Tendering Strategies (1st Edition) recommendes open-book collaboration under the PCSA.
• If client disagrees, share high-level summaries only

RICS guidance stresses open-book collaboration under the PCSA.

Question 4

Did you see the Two-Stage option as viable for reducing costs?

Answer 4

Yes - Part of there PCSA was obviously to facilitate with cost reduction.
Also - By de-risking the project & drive value. Which can reduce overspend through post contract change.
Drive further value through VE/Buildability

This is an approach that’s largely favoured due to the time constraint on the project.

Two-stage can unlock savings through de-risking, VE, early site start, and reduced program.

Question 5

What was the contractor’s role under the PCSA?

Answer 5

• De-Risk (Logistics/Surveys/Site Reviews/Buildability)
• Cost Savings (VE)
• Support Programme Development (Identify long lead items and early procurement of enabling works package.)

The contractor’s role includes identifying long lead items and potential procurement of enabling works.

Question 6

What was the contractor’s role under the 2nd Stage?

Answer 6

• Finalise pricing based on developed design
• Agree contract sum
• Mobilise for construction

This stage focuses on finalizing the financial aspects and preparing for construction.

Question 7

How could you demonstrate cost-saving ability for the Two-Stage Approach?

Answer 7

• Not instant cost savings; advised as an investment
• Savings through VE alongside contract
• De-risking and programme support to relieve post-contract costs

Benchmark reports show two-stage procurement results in fewer disputes and more predictable final accounts.

Question 8

How could you save time under the Two-Stage approach?

Answer 8

• Overlapping stage 4 design and procurement
• Potential to Tender enabling works package earlier (as design was complete).
• Engage contractor sooner, initiating tender & procurement before that of a single stage, so facilitating an earlier site start

Early engagement can help mitigate delays.

Question 9

What sort of cost build-up would you expect for the PCSA?

Answer 9

• PCSA Fee (Cost Planning/Design Input/Buidability/Logistics/Procurement)
• Price for Preliminaries
• OH+P
• Programme
• T&C’s

These elements contribute to the overall cost structure of the PCSA.

Question 10

How would you appoint under a Negotiated approach?

Answer 10

• Appoint contractor through negotiated approach under 1st Stage
• Benchmark fee, preliminaries, and OH+P

Sharing information helps validate the proposal.

Question 11

What other forms of contract/procurement could have been appropriate?

Answer 11

• CM (Construction Management) - Employer manages trades. Early start but limited cost certainty.
• MC (Management Contracting) - Contractor manages trades. Early start but limited cost certainty.
• D&B (Design & Build) - Early Start & Fixed Price but limited design control.

Each method has its own advantages and disadvantages regarding cost certainty and client control.

Question 12

Why was the Two-Stage approach ultimately rejected?

Answer 12

• Despite offering opportunity to drive programme and value through de-risking.
• Clients prioritized cost certainty
• Two-stage introduced uncertainty until Stage 2
• Additional PCSA cost

The decision was influenced by the need for predictable costs.

Question 13

What is the difference between a single stage strategy vs two stage?

Answer 13

• Single Stage: Full design priced competitively upfront
• Two Stage: Early contractor involvement to develop scope and agree final price for the works to ocmplete.

The two-stage approach allows for collaboration during the design phase.

Question 14

How could you seek competitiveness at the 2nd stage?

Answer 14

• Utilize open-book tendering - providing full visibility of rates and sub-contractor packages
• Advise contractor to tender 3 for each package

Transparency in the tendering process can enhance competitiveness.

Question 15

At what stages would you typically tender on at single vs two stage tendering?

Answer 15

• Single Stage: Design Completion (Stage 4)
• Two Stage: After Stage 2

Question 16

How were the benefits of having a contractor onboard still accounted for despite the approach not going forward?

Answer 16

• Benefits achieved through VE/Scope Reduction
• Robust tendering (site visits, mid-tender interviews, post tender interviews, robust and clear Queries process)
• Robust tender documentation (Pre-Construction Information)

Effective strategies can still yield positive outcomes even without proceeding with the contractor.

Question 17

Could you provide a rough estimate for the PCSA?

Answer 17

• Gather benchmark data
• Breakdown cost per staffing, preliminaries, fees, allowances, exclusions
• Typically between 0.5-1.5% of contract value

This estimate can range from 75k to 225k.

Question 18

How long did you expect the PCSA to last?

Answer 18

Around 8-12 weeks

This timeframe is typical for the completion of a PCSA.

Question 19

How did you see the management occurring between you and the contractor in terms of cost reductions?

Answer 19

*Open-book Collaborative approach (Tendering Strategies 1st Edition)
* Contractor proposes practical cost saving solutions; These would be reviewed with the team/ approved/rejected (aligned to the clients profile) - validated commercially by me as the QS.
* Implement these into the Stage 4 cost plan.

Alignment with client objectives is crucial for effective management.

Question 20

Why didn’t you propose a Design & Build?