T062 Procurement And Tendering Rics Apc

Front 1

What is procurement?

Back 1

The overall process of acquiring construction work or services
What should be considered when selecting a procurement route?
The specifics of the project
The client objectives regarding cost, time, control, quality and risk

Front 2

What are the main procurement methods?

Back 2

Traditional / general contracting

Design and build

Management contracting

Construction management

Front 3

What is traditional procurement?

Back 3

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

Front 4

How does traditional procurement work?

Back 4

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

Front 5

When might traditional procurement be appropriate?

Back 5

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
Cost certainty at start on site is important
The shortest overall programme is not the client’s main priority

Front 6

What contracts might be used?

Back 6

JCT – minor, intermediate, standard with quantities

Front 7

What are the advantages of traditional procurement?

Back 7

Competitive fairness and transparent process – increase value for money
Design led – can ensure quality
Price certainty before commencement
Well known procedures
Changes are reasonably easy to arrange and value

Front 8

What are the disadvantages?

Back 8

Overall project may have a longer duration than others – sequential process
No contractor design and planning input
Strategy based on price competition – could lead to adversarial relations
Dual point of responsibility – design team for design and contractor for construction
If design not complete at time of tender, cost and time certainty are reduced

Front 9

What is design and build?

Back 9

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

Front 10

How does D&B work?

Back 10

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

Front 11

When might D&B be appropriate?

Back 11

Where there is a need to make an early start on site – can overlap design and construction
Where the client wishes to minimise their risk – not got responsibility for design
For technically complex projects – benefit of contractor’s expertise
Where the employer does not want to retain control over the design development

Front 12

What contracts might be used?

Back 12

JCT DB 11

Front 13

What are the advantages of design and build?

Back 13

Single point of responsibility for design and construction
Earlier commencement on site
Early price certainty
Benefit of contractor’s experience harnessed during design

Front 14

What are the disadvantages of D&B?

Back 14

Client may find it hard to prepare a sufficiently comprehensive brief
Client has to commit to a concept design early
Variations from the original brief are difficult to arrange and often expensive
Harder to compare tenders – harder to determine if getting value for money
Ease of fabrication may be prioritised above aesthetic quality
May be less real competition due to fewer design and build firms

Front 15

How much design input will the contractor have under D&B?

Back 15

This depends on the amount of design work the employer has already had completed at time of tender

Can range from full design to production information and coordination only

Front 16

Under D&B - who carries out the design for the contractor?

Back 16

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

Front 17

What is novation?

Back 17

A new contract that transfers the rights and obligations of one contractual party to a new third party i.e. design rights and obligations of architect transferred to contractor

Front 18

If the design team is novated, what should the client put in place?

Back 18

A collateral warranty to the design team to give them remedies for breach of contract

Front 19

What is management contracting?

Back 19

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

Front 20

How does management contracting work?

Back 20

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 tenders
The client reimburses the cost of these packages to the MC plus their fee
The MC’s role is low risk – get prime cost plus a fee

Front 21

When might management contracting be appropriate?

Back 21

Where the client does not want cost certainty before commencement

Where an early start on site in a priority

Front 22

What contract might be used?

Back 22

JCT – Management Contract 05

Front 23

What are the advantages of Management Contracting?

Back 23

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

Front 24

What are the disadvantages of Management Contracting?

Back 24

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 - expensive
There is little incentive for the MC to reduce costs
May become a ‘post box’ system
In practice, the MC has little legal responsibility for the defaults of the works contractors

Front 25

What is construction management?

Back 25

The employer places a direct contract with each of the trade contractors and utilises the expertise of a construction managers who acts as a consultant to coordinate the contracts

Front 26

How does it construction management work?

Back 26

The trade contactors carry out the work
The construction managers supervises the construction process and coordinates the design team
The CM has no contractual links with the trade contractors or members of the design team
Their role includes preparation of the programme, determining requirements for site facilities, breaking down the project into suitable works packages, obtaining and evaluating tenders, co-ordinating and supervising the works

Front 27

When might construction management be appropriate?

Back 27

On large, complex projects were the advantages of CM can be put to use e.g. upfront buildability knowledge, programme advise, specialist input from trade contractors
Where early start on site is key
Flexibility in design, procurement, construction strategy
Where price certainty before commencement is not key
Where the client is experienced in construction

Front 28

What contracts might be used for construction management ?

Back 28

JCT - Construction Management Agreement CM/A AND Construction Management Trade Contract (CM/TC)

Front 29

What are the advantages of construction management?

Back 29

Overall project duration reduced by overlapping design and construction
Construction manager can contribute to the design and project planning processes
Roles, risks and relationships for all parties are clear
Changes in design can be accommodated without paying a premium
Prices may be lower due to direct contracts with trade contractors
Client has means of redress to trade contractors through direct contractual links

Front 30

What are the disadvantages of construction management?

Back 30

Price certainty not achieved until last trade package is let
Changes to later packages may adversely affect packages already let - expensive
Need an informed, pro active client
Client has a lot of consultants and contractors to deal with – not just one – more fees

Front 31

What is the difference between management contracting and construction management?

Back 31

Under construction management the client is in direct contractual relationships with each of the trade contractors and the construction manager isn’t

Under management contracting, the MC is in direct contractual relationships with the trade contractors and the client is in contract with the MC only

Front 32

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

Back 32

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

Front 33

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

Back 33

Depends on their other requirements – such as cost and quality

If time was their overriding priority then CM or MC as they offer the fastest start on site, this is because start on site is not dependent upon a long tender period BUT has consequential disadvantages in terms of cost certainty

Front 34

What if they wanted an early start but also cost certainty, what procurement route would you recommend?

Back 34

Then design and build might be the most appropriate
Allows design and construction to be overlapped rather than being sequential
Tenders are based on the provision of all services so the client gets a lump sum price

Front 35

What is GMP? What does it mean to you?

Back 35

Guaranteed maximum price

A lump sum contract under which there is no adjustment of tender price unless the SCOPE required by the client changes

The contractor includes the additional risks involved in the design development process in his tender price

Front 36

What are the advantages of GMP?

Back 36

Greater price certainty – contractor takes risk of design development and unforeseen occurrences

Greater control of overspending – contractor’s interests to alert the team to expensive items of design development

Quicker settlement of final account

Front 37

What are the disadvantages of GMP?

Back 37

The client may pay too much – contractor’s risk allowance may be higher than in reality

Scope changes are likely to be very expensive

Can be adversarial – trying to decide whether changes are design development or scope changes