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APC Trainer on... procurement routes (T062) | Online News | Building

Tuesday03 December 2013 APC Trainer

APC Trainer on... procurement routes (T062)

1 July 2008 | By Alasdair Thompson

the various procurement options available, their differences and reasons for use This article focuses on the core competency of Procurement and Tendering (T062). The competency covers a wide range of issues in relation to both procurement and tendering methods within the construction industry and a candidate would be expected to have a good understanding of these matters at level 3. This article focuses specifically on the various procurement options available, their differences and reasons for use. As a quantity surveyor working in either the private practice or contracting sides of the industry this is an issue that will be dealt with regularly and therefore you will be expected to understand and respond in detail. Lev el 1 The RICS guide outlines the requirements at Level 1 as demonstrate knowledge and understanding of the main types of procurement. Demonstrate knowledge and understanding of the tendering and negotiation processes involved in procurement. Competency at Level 1 is generally focussed on having a knowledge and understanding of the competency knowing. Question What are the main factors that govern procurement route selection? Answer The three key issues are Time, Cost and Quality. Usually you cannot satisfy all three of these with one option but consideration must be given to the clients list of priorities and the implications of time, cost and quality to get the best route for the client. Question What procurement options are you familiar with? Answer You need to identify what procurement options you are familiar with and demonstrate a brief understanding of each: Traditional Procurement (Client engages design team and contractor direct) Design and Build (Client engages contractor who then employs designers) Management Contracting (Contractor performs the role of managing the works contractors who carry out the works) Construction Management (Construction manager is employed to arrange trade contracts and monitor them) 1/5


APC Trainer on... procurement routes (T062) | Online News | Building

Framework Agreements (a template contract is agreed for a series of projects) Two Stage Tender (Contractor is selected for first stage on basis of limited scope i.e. preliminaries, overheads and profit. In second stage a full price is negotiated through an open book tendering of subcontracts) PFI/PPP (Private sector designs, builds, operates and finances the asset for the public sector who pays an annual charge) Lev el 2 The RICS guide outlines the requirements at Level 2 as Apply your knowledge to the implementation of the procurement routes selected for your projects and to carrying out tendering and negotiation processes relevant to them. Competency at level 2 is generally focussed on having an application of knowledge and understanding doing. From a Quantity Surveying perspective this means demonstrating a working knowledge of the procurement options identified above including the advantages and disadvantages of each. Question What are some of the benefits and pitfalls of the procurement options identified? Answer You will need to identify the key advantages and disadvantages associated with each procurement option: Traditional Procurement Advantages: Control over design process Direct reporting of design team to ensure quality control No built in contractor risk premium Disadvantages: No one person is responsible for the design and construction Design needs to be developed as fully as possible Time / Cost more likely to escalate Design and Build Advantages: Well established in construction industry Single point of responsibility Early involvement of the contractor Cost Certainty Disadvantages Less control over the quality / specification of the work Contractor will build in risk premium Complex legal issue over novation of design team 2/5


APC Trainer on... procurement routes (T062) | Online News | Building

Management Contracting Advantages: Management contractor has early involvement and manages works contractors Can appoint early Disadvantages: No single point responsibility for design and construction Management contractor only responsible for workmanship to the extent that works contractor is responsible/able to pay Construction Management Advantages: Construction Manager is qualified advisor to employer Construction manager can exercise cost and quality control Disadvantages: Construction Manager has no direct control with the trade contractors Difficult to control cost increases Framework Agreements Advantages: Only need to negotiate once for a series of projects Prospect of repeat business for consultants / contractors Disadvantages: May not always be best value for money Public procurement regulations may impact Two Stage Tender Advantages: Early involvement of contractor in design / build ability issues Can start on site earlier Disadvantages: Once contractor selected competition is lost and may impact on the pricing Difficult to walk away PFI/PPP Advantages: 3/5


APC Trainer on... procurement routes (T062) | Online News | Building

Risks transferred to private sector Specialist private sector manages construction and operation of asset Disadvantages: Loss of control by public sector Can be hard to show value for money Lev el 3 The RICS guide outlines the requirements at Level 3 as Give reasoned advice on the appropriateness of various procurement routes. Manage the tendering and negotiation process and present reports on the outcome. Competency at Level 3 is generally focussed on the provision of reasoned advice and depth of technical knowledge advising. Question You have identified Project X in your critical analysis. Please outline the procurement strategy you adopted and your reasons for the selection of the particular procurement route. How did this tie into the client list of priorities? Answer You will need to talk in detail about how and why you made the decision you did. Link this into the clients priorities and the advantages and disadvantages identified above. Show a clear and well thought out plan with a sensible conclusion. Also identify options that were considered but rejected and explain why they were rejected. Question What experience have you had of Partnering? Answer Partnering is a concept that can be applied to any of the procurement routes above. In the Partnering scenario negotiation rather than competitive tender is the key and experience has shown that in the long run this achieves better results for both contractor and employer, particularly as both parties go into the contract with their eyes open and hopefully no surprises will ensue.


By Alasdair Thompson, divisional director, Franklin + Andrews responsible for Western Business Unit APC Trainer's advice is guidance only and should not replace your own study

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APC Trainer on... procurement routes (T062) | Online News | Building

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Readers' comments (4)

Got a question for our APC Trainers? Let us know... Gary Wake | 8 Jul 08 4:44 pm Just starting out and this looks excellent. Thank you

Kazeem | 25 Aug 09 3:11 pm What issues would be considered in a tender report?

Mohammed Almaskari | 14 Oct 10 0:47 am Your client is procuring a new laboratory facility for the testing of clinical samples. The facility will serve several local hospitals and will operate continuously for 24 hours every day. The public sector client is publicly accountable for all of its expenditure. The laboratory facility will be a key resource for the local health service. It must be well built and durable. It is twenty years since the client last procured a building of this type. Funding will not be available to replace or refurbish the building for another twenty years. The facility will incorporate laboratory equipment and furniture which must be installed by an organisation chosen by the client. Although the laboratory equipment is not excessively specialised, the laboratory requires the provision of: piped medical gases; hygienic accommodation throughout; extensive mechanical extract ventilation; and biohazard control. Take the client and project characteristics into account and recommend a procurement route capable of delivering the above project. Justify your recommendation with an explanation of why it is the most appropriate. State clearly any assumptions you have made. Do not describe your chosen procurement routes features, but explain why that procurement route is the most appropriate, given the client and project characteristics.

Idriss Bengana | 9 Jan 13 8:30 pm To Mohammed - In your case study I would advise to use ProCure 21 as a preferred procurement option. Similar to Prime Costing this form of contract has been used by Hospital and Medical facilities; and owes its origins to the report Rethinking Construction.

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