Procurement and Tendering

Question 1

What is procurement?

Answer 1

The overall process of acquiring construction work or services.

Question 2

What should be considered when selecting a procurement route?

Answer 2

• The specifics of the project.
• The client objectives regarding:
  o Cost.
  o Time.
  o Control.
  o Quality.
  o Risk.

Question 3

What are the main procurement methods?

Answer 3

• Traditional Route
• Design and Build.
• Management Contracting
• Construction management

Question 4

What is traditional procurement?

Answer 4

The design is completed by the client’s design team before competitive tenders are invited and a main
contractor is employed to build what the designers have specified.

Question 5

How does traditional procurement it work?

Answer 5

• The client will hire a design consultant to produce the design and specification then hire a contractor to construct the project
  The contractor takes responsibility and financial risk for the construction of the works to the design produced by the client’s design team for the contract sum within the contract period.
• The client takes the responsibility and risk for the design and design team performance.

Question 6

When might traditional procurement be appropriate?

Answer 6

• If the employer has had the design prepared.
• If the design is substantially completed at time of contractor selection.
• The client wishes to retain control over the design and specification.
• If cost certainty at start on site is important.
• The shortest overall programme is not the client’s main priority

Question 7

What are the advantages of traditional procurement?

Answer 7

• Retaining control over the design can lead to higher quality.
• It offers increased levels of cost certainty before commencement
• Design changes are reasonably easy to arrange and value.

Question 8

What are the disadvantages of traditional procurement?

Answer 8

• The overall project duration may be longer than others due to lack of overlap between design and construction.
• There is no input into design and planning by the contractor.
• There is a dual point of responsibility with the design team controlling the design and the contractor retaining responsibility for the construction.

Question 9

What is design and build?

Answer 9

Where the contractor is responsible for the design, planning, organisation, control and construction of the works to the employer’s requirements.

Question 10

How does design and build work?

Answer 10

The employer gives the tenderers the ‘Employer’s Requirements’ and the contractors responds with the
‘Contractor’s Proposals’, which include the price for the works

Question 11

When might design and build be appropriate?

Answer 11

• Where there is a need to make an early start on site as there can be overlap between design and
  construction.
• Where the client wishes to minimise their risk as they transfer design responsibility to the Main Contractor.
• For technically complex projects requiring the contractor’s expertise.
• Where the employer does not want to retain control over design development.

Question 12

What are the advantages of design and build?

Answer 12

• There is a single point of responsibility for the design and construction.
• There is earlier commencement on site.
• Early price certainty is increased.
• The client can benefit from the contractor’s experience harnessed during the design

Question 13

What are the disadvantages of design and build?

Answer 13

• Clients may find it hard to prepare a sufficiently comprehensive brief.
• Variations from the original brief are difficult to arrange and are often expensive.
• It is harder to compare tenders and harder to determine whether value for money is being achieved.

Question 14

How much design input will the contractor have? (DB)

Answer 14

• This depends on the amount of design work the employer has already had completed at time of tender.
• This can range from full design to production information and coordination only.

Question 15

Who carries out the design for the contractor?

Answer 15

• It may be outsourced to a separate design company (contractor retains responsibility).
• They may have in-house design capabilities or the client’s team may be novated.

Question 16

What is management contracting?

Answer 16

A management contractor is employed to contribute their expertise to the design and to manage construction with a management fee being paid to them for doing so.

Question 17

How does management contracting work?

Answer 17

• The management contractor has direct contractual links with all of the works contractors.
• They have the responsibility for the construction works without actually carrying them out.
• Not all of the design need be completed before the first works contractors start work.
• The MC selects the works contractors through competitive open book tender.
• The client reimburses the cost of these packages to the MC plus their management fee.

Question 18

When might management contracting be appropriate?

Answer 18

• Where the client does not want cost certainty before commencement.
• Where an early start on site is a priority.

Question 19

What are the advantages of management contracting

Answer 19

• Overall project duration is shorter due to overlapping design and construction.
• There is contractor contribution to the design and planning process.
• Changes can be accommodated in packages not yet let if they have no further impact.
• The works are let competitively at current market prices on a firm price basis.

Question 20

What are the disadvantages of management contracting?

Answer 20

• The price for the works is not received until the last package has been let.
• Changes to the design of later packages may affect packages already let.
• There is little incentive for the Management Contractor to reduce costs.
• In practice, the MC has little legal responsibility for the defaults of the works contractors.

Question 21

How do you identify the client requirements before recommending a procurement route?

Answer 21

Through detailed discussions with the client and design team to identify their priorities in terms of cost, time, quality, risk, control requirements and experience.

Question 22

If the client wishes to start on site asap, what route would you recommend?

Answer 22

• My recommendation would need to take into account their other requirements such as cost and quality.
• If time was their overriding priority, then Construction Management or Management Contracting may offer the best solution as they can offer the fastest start on site with overlap of the design and
  construction.
• This is because start on site is not dependent upon a long tender period however the key tradeoff is a reduction in cost certainty

Question 23

What would you recommend if the client wanted an early start but also
cost certainty?

Answer 23

• Design and build procurement may offer the best solution.
• This is because it allows the design and construction to be overlapped rather than being sequential.
• Design and Construction risk is transferred to the Main Contractor with their tender being based on a lump sum price to offer high levels of cost certainty.

Question 24

What is tendering?

Answer 24

A structured procedure for generating quotations from suppliers or contractors looking to obtain an award of business activity either under competition or via negotiation with a single contractor.

Question 25

What are the main methods of choosing a contractor?

Answer 25

* Open tendering. * Selective tendering:- o Single or Two Stage. * Negotiated tendering. * Serial tendering.

Question 26

What is open tendering?

Answer 26

* This is an indiscriminate request for tenders to be submitted to the open market. * This could be achieved by advert placement in local papers or technical press inviting contractors to apply for the tender documentation. * There are little or no barriers to entry needed to submit a tender.

Question 27

What are the advantages of open tendering?

Answer 27

* It provides opportunities for capable firms which the clients may have not previously considered. * It should secure maximum competition from the open market.

Question 28

What are the disadvantages of open tendering?

Answer 28

* There is a danger of increased errors within the tender submission due to a risk of inexperienced contractors that have no prior understanding of the clients requirements. * There is no assurance that the lowest tenderer is capable or financially stable. * The total cost and time needed to review the tenders is increased.

Question 29

What is selective tendering?

Answer 29

This restricts the number of tenderers by pre-selecting a limited number of contractors to tender for the work.

Question 30

What are the two types of selective tendering?

Answer 30

* Single stage. * Two stage.

Question 31

What is single stage tendering?

Answer 31

* A structured process of receiving competitive tenders from a number of pre-selected capable contractors. * Contractors are pre-selected based on:- o Financial standing. o Qualifications and certifications. o Previous track record. o References. o Organisational structure. o Capacity and resources. o Size of work previously undertaken.

Question 32

What are the advantages of single stage tendering?

Answer 32

It ensures only capable and approved firms submit tenders. * It tends to reduce the aggregate cost of tendering. * It reduces the risk of receiving tenders from unsuitable contractors

Question 33

What is two stage tendering?

Answer 33

* Two stage tendering is where the Client seeks to appoint the Contractor based on an outline scope of work that is not fully defined. * The client then works with the appointed contractor to develop the scope of work and reaches an agreed price. * It can be used when it is useful to obtain the contractors buildability expertise on the planning of the project and gain an earlier contractor involvement.

Question 34

What is the purpose of the first stage?

Answer 34

* The client provides an outline project design to each of the tenderers. * The tendering contractors will submit prices for helping the client develop and finalise the design using their buildability expertise. * Tender submissions will typically consist of:- o A schedule of rates that will be used to calculate the agreed price during stage 2. o A price for assisting the client with design development and buildability expertise during stage 2. o Confirmation of the contractors Overheads & Profits Percentage. * A preferred contractor is then appointed to assist with developing the design further.

Question 35

What is the purpose of the second stage?

Answer 35

Following development of the design to a defined stage, a formal negotiation process is undertaken during stage 2 to agree:- o The final price. o The contract conditions. o Programme.

Question 36

What do tenderers return as part of the first stage?

Answer 36

* Detailed build up of prices for the preliminaries items. * Percentage additions for profit and overheads. * A construction programme. * Proposed sub-letting of the works.

Question 37

What are the advantages of two stage tendering?

Answer 37

* Early involvement of the contractor. * Encouragement of collaborative working. * Potential for an earlier start on site. * Greater client involvement in selecting the supply chain. * The contractor can help identify and manage risk

Question 38

What are the disadvantages of two stage tendering?

Answer 38

* Cost certainty may not be achieved before construction starts. * Additional pre-construction fees are incurred for the main contractor. * The contractor could take advantage of second stage negotiation and increase costs. * There is the potential for parties to not agree the contract sum with a risk of retendering.

Question 39

Why should you use 2 stage tendering?

Answer 39

* With a complex building. * Where the magnitude of work is unknown at time of contractor selection. * If early completion is required. * Where the design team would like to make use of contractors expertise on buildability issues.

Question 40

What is negotiated tendering?

Answer 40

Where the client has an existing preference for appointing a particular firm and only negotiates with one contractor.

Question 41

When might negotiated tendering be used?

Answer 41

When the contractor has carried out work successfully for the client previously where they have an existing relationship

Question 42

How does negotiated tendering work?

Answer 42

* There is no competition and only one contractor is invited to tender. * The contract sum is arrived at by a process of negotiation. * Schedule of rates or prices from previous projects may be used as the basis of agreeing a price.

Question 43

What could selecting the wrong contractor lead to?

Answer 43

* A bad client & contractor relationship. * A dissatisfied client. * An insolvent contractor.

Question 44

What is the form of tender?

Answer 44

* A preprinted formal statement in which the tenderer fills in the blank spaces. * The tenderer provides their name, address and the sum of money for which they offer to carry out the works.

Question 45

What are the employer’s requirements?

Answer 45

* They set out the client’s requirements including the function, size, accommodation and quality requirements of the project. * Their level of detail depends on how much design development has been carried out prior to tender. * They normally includes the current state of planning permission. * It should also detail the level of design, structure and specification information to be provided by the tenderers.

Question 46

What are the contractor’s proposals?

Answer 46

The contractor’s response to the Employers Requirements. * They are the key documentation for the client to consider at the tender review. * They often include plans, elevations, sections and typical details. * Layout drawings and specification for materials and workmanship are also provided.

Question 47

What would you include in the pre-qualification questionnaire?

Answer 47

* Details of contract particulars. * Company turnover. * Previous relevant experience and references. * Company accounts. * Management and organisational structure. * Health and safety records. * Quality systems and environmental policy. * Provision of bonds, warranties & PCGs.

Question 48

How would you determine the duration of the tender period?

Answer 48

* It depends on the procurement process and size of the project. * If a traditional procurement route with a BoQ is being adopted then I would usually allow around a month in order for the MC to obtain pricing information from theirsub-contractors. * For large complex schemes the tender period would need to be longer. * If the tender is the first stage of a two stage tender then the tender period may be a shorter duration of 2-3 weeks. * It is better to ensure there is sufficient time so contractors can price the project correctly rather than rush and encourage contractors to price a high risk element into the tender.

Question 49

What is a pre qualification questionnaire?

Answer 49

A pre-qualification questionnaire sets out a series of questions for potential tenderers to answer regarding their level of experience, capacity and financial standing. The answers to these questions enable the client to produce a short list of suppliers that are likely to be most appropriate for their project.

Question 50

How would you determine your scoring criteria and weightings for your client?

Answer 50

I would consider their goals in terms of cost, quality and time. If quality and time were more of a concern I would put the weighting to 60% for technical with 40% to commercial and vice versa

Question 51

What would you expect to see in a tender return?

Answer 51

Official tender return Price build up with a BoQ or Activity Schedule Schedule of rates Programme Any design recommendations Risk register

Question 52

On the WSSRP scheme can you talk me through the contents of the letter of invitation

Answer 52

So I sent this through an email and the letter of invitation included a formal statement of inviting the contractor to be invited into the tender with a specified tender pack and project details and relevant documents. It also disclosed a tender return date and key dates for site visits and tender return dates

Question 53

Did you follow any guidances of the procurement process?

Answer 53

RICS have published the tendering strategies guidance note which highlights the process

Question 54

On Mercury House project can you elaborate why you advised on following a design and build route?

Answer 54

Effectively time was the most important factor for the project followed by cost. The client wanted to use traditional procurement route as this was a route they're familiar with but I advised on the advantages of the design and bui

Question 55

On Mercury House is there any other procurement routes you could have advised on?

Answer 55

I could have also advised on management contracting

Question 56

You mentioned on CMP you issued a tender tender report and advised your client on who won the contract. Talk me through that

Answer 56

This document effectively highlighted key facts about the tenderers who submitted a tender and highlighted the commercial scoring, their resources, availability to start and those sort of things. Any key risks This tender report

Question 57

How would you inform unsuccessful contractors of the result?