Procurement & Tendering

Question 1

What is Procurement?

Answer 1

The overall act of obtaining goods and services

Question 2

What are the main factors that typically govern procurement route selection

Answer 2

Identifying the client’s objectives and key drivers in terms of time, quality, cost, and risk.

Question 3

Which procurement routes are you familiar with?

Answer 3

Traditional, Design & Build, Construction Management, Management Contracting

Question 4

What is traditional procurement?

Answer 4

The traditional procurement route involves separating design from construction. The client first appoints consultants to design in detail, contractors are then invited to submit tenders based on a fully developed scheme.

Question 5

What are the key advantages of traditional procurement?

Answer 5

• The client retains control of the design.
• The design is largely finalised before the contractors tender, which means the client knows what they are getting.
• All tenderers produce a submission based on the same information, which makes tender analysis easier.
• Assuming the design is robust, there is reasonable price certainty.
• Minimal built-in risk premium.

Question 6

What are the key disadvantages of traditional procurement?

Answer 6

• The overall project duration can be longer than design and build procurement.
• Zero or limited buildability from the contractor.
• Design risk is retained by the client, any changes post contract will be a Compensation Event.
• Dual point of responsibility (client for design and contractor for construction).

Question 7

When might traditional procurement be appropriate?

Answer 7

• The client may have specific or detailed design requirements.
• Cost certainty is important (traditional more so than management contracting and construction management).
• Time is not a client’s main priority.

Question 8

What is design & build?

Answer 8

• The contractor is responsible for completing the design and executing the construction phase of the project.
• Under JCT the client’s team produces a set of client’s requirements, the contractor then responds to the ER’s via their contractor’s proposals. The original client’s design team may be novated to the contractor for continuity, or the contractor may appoint their own design team.
• The contractor is responsible for the design, planning, organisation, control, and construction of the works.
• Design risk is transferred to the contractor.

Question 9

What are the key advantages of Design & Build?

Answer 9

• Single point of responsibility for design and construction.
• Earlier commencement on site is possible.
• Benefit of the contractor’s experience harnessed during design.
• Design and construction risks rest with the contractor.
• Provides more cost certainty than traditional procurement.

Question 10

What are the key disadvantages of Design & Build?

Answer 10

• The client may struggle to prepare a comprehensive brief.
• More complex to compare tenders.
• Client changes can be difficult to value and expensive.
• The client may have less control over aesthetics and quality.
• The contractor will build risk premiums into their tender return.

Question 11

When might design & build be appropriate?

Answer 11

• When there is a need to make an early start on site.
• Where the client wishes to minimise their risk profile.
• For technical projects where the client will benefit from the contractor’s buildability input.
• Where retaining control of design is not a priority.

Question 12

What additional insurance might be required under a D&B?

Answer 12

• The contractor and their design team will have design responsibility, so therefore it is likely they will need professional indemnity insurance.

Question 13

What procurement route poses the least risk to the client?

Answer 13

• JCT Design and Build
• NEC Option A

Question 14

Under Design & Build, who executes the design?

Answer 14

• The contractor may use their own in-house designers, or they can appoint external consultants. The client’s original design team can also be novated to the contractor.

Question 15

What is construction management?

Answer 15

• The client directly appoints multiple subcontractors (referred to as trade contractors) instead of employing a single main contractor. The client places individual contracts with separate specialist trade contractors themselves.
• The client places a direct contract with each trade contractor and utilises the expertise of a construction manager to coordinate the works.
• The construction manager programmes and coordinates the works.
• The construction manager has no contractual relationship with the trade contractors.
• The construction manager has no vested interest in the financial outcome of the project, and barring professional negligence, carries no risk.

Question 16

What are the advantages to Construction Management?

Answer 16

• Speed (Early start on site).
• The overall project duration could be reduced by overlapping design and construction.
• The construction manager can contribute to the design and project planning processes.
• Changes in design can be accommodated without paying a premium.
• Prices may be lower due to direct contracts with trade contractors.
• The client has a means of redress with trade contractors through direct contractual links.

Question 17

What are the disadvantages to Construction Management?

Answer 17

• Price certainty is not achieved until the last trade package is let.
• The procurement route requires an informed, experienced, and proactive client.
• The client has a lot of consultants and contractors to manage.

Question 18

When might construction management be appropriate?

Answer 18

• The client is experienced in construction and has suitable resources to manage the project.
• The client wants to achieve an early start date on site.
• The client wants the flexibility to make minor changes to the design/specification throughout the process with minimal impact on time or finances.
• The project is technically complex and requires detailed engagement of specialist consultants and trade contractors.

Question 19

Which is the riskiest procurement route for the client?

Answer 19

• Construction management. This is because the client places individual contracts directly with each trade contractor and the construction manager carries no risk (barring professional negligence).

Question 20

What is management contracting?

Answer 20

• The client appoints a management contractor to manage the entire building process, who in turn appoints trade contractors to carry out construction works.
• The management contractor is usually paid a fee percentage based on construction costs.
• The management contractor has a direct contractual link with the 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.
• The management contractor will provide buildability input.
• Single point of responsibility (management contractor).
• Trade packages are let competitively and transparently.
• There can be considerable flexibility in design, with changes being made throughout the construction process.

Question 22

When might management contracting be appropriate?

Answer 22

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

Question 23

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

Answer 23

• Client responsibility.
• Construction management – the client directly appoints multiple trade contractors to execute the works.
• Management contracting – the client appoints a management contractor, who in turn appoints the trade contractors.

Question 24

What is a framework agreement?

Answer 24

• A framework agreement is an umbrella agreement that a party enters with one or more suppliers to establish governing terms.
• A framework usually establishes a strategic partnership for the procurement of goods, works, or services.
• NH CPMS example

Question 25

How long can a framework last for?

Answer 25

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

Question 26

What are the key advantages of a framework?

Answer 26

* Framework agreements can help to develop stronger relationships between the parties involved and encourage long term collaboration and cooperation. * Time saving (can speed up the procurement of goods and services) * Repeat work and continuity of delivery. * Rates and prices are usually agreed upfront.

Question 27

What are the key disadvantages of a framework?

Answer 27

* Contractors, suppliers, consultants can become complacent. * Bidders will invest time and resources to be awarded a framework and potentially not receive work through it. * May be restrictive to new suppliers who offer innovative, new solutions with the changing and evolving nature of technologies.

Question 28

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

Answer 28

* Clients who are continuously commissioning construction work might want to reduce procurement timescales, learning curves and other risks. * A framework allows the client to invite tenders from suppliers of goods and services on a ‘call-off’ basis as and when required.

Question 29

What is the difference between a framework agreement and a contract?

Answer 29

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

Question 30

What is project partnering?

Answer 30

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

Question 31

What are they key advantages of partnering?

Answer 31

* The overall construction and design programme can be shortened. * The likelihood of conflict is reduced. * Improved customer satisfaction. * Improved value for the client. * Improved buildability.

Question 32

What are the disadvantages of partnering?

Answer 32

* Less opportunity to understand what other contractors or potential partners have to offer. * It is difficult to find a strong partner who shares the same objectives, ethics, attitude.

Question 33

What is tendering?

Answer 33

* Tendering is the process by which the client invites suppliers to place a bid for work on a project. The overall objective is to obtain a price for the works.

Question 34

What is the difference between procurement and tendering?

Answer 34

* Procurement is the overall act of obtaining goods and services from external sources and deciding the strategy for how these goods are to be acquired. * Tendering is a phase in the procurement strategy that deals with obtaining a price through a bidding process.

Question 35

What are the three main tendering options?

Answer 35

* Single stage tender. * Two stage tender. * Negotiated tender.

Question 36

What documents would you include in a tender pack?

Answer 36

* Form of tender. * Construction drawings. * Tender return information. * Instructions to bidders. * Tender scoring matrix. * Invitation to tender. * Pricing document. * Quality questions

Question 37

What is a bona fide tender?

Answer 37

* A bid submitted in good faith, complete, and in prescribed form that meets the conditions of the bidding requirements. * Confirmation that the supplier has not colluded with another party when compiling the tender.

Question 38

What is OJEU?

Answer 38

* The Official Journal of the European Union. * An online portal that houses public sector contracts that are over the stated procurement threshold.

Question 39

What happens to OJEU now that the UK has left the European Union?

Answer 39

* It has been replaced with ‘Find a Tender Service’

Question 40

What is the threshold for Construction Works under the Public Contracts Regulation?

Answer 40

* £5,336,937 (£5.3m)

Question 41

Are you aware of any guidance issued by the RICS associated with tendering?

Answer 41

* Tendering strategies, 1st edition

Question 42

What is a pre-qualification questionnaire ?

Answer 42

* A pre-qualification questionanaire sets out a series of questions for potential tenderers to answer regarding their level of experience, capacity, financial standing, etc. prior to being invited to tender.

Question 43

What is the purpose of a PQQ?

Answer 43

* The 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

Question 44

What has replaced PQQ's?

Answer 44

Selection Questionnaire (SQ)

Question 45

What might the PQQ ask?

Answer 45

* Company details. * Details of insurance cover. * Relevant experience. * Information about technical and professional ability. * Information about capability and capacity. * Quality assurance policy. * Environmental management policy * Health & Safety policies and records.

Question 46

A credit check is usually part of the PQQ process. Where could a business get a credit check from?

Answer 46

* Dun & Bradstreet. * Credit agency such as Experian.

Question 47

What is single stage tendering?

Answer 47

* Tender documents are issued to several competing contractors, who are all given the chance to bid for the project based on identical tender documentation.

Question 48

What are the key advantages to a single stage tendering?

Answer 48

* The client benefits from a competitive tendering process, which can lead to competitive pricing. * The client can benefit from a fixed price through this tendering process.

Question 49

What are they key disadvantages of single stage tendering?

Answer 49

* No buildability input from the Contractor. * The price is only as good as the design information. * Contractors may be unwilling to tender in a good economic climate (too much competition).

Question 50

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

Answer 50

* The tender period is largely dependent on the complexity of the project, however 12 weeks would be reasonable.

Question 51

What is two stage tendering?

Answer 51

* Stage 1 – The client provides an outline project design and contractors then compete for preferred contractor status. The preferred contractor is usually chosen based on the quality of their bid, the quality of their team, prelims and OH&P. The preferred contractor then joins the design team on a consulting basis using a pre-construction services agreement. * Stage 2 – Once the design has sufficiently progressed, the contractor enters into detailed negotiation with the employer to agree on the final price, contract conditions and programme.

Question 52

What are the key advantages of a two-stage tender?

Answer 52

* Early appointment of the contractor to work in parallel with the design team. * Early involvement of the contractor to benefit from buildability input. * An earlier start on site is possible. * Client involvement in subcontractor selection. * Increased opportunity to value engineer with contractor’s input. * Improved opportunity to identify project risk.

Question 53

What are the disadvantages of two-stage tendering?

Answer 53

* The contractor has less incentive to price the second stage competitively, negotiations may therefore be difficult. * Additional cost of the contractor’s pre-construction fee. * Potential for the negotiation stage to fail (contract sum not agreed).

Question 54

What is a negotiated tender?

Answer 54

* A negotiated tender is effectively a single-stage tender carried out between the client and just one contractor of their choice to submit a tender response for the project.

Question 55

What are the key advantages of a negotiated tender?

Answer 55

* Simplicity. * Speed. A negotiated tender can have programme advantages if undertaken in good faith. The client has flexibility in terms of choosing their preferred contractor. * Time and cost savings involved in comparing and analysing multiple tender submissions. * The process can allow early contractor involvement.

Question 56

What are the key disadvantages of a negotiated tender?

Answer 56

* Possibility of delay with contract negotiations. * Potential cost premium due to the lack of competition. * There is a heavy reliance on trust between the parties. * It can be seen as anti-competitive and exclusive.

Question 57

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

Answer 57

* Insist on an open book approach when agreeing subcontract packages and a minimum of 3 quotes to be provided for each element of the works.

Question 58

What is a ‘form of tender’?

Answer 58

* It is typically a one page document which a contractor signs and returns with their proposed tender price and submission. It is a formal acknowledgement that the tenderer understands and accepts the terms and conditions of the tender documents and any other requirements that are stipulated.

Question 59

What information is typically included in the form of tender?

Answer 59

* Tender sum. * The date until which the price remains valid. * Construction period. * Confirmation of the tender being genuine and bona fide. * Tenderer details and signature. * Acceptance of the terms and conditions.

Question 60

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 60

* Track record of previous experience. * Proposed team and hierarchy. * Methodology and approach. * Programme. * References. * H&S information. * Value engineering proposals * Logistics plans * Social value strategy. * Diversity and inclusion policy.

Question 61

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

Answer 61

* Arithmetical errors. * Pricing errors (items not priced). * Pricing methods (front loading). * Check the form of tender is complete and signed. * Resolve any qualifications.

Question 62

What happens if a tender is submitted late?

Answer 62

* Public sector project – the documents should not be accepted. * Private sector project – the matter should be discussed with the client to understand if they would like to accept. The safest option is not to consider

Question 63

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

Answer 63

* The tender should be discarded on the basis that the project is funded by the public sector.

Question 64

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

Answer 64

* The contractor may be trying to ‘buy’ the project with a view to recovering their costs with Compensation Events. * It could indicate that the contractor is in a poor financial condition and is eager to win the work at any cost. * Areas of the project may not be priced accurately, creating the potential for an adversarial relationship to develop post contract.

Question 65

How do you deal with qualifications in the tender submission?

Answer 65

* Procedures associated with qualifications should be outlined in the tender instructions. * If the qualifications are unauthorised, it may invalidate the tender. * The client and contractor should look to resolve the qualifications prior to signing the contract. Any outstanding matters should be clearly documented in the contract to avoid future disputes.

Question 66

How would you deal with errors identified in the tender submission?

Answer 66

* JCT has produced a tendering practice note where two options are suggested to deal with errors. * Alternative 1 – The tenderer should be given the details of the errors and afforded the opportunity to confirm or withdraw their tender. If they withdraw the next lowest bid is considered. * Alternative 2 – The tenderer should be given the opportunity to confirm their offer or amend it to correct genuine errors.

Question 67

What would you do if you believed the contractor submitting the lowest tender was in financial difficulty?

Answer 67

* As part of the evaluation process, the company accounts would be reviewed to assess the financial stability of the contractor (if not already complete at the PQQ stage). This could lead to disqualification if the contractor is having financial difficulty. * Consider a performance bond. In the event the contractor fell into insolvency, the employer would be able to call on the bond and appoint another contractor to complete the project. * Consider a parent company guarantee. * Raise the concern with the client.

Question 68

How would you deal with a front-loaded tender?

Answer 68

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

Question 69

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

Answer 69

* Not enough tenders returned. * The tendering procedure is compromised for some reason. * If tenders were not at the cost level required and it was believe that re-tendering to different tenderers would provide a different result. * Design changes or value engineering have significantly changed the design that was originally tendered.

Question 70

What information is typically included within a tender analysis report?

Answer 70

* List of tenders received. * Initial tender return totals. * Any qualifications identified. * Post-tender adjustments. * Revised tender sum. * Comparison of tender returns. * Comparison with the pre-tender estimate. Recommendation.

Question 70

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

Answer 70

* Ensure the tender information is as accurate as possible. * Ensure the tender period is long enough. * Go through the PQQ to ensure the correct contractors are selected. * Check that the contractors have the time and resource capacity to complete the tender.

Question 70

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

Answer 70

* A contract sum analysis is an alternative pricing document to a schedule of works or bill of quantities. It’s often prepared in a standard format from the client’s team to support the tender analysis. The client team usually requests all tenders to be returned in the same contract sum analysis format.

Question 71

If you think the delivery programme is tight, how could you give comfort to the contractor regarding delay damages (to avoid excessively pricing in their tender sum?)

Answer 71

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

Question 71

If the tender was received on time, but the project was delayed for a few months, what would you need to check?

Answer 71

* Check the form of tender; this would show long the price was valid for.

Question 72

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

Answer 72

* I would seek further information from the contractor and request that it is removed; subject to the tender instructions, this may invalidate the submission.

Question 73

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

Answer 73

* This could be due to market conditions. * The client team should reconcile the tenders against the pre-tender estimate to identify where the major differences are. * The team could value engineer or look for cost savings if the prices are over budget.

Question 74

What is the purpose of a pre-tender estimate?

Answer 74

* The pre-tender estimate is the last cost check of the project before it is issue to tender. The design should be sufficiently developed at this stage, therefore, the pre-tender estimate should be an accurate reflection of the works. * The estimate can then be used to compare against the tender submissions.