Tender and Construction Phase

Construction Process Management

Week 3

Tender / start of Construction stage

Pre-contract programming

The design stage continued As the design stage develops it will progress fromthe scheme design to the detailed design stage.At this stage the Client should commit to approvaland the brief should not be modified after thispoint. Any further changes may incur additionalexpense and may affect the remainder of thedesign program.

At the end of the design period the design shouldbe frozen since any further changes will inevitableresult in abortive work



Production of contract information

As the final design proposals draw to a closeother information such as;

• scheme plans,

• elevations and the

• coordination of components and elements

will be finalised to allow the commencement ofthe production information stage.

Production information stage

The purpose of production is to enable thetender documentation and application forstatutory approvals to be completed.

Production information will include;

•Detailed drawings

•Schedules

•Production of specifications

•Bills of quantities

•Appointment of nominated contractors


Tendering Procurement and Contractual arrangements

The most brilliant design remains just that,a design, unless turned into reality bybuilding operations. Those operationsgenerally, and always in the public sectorcontext, require a formal agreement whichsets out who does what for how much,how it should be done, and allocates therisk – a contract.

Tendering Procurement and Contractual arrangements

Depending upon the Client’s brief and the timeavailable for the total design and buildingprocess, there may be a number of differentways of dealing with the design, development ofproduction information and tendering /procurement methods.

It is important that a decision on the method toused, given the circumstances, is agreed at theearliest opportunity.

Procurement

The transition from a successful design to asuccessful building requires the selectionof a contract which reflects the aspirationsof the Parties and meets the demands ofthe project. An essential skill of a ContractAdministrator is the selection andmanagement of the building contract

Choice of procurement route

The choice of procurement route depends onthe Client’s required balance of time /cost /quality and an analysis of how that can beachieved. This is in the context of the Client’sother requirements, not least being his requiredlevel of involvement in the design andconstruction process and the extent to which hemay change his mind or wish to alter thespecification during construction.


For each project, key criteria must be considered

and risks allocated, before the form of contract

is selected. That selection can be made from a

range of standard forms of contract.


Those considerations promote a useful set of criteria for selection of the form of contract. In this guide each contract form is summarised in terms of the following key criteria:

• Speed - design and construction

• Cost certainty

• Dealing with complexity

• Client’s involvement


• Capacity for variations

• Clarity / settlement of disputes

• Separation of design and management

Management of risk

The formation of a contract involves acceptanceof an offer, an intention to have a legally bindingagreement, performance and payment.“Transfer of risk” is often referred to but, inreality, the allocation of risk, not its transfer, is amajor element in any contract.

Management of risk

The offer includes a proposed allocation ofrisk, which is agreed in making thecontract, and the agreed payment includesconsideration for the risk taken inperformance of the contract. For example,“price certainty” is bought, by paying thecontractor to accept the risk of fixing aprice in a commercial, changing market.

Management of risk

The degree of risk involved in certain keyaspects of the project must, therefore, beassessed in respect of whether it is moreeconomic for the Employer to take a risk or forhim to pay the Contractor to take it for him.

This is an essential consideration in selecting acontract form in support of a procurement routewhich achieves “best value”.

Procurement methods

There are various methods of procurementwhich can be broadly classified under thefollowing headings:

• Traditional

• Design and Build

• Two Stage Tendering

• Public Private Partnerships / Private Finance Initiative

Forms of contract

• Management Contracting

• Construction Management

• Framework Agreements

Each method has different aspects of risktransfer and no one method can be classed asbest overall.

Procurement methods

Source RICS

Types of contracts

There are a number of standard forms ofbuilding contract available for this purpose.

The most common form of building contractsare usually in the from of JCT (Joint ContractsTribunal) format

Traditional Procurement

Traditional procurement involves the Clientproduces a full set of contract documents uponwhich the Contractor prices. The Contractorbuilds to a defined scope of works for a fixedprice lump sum. The client retains theresponsibility for the design and the projectteam. The contractor is normally appointedfollowing a tender process or negotiation.

Both the Client and Contract are subject to alegal contract for the works.

Design and Build Procurement

In a Design and Build the Contractor becomesresponsible for part or the whole design of theproject. Standard forms of contract are availablefor to ensure that the building is completed toan agreed cost and programme. The Contractmay be let on a Client led or Contractor ledbasis.

Contractors can be chosen through a tenderprocess or through negotiation.


In Client led designs the Contractor is appointed when the design process has been developed. This allows the Client to retain control of the important elements of design and specification. The Design Team will be transferred over to the Contractor with their contractual obligations to complete the designs on behalf of the Clinet. This process is called Novation.

In Contractor led appointments the Contractorbecomes responsible for the full works designand package.

The Client can appoint a consultant to overseethe works. Maximum risk is transferredfollowing this method of procurement.

However Clients need to constantly liaise withthe Contractor to ensure they receive a buildingwhich satisfies their requirements .


Partnering

Partnering is a form of collaborative workingbetween customers (Clients) and suppliers(Contractors).

In contrast with traditional 'arms-length'procurement and contract managementapproaches, partnering is characterised by agreater degree of openness, communication,mutual trust and sharing information.

Partnering

The aims of partnering arrangements are often expressed in terms of business outcomes rather than specific outputs or improvements; their success is particularly dependent on the people and relationship aspects.

The management of a partnering arrangement is usually proactive rather than reactive. Both parties work together to identify optimum solutions and to anticipate and resolve problems in a constructive, collaborative way.

‘Partnering agreement':

A 'partnering agreement': this is usually created as a 'charter' to complement the formal contract terms. A partnering facilitator leads a workshop that helps both parties together to set out the principles, attitudes and ideals that will characterise the arrangement. These could include the degree of openness, the spirit in which problems will be handled, the desired 'tone' of the relationship, principles for communication, the behaviours of staff and so on.

Partnering

Open book accounting: there could be open book accounting for both parties, together with other measures that continually evaluate and demonstrate value for money, not lowest price. Actual costs and agreed profit margins are made visible, while also creating an understanding of the customer's budgetary restrictions. The degree of 'openness' needs to be carefully considered at the outset.

Two Stage Tender Procurement

The Contractor is appointed as part of a 2 Stagetender package. The first stage determines thelevel of overhead and profit for each Contractor.The successful Contractor then works with theProject Team during the second stage to developthe designs and establish detailed costings forseparate project work elements. This processwill provide for a fixed price on a detailed designbasis.

Two Stage Tender Procurement

The Contractor can then enter into a contract onthis fixed price basis and also pursue theopportunity to novate the Design Team as withthe Design and Build Procurement route aspreviously noted. This process requires a longsecond stage period in which to design andtender the different work elements andtherefore a start on site would occur later thannormal.

Public Private Partnerships

Public Private Partnerships (PPP), particularlyPrivate Finance Initiatives (PFI) projects werecreated to provide a service i.e. a school whichwould be managed by the PFI contractor for aperiod of years. The Client did not own thecapital asset of the building. At the end of theterm i.e. 30 years the Client would be given theoption to acquire the building.


Most PFI projects are design and build projectswhich are funded by the PFI contractor. TheClient / user repays the investment monies plusservice charges over the agreed contract period.

The PFI contractor will be responsible foracquisition of the land, design, construction andmaintenance of the building life throughout its‘lettable’ life.


This procurement route is expensive andrequires negotiation rather than competitivetendering. In comparison with otherprocurement routes the time fromcommencement of the project to attaining astart on site is substantially longer.

Management Contracting

This is a fast track strategy which overlaps thedesign and construction stages and allows earlyelements of the construction process to becommenced before design has been completed.The Management Contractor is engaged tomanage the overall contract in return for a fee.The Management Contractor can therefore beappointed early in the design and can advise onbuildability and programming.

Management Contracting

In addition to the contract with theManagement Contractor, the contracts for theindividual work packages are between theManagement Contractor and the individual -contractors. A cost plan is utilised to control thedevelopment costs although actual costs cannotbe obtained until the final work package hasbeen awarded.

Construction Management

This is also a fast track strategy where individualelements of the project are let before the designof later work packages or elements have beencompleted. The provider will appoint aConstruction Manager to manage the overallcontract in return for a management fee as withManagement Contracting. Also, as before, theproject can benefit from early involvement ofthe Contractor.

Construction Management

In this process the contracts for the sub-contractors are placed directly between theClient and the sub-contractor and the Client willneed to have a high level of involvement duringthe design development and the constructionphases of the work. As with ManagementContracting, the final costs will only be knownonce the final work elements have beenawarded.

Framework Agreements

Framework Agreements can be established with single suppliers or with a limited number of suppliers. Frameworks can allow suppliers to be brought together with the relevant expertise and experience which can result in savings to both parties where a number of projects are involved. These agreements can cover different forms of procurement including Design and Build, Traditional, etc.

Open procedure

Under an open tender procedure all suppliers who respond to an advertisement are supplied with tender documentation, which they can return as appropriate.

Restricted procedure

The restricted procedure can best be described as a two-stage approach in which the Council invites interested suppliers to undergo a pre-qualification assessment to draw up a shortlist before inviting those on the list to tender. This is the most common approach used by the Council when tendering.

Tendering

Tendering is the process which is undertaken toobtain offers to create a contract between aclient and a contractor (Turner, 1997). Types ofconstruction tendering differ from each other inthe way in which contractors are selected. Thereare two means of choosing a contractor namelycompetitive tendering and negotiatedtendering. Competitive tendering is where anumber of contractors compete to win aconstruction contract.

Tendering

This method allows the client to get the lowestpossible price. Competitive tendering may bedone by open tendering, selective or serialtendering. Tendering may also be negotiatedrather than competitive. Negotiated tendering isa non-competitive approach where the cliententers into contract and negotiates a price witha specific preferred contractor (Smith, 1986).

Contractors by value

Evaluation of tenders

In order to preserve the integrity of thecompetitive process, it is imperative that theevaluation of proposals is undertakenobjectively, consistently and without biastowards particular suppliers. Accordinglyevaluation of tenders is undertaken by anevaluation panel, comprising a minimum ofthree members, to ensure a fair and objectivedecision is reached.


Because of the nature of contracts it is unlikelythat they will be awarded on the basis of pricealone. The Client should award the contract tothe supplier it considers offers value for money.For this reason our main evaluation criterion willbe the "most economically advantageoustender" (MEAT) as determined by the criteria setout in the tender documents.


The award criteria will vary depending on thetype of contract. Examples of award criteria areexperience, technical merit, financial viability,flexibility to future changes to our requirements,speed of project delivery etc.

THE CONTRACTORS RESPOSNSE

Tendering – Pre-qualification

Before being allowed to tender for a project thePrincipal / Contractor will be expected to gothrough some form of pre-qualification process.The pre-qualification process, usually in theform of a Pre-Qualification Questionnaire (PQQ),is used as a means of short listing potentialContractors , before allowing them to go on tothe next stage of the tendering process, or forassessing an organisation’s suitability to becomepart of preferred contractor lists.

Pre-qualification

The range and depth of information will depend upon the Client’s requirements but generally the following information is required;

Financial Information

• Information on the tenderers latest trading performance, and that the contractor is financially stable and that they have the necessary financial resources to complete the contract.

Pre-qualification

Experience and Technical Ability

• details of similar contracts completed over recent years as well as providing contact details of referees with whom confidential references can be directly obtained

Pre-qualification

Insurance

• You will be advised of the insurance requirements in the pre-qualification questionnaire and insurance cover must be in place before a supplier/contractor can commence work for Bristol UWE. If you do not have the required cover in place at the time of completing the PQQ you will be asked to provide an assurance that, should you be selected for standing lists or awarded the contract, you will ensure that your insurance cover is appropriate.

Pre-qualification

• Organisation

• We will ask about your organisational structure to establish whether you have the appropriate resources to fulfil the contract. We may also ask for information on professional qualifications held by staff and professional or trade bodies to which your organisation belongs.

Pre-qualification

Health and Safety

The CDM regulations (reg 4 competency) require the Client to ensure that only competent contractors are employed to undertake work on its behalf.

Clients are therefore a required to assess the Contractors’ systems for the control of health and safety. Some Clients employ agents such as CHAS to carry out such assessments on their behalf.

Pre-qualification

Equal Opportunities

Clients are required to ensure that contractors do not discriminate in either their employment practices or in contract delivery.

There is a legal framework surrounding equalities, which all employers have a duty to follow, including:

• Race Relations Act 1976 and Amendment Act 2000

• Disability Discrimination Act 1995

Pre-qualification

• Sex Discrimination Act 1975

• Employment Equality (Religion or Belief) Regulations 2003

• Employment Equality (Sexual Orientation) Regulations 2003

Pre-qualification

Environment

Most Clients have policies re; Sustainable development. Their procurement decisions have a direct influence on how well they can meet their sustainability aims. Contractors will be expected to show that they themselves have sound environmental performance and improvement policies.

The tendering process

From the Contractors point of view the tender planning process begins with the receipt of the tender enquiry and ends with the submission of the tender.

As with all other processes tendering is a series of interrelated stages which include;

1. contacting suppliers to identify the cost of the material content of the project


2. obtaining specialist quotations from contractors,

3. calculating the cost of labour element including on-costs such as national insurance, holidays etc.

4. pricing the bill of quantities

5. establishing the overall time for the contract

6. estimating the cost of on site preliminaries


7. producing a summary of the tender bid foothe directors

The various stages of tendering

1.Enquiry summary; A summary of the major contractual details e.g. The name of the client , architect, description of the main elements of construction, contractual conditions, etc., should be prepared, together with an approximate estimate of the total price/value based on either a summary of the major quantities or upon approximate prices per m2.


•1 Cont’d; from the overall picture the senior member of the estimating /building team will consider factors such as profit margins on labour, plant and materials and the subletting of any elements of the works and how they are to included in the overall price.


•2, Analysis of the bill of quants. Once the scope of the works have been established material and contractor invitations can be sent out by the various members of the estimating team. Other duties such as site inspections etc can also be allocated.


•3, Pricing of rates; the bill of quantities can be broken down into their various components and each priced separately. Material elements can be built up from suppliers quotations. Allowances will be included for items such as wastage, conversion factors i.e. mixing or consolidation, and anticipated profit margins.


• 3 Cont’d. Labour and plant elements will be complied from a library of known outputs, schedules of rates or rates included from estimated past knowledge.

The bill rates will be ‘worked up’ and collected to establish the basic price.


• 4 Financial analysis; when the actual price of constructing the works has been established the price will broken down to produce a financial analysis indicating the preliminary tender total identifying; labour, plant, materials and profit, contractors work and profit, prime cost and provisional sums including profit and preliminaries.


• 5 Financial considerations; the financial analysis combined with a summary of the build-up of the major items can then be presented to the directors for consideration.

Factors such as market conditions, the current work load and the availability of labour, plant and materials can be carefully considered and the price modified accordingly


•6 Records of success; records of successful /unsuccessful tender bids should be kept to provide feed back to the estimators. This information can be used in the future when submitting work especially against similar contractors. Similarly it can be used to analyse trends in the percentage of successful bids against the general market.

Programme of tender activities

Source; Cooke & Williams

Documents

Tender and Construction Phase