What is procurement?
The overall act of obtaining goods or services for a construction project.
What is tendering?
It is the process where an employer invites contractors to bid on a construction project. The intention is to obtain a price for the works.
What was the procurement strategy for RCC?
D&B, 2 stage restricted through a framework, NEC4 Option A Fixed Price
What is novation in D&B procurement?
Novation is a process that transfers design consultants who are intially contracted to the employer/client to the contractor. It is a mutual agreemnt that replaces an old obligation with a new one.
In general novation is when the contractual rights and obligations are transfereed from one party to another. Benefits and burdens under a contract can be transferred by assignment this must be done by a novation agreement.
Why did STFC use this procurement method?
STFC are a government funded organisation so must follow public sector procurement process. All public sector procurement is subject to a legal framework, which is designed to encourage free and open competition and value for money. The main focus for public sector procurement is to ensure value for money due to the nature of where the money has come from.
STFC are a very risk adverse client so used design and build procurement to transfer the design risk over to the contractor, but they still maintained control of elements of design that were most important to them.
In terms of the tendering method a framework must be used and this was done on a 2 stage basis. A restricted tender was the recommended approach to limit the number of contractors as this project was a data centre so only certain contractors could be used and it was difficult to find the appropriate framework to use. 2 Stage was used to be more attractive to the market due to the nature of the project.
What factors typically govern procurement route selection?
The key is to identify a client’s key drivers in terms of time, cost and quality. Other factors such as risk allocation and design flexibility should be considered.
It is worth noting that when selecting a procurement route it is not possible to fulfil all of a clients key drivers and areas must be prioritised to find the most appropriate route.
What types of procurement are you aware of?
Traditional
Design & Build
Management Contracting
Construction Management
What is traditional procurement?
This involves separating design from construction. The employer/ client will appoint consultants to design the project, the contractors are invited to submit tenders on the project based on a fully developed scheme (with the execption of Contractors Design Portion that might be included).
Employer retains the design consultants during construction to maintain quality control and be available to produce any further design if required.
Providing there are no major design changes costs can be determined with reasonable certainty before work begins.
What is design and build?
The contractor is responsible for completing the design and executing the construction phase of the project.
The design risk is transferred to the contractor.
Often the clients design team will be novated across to the contractor to continue with the design works for continutity.
When might traditional procurement be appropriate?
When an employer has specific or detailed design requirements.
When cost certainty is important (more benefits over construction management or management contracting).
When the shortest overall programme is not the client’s priority.
What are the advantages of traditional procurement?
Employer retains control of the design.
The design will be largely finalised before the construction tender for the build is issued.
All tenderers produce a bid based on the same detailed design information.
Providing the design is robust, it is possible to achieve cost certainty at contract award.
Minimal built-in contractor risk premium
What are the disadvantages of traditional procurement?
Overall project duration might be longer (design and construction can’t overlap like D&B).
Very little contractor buildability input.
Design risk is to be retained by the employer.
Dual point of responsibility between both employer and contractor.
What are the advantages of D&B?
Single point of responsibility for design and construction.
Earlier commencement on site is possible if design and construction are overlapped.
Benefit of contractors experience throughout the design period.
More cost certainty than traditional procurement.
What are the disadvantages of D&B?
Design is only as good as the employers requirements.
More complex to prepare tender returns.
Employer changes can be difficult to value.
Employer will have less control over aesthetics and quality.
The contractor will build risk premiums into their tender returns.
When might design and build be suitable?
When there is a need for an earlier start on site.
Where the employer wishes to minimise their risk profile.
For technically complex projects, the design will benefit from contractor’s buildability input.
When retaining control of the design is not a priority.
What additional insurances might be required under a D&B contract?
The contractor will have design responsibility so are likely to need additional professional indemnity insurance.
What are the employers requirements?
It is a set of documents produced by the employer to set out the projects requirements which includes performance specifications, drawings, initial designs and is used as a basis for design and construction.
What are contractors proposals?
They are prepared by the contractor to respond to the employers requirements.
The contractor will produce detailed design information which will require further development throughout the course of the project.
What is construction management?
The employer directly appoints multiple subcontractors instead of employing a single main contractor. The employer will have individual contracts with separate specialist trade contractors themseleves.
The employer will utilise expertise of a construction manager to coordinate the works.
The construction manager will programme and coordinate works, but will not have any contractual relations with the trade contractors.
The construction manager has no vested interest in the financial outcome of the project and apart from professional negligence they carry no risk.
When might construction management be appropriate?
When an employer is experienced in construction and has suitable resource to manage the project.
The employer wants to achieve an early start on site.
The employer wants flexibility to make minor changes to design/ specification throughout the process with minimal impact on time or finances.
The project is technically complex and requies detailed engagement of specialist consultants and trade contractors.
What is management contracting?
The employer appoints a management contractor to manage the entire building process, who in turn appoints trade contractors to carry out the construction works.
The management contractor is paid a fee percentage based on construction costs.
The management contractor has direct contractual links with trade contractors and is responsible for the overall construction works.
When might management contracting be appropriate?
When an early start on site is a priority.
Flexibilty in design is required.
Buildability input from management contractor is required.
Where cost certainty is not a priority for the employer.
What is a framework agreement?
A framework agreement is an umbrella agreement that a party enters with one or more suppliers to establish governing terms.
It establishes a strategic partnership for the procurement of goods, works or services.
What are the three main tendering options?
Single Stage
Two Stage
Negotiated
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