Procurement Management: in Construction in Construction

Procurement
Management
in Construction
Course Title
Part 3
Types of tendering
Part 3- Types of tendering
General principles
•This section, we will look at what tendering is and how
tendering processes are used to establish a contract
price.
•We will look into different types of tendering and
negotiation strategies and their advantages and
disadvantages.
•And seek to understand the tendering and negotiation
processes involved in procurement.
Some Confusions
Procurement v/s tendering
Some Confusions
Procurement v/s tendering
Some Confusions
Tender v/s contracts
Some Confusions
Tender v/s contracts
General principles
General principles
Minimum level of service of a QS
General principles
Minimum level of service of a QS
Main/ Common Types of Tendering
General
•There are three main types of tendering strategy which
are common to the construction industry, although there
may be subtypes of each.
•Single stage tendering
•Two-stage tendering
•Negotiated tendering
•Note that the chosen procurement route should not
affect the tendering strategy as each tendering strategy
can be used within most procurement strategies
Single-stage Tendering
•Generally considered as the most common type of
tendering strategy for obtaining a price for the whole of
the construction works.
•Usually undertaken at RIBA Stage 4 so that the tenderers
receive the most detailed information to base their bid
on (aligns most with Traditional Procurement method).
•The bidding contractors are given a predetermined
amount of time to submit their tenders.
•Invitation to tender documents are issued to a number
of competing contractors who are all given the same
equal chance to bid for the project based on identical
tender documentation.
•The client and/or his Project Team (PM, Architect and
QS) compile a list of the preferred contractors for the
proposed project.
•Pre-selecting a limited number of contractors to tender
for the works. Usually the full tender documentation is
issued to these selected companies.
• The number of tenderers is normally limited to
between five & eight, depending on the size and nature
of the contract.
• Shortlist is usually based on previous experience from
the Project Team.
•Tender receipts are then analysed, in terms of time, cost
and quality, before a single contractor is declared the
preferred contractor.
• The preferred contractor then finalizes the process to
enter into a formal contract with the client to deliver the
tendered works.
Advantages Disadvantages
It should ensure that only The cost level of the tenders
capable and received may be higher
approved/selected firms
submit tenders; and
It tends to reduce the This is resultant from there
aggregate cost of tendering being less competition
(Cost to the Client for (compared against Open
Advertisements etc) Tendering – see later) and also
to the likely higher caliber of
the tenderers selected.
Two-stage Tendering
•This process has become more common in recent years.
•Often used where time is constrained as it enables
design and tendering to overlap.
•Can be used if the design process would benefit from
the technical input of a contractor in the later design
stages (complexity, unique elements).
•In this sense it is used to obtain an early appointment of
a contractor
Two-stage Tendering
•Similar process to Single Stage Selective tendering to
select companies for the Bid
•First stage aims to select a suitable contractor by means
of limited competition. This may be on a % basis for
Overheads and Profit for example.
•The second stage is a process of negotiation or pricing
with selected contractor on the basis of first stage tender
Two-stage Tendering
This may have benefits of This is resultant from there
competition and at the same being less competition
time to have the advantage of (compared against Open
bringing a contractor into the Tendering – see later) and also
planning of the project and to the likely higher caliber of
making use of his practical the tenderers selected.
knowledge and expertise; and
It may also result in an earlier The cost level of the tenders
start on site. received may be higher.
Negotiated Tendering
•Only one contractor is approached.
•Used specially when the client has a preference for a
particular contractor due to previous work done for him.
•On completion of the design the contractor will price
the bill of quantities and enter into a negotiation with
QS.
•The contract sum will be arrived at by negotiation and
an agreement will be made between the client and the
contractor.
•In effect- A negotiated tender is like a single-stage
tender with a single contractor who returns with an
initial price. This is then negotiated with the client’s
professional team (usually the professional quantity
surveyor (PQS)).
If it is part of a ‘framework’ or Competition is eliminated
‘supply chain’ then rates and which may lead to a higher
the like may already be price in some instances; and
known; and
Usually a good relationship Government projects usually
between the Client and the will not allow negotiated
Contractor has already been tendering as it is difficult to
formed over previous prove that value for money in
experience. (Could lead to the current market has been
reduced risk pricing) achieved
Speed with which a price can competitive advantage of a
be obtained for the works formal bidding process is
compromised
As buildings become more complicated,

Other tendering engineering evolves and building
information modelling (BIM) becomes
options more widely used, the early engagement
Early contractor of a contractor is becoming much more
important. In essence ECI is a form of
involvement negotiated tender but emphasis is put on
the contractor as the lead designer from
the outset of the project. This is beginning
to be seen in infrastructure projects
where the early appointment of a
contractor can significantly affect the
direction of the emerging design
Tendering Strategy
Tender Documents
•The choice of Procurement route will have differing
effects on how the tender documents are compiled.
•Under a Traditional Procurement route the design
information, BOQ’s and Preliminaries will be issued.
•Whereas under a Design & Build Procurement route, the
documents are compiled together in documents called
the Employer’s Requirements where the Contractor
responds with the Contractor’s Proposal.
(from RICS Guidance Note – ‘Tendering Strategies’ 1st Edition 2014)
Tendering Strategy
Pre tender estimate
•As a precursor to the tendering phase of the project there is
a minimum amount of design work that has to be produced.
•This might be to a greater or lesser degree, depending on
the chosen procurement route.
•Before the tender action is carried out it is important to
know the estimated cost of the project for two reasons:
•first, the client will want to know that they can afford
the proposed development
•second, so there is a basis of comparison when the
tenders are returned. This estimate is called the pre-
tender estimate (PTE)
Tendering Strategy
Pre tender estimate
While the pre-tender estimate is not strictly part of
the tendering process, it is important that it exists
before the tender is carried out, otherwise analysis
could be very problematic.
Difference between estimate and cost plan

Tendering strategy
Overview in relation to procurements routes selected
•Whist all three tendering strategies can be used with almost any
procurement route, it is reasonable to state that some suit certain
strategies better than others.
•Two-stage tendering strategy for both construction

management and management contracting procurement routes
• A two-stage tendering strategy is useful where a quick start
on site is required, as tendering and design can be overlapped.
Therefore, it would seem a natural fit for construction
management/management contracting procurement routes,
which would support a quicker start on site.
Tendering strategy
Overview in relation to procurements routes selected
•Single Stage Tendering strategy for Traditional procurement
route
Traditional projects are generally advanced to a far greater
level of design detail before going to tender. As the contractor
is therefore not responsible for the design, it generally
supports a single-stage tender (unless the project is
particularly complex, in which case it may benefit from the
input of a contractor in the design stages).
•Two stage tendering strategy for D&B procurement route
Design and build projects pass a larger proportion of the risk
and design responsibility onto the contractor, therefore a two-
stage tender can benefit from a contractor’s understanding of
the project, so that they can positively influence the design.
Tendering strategy
Overview in
relation to
procurements
routes selected
Tendering strategy
Overview in
relation to
procurements
routes selected
Tendering strategy
Overview in
relation to
procurements
routes selected
Tendering strategy
Tender timing
•As we had discussed in the Procurement Section, Time
(Speed) is an important aspect in Procurement. This also
affects the Tender process.
•In theory, tendering can occur at any time during the
design process.
•For example a pure Design & Build project could be
tendered at Concept Stage (RIBA Stage 1), with the
Contractor taking full responsibility for completing the
concept design against high level employers
requirements through to construction and completion.
(from RICS Guidance Note – ‘Tendering Strategies’ 1st Edition 2014
Tendering strategy
Tender timing
•The timing of the tender will be dictated mainly by the
amount of input required from the contractor, which
should have been identified in the Procurement route.
•If the tender is simply to build in exact compliance with
the fully designed tender document (Traditional Method)
then the time for tender is different to a tender to design
the concept and then construct (Design & Build Method).
( see RICS Guidance Note – ‘Tendering Strategies’ 1st Edition 2014)
Tendering strategy
There are various work plans for the design
and construction of a construction project.
Previous versions of the RIBA Plan of Work
reflected the natural position for tendering
RIBA Plans of to be carried out in a traditional manner,
usually after Stage F. The new plan of work
works (RIBA Plan of Work 2013) now recognises the
changes in the industry and specifically the
adoption of two-stage tendering techniques.
It recognises that tendering can be carried
out at various points throughout the design
life of a building.
Tendering strategy
•The timing of tender action will be dictated
mainly by the amount of input required from
the contractor.
•If the tender is simply to build in exact
compliance with the fully designed tender
RIBA Plans of document then the time for tender action
works would be different to a tender to design the
concept and take responsibility for the design
of the building.
•Next slides illustrates (in a simplistic form for
illustration purposes) the link between design
requirement and the optimum time for tender
action.
Tendering strategy
Tender timing

Procurement Management: in Construction in Construction

Uploaded by

Copyright:

Available Formats

You might also like

Procurement Management: in Construction in Construction

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Procurement Management: in Construction in Construction

Uploaded by

Copyright:

Available Formats

Procurement

As buildings become more complicated,

Difference between estimate and cost plan

•Two-stage tendering strategy for both construction

You might also like