LINK COURSE MODULE

Module 3.4
Principles of Tendering &
Procurement

Technological Institute of the Philippines

In association with
Davis Langdon and Seah (Phils) Inc.
August 2007
Contents
„ Contents.
– Outcomes
– Overview
– Routes
– Selection
– Reporting
 Procurement One –
Expected Outcomes
– Personal
„ By the end of this module you should have:
– Questioned the procurement process
– Reviewed current Procurement options.
– Reminded yourself of key procurement principles
– Considered other industries experience of
procurement
– Organisational.
„ By the end of this module you should be able to:
– Better support Client need.
– Reduce Risk
Procurement

Overview
 Procurement
„ Task.

– Mind map or Brainstorm all the areas that

you consider to be part of Procurement.
 Procurement

Defined:
“ to obtain by care or effort “
 Procurement
„ Care.
– Of a professional level

„ Effort.
– That can be demonstrated
 Procurement
„ Procurement can be considered as a
process.
– Some features of any process:
„ Systematic
„ Logical

„ Effective
Procurement – a process
how to get from idea

to completion
 Procurement
„ There are a variety of Procurement
‘routes’.

„ We need to be fully conversant with them

in order to provide the right process for
the Client and Project.

„ It might be relevant to consider the

reputation of the Construction industry at
this point.
 Procurement
„ What a lucky person the client is.

– Think of the construction industry's

reputation!

– Late delivery

– cost overruns

– questionable
quality
 Procurement

„ The following slide summarises some

common points concerning what Clients
want from the industry.
Client expectations.
– minimum disruption
– meet their needs
– complete on time
– complete within cost
– quality levels met
– value for money
– risk identified and apportioned
– unbiased advice
– involvement
– honesty
– protection
– allowed to change mind
 Procurement
„ Do any of these appear unreasonable?
„ Why have these demands not been
met?
 Procurement

„ Impact on the Client.

– This reputation has led to Clients:
„ Forming their own procurement teams
„ Drafting their own special requirements

„ Demanding more from professionals

„ Etc.
Procurement

Routes
 Procurement
„ Procurement Routes.
– We need to remind ourselves of the
options that are available, and selection
criteria.

– The named options are listed on the

following two slides, together with ideas as
to how you can research the routes if you
need to.
 Procurement

„ Usual choices.
– Traditional
„ Single Stage Selective Tendering.
„ Two Stage Selective Tendering.

– Design and Build

Management
„ Management Contracting
„ Construction Management

– Partnering
 Procurement

„ Less ‘normal’
– Prime Cost
– Turnkey
 Procurement
Lets clarify what we mean by :

„ Single Stage Selective Tendering

The basis of Single Stage Selective Tendering is that tenders
are invited from a short list of Contractors who had been
selected by virtue of their known competence, interest in the
job etc., and the Contractor who submits the lowest bonafide
tender is awarded the contract.

„ Two Stage Selective Tendering

Two Stage Selective Tendering can be defined as the selection
of a Contractor on the basis of preliminary tendering
documents covering preliminary design information which
subsequently provides a framework within which the final
contract price is negotiated before the start on site.
 Procurement
– Before we look briefly of these choices it is
important that we remind ourselves of the
three basic criteria, and the need for all of
them to be in balance.

time cost

quality
Procurement
time cost

quality

Health Warning!
Beware promising too much.
High Quality; High Speed; Low Cost:
 Procurement
„ Consider this:
„ “ Above all, though, procurement arrangements are
principally about risk and value, how the former is
disposed, and how the latter is secured. If there is a
general rule ( and there are not many relating to
procurement ), then I would say it is that a Client should
carry risk for no longer than he can create value by
doing so. That value might be secured by getting a
better building ( however that might be defined for a
specific Client ) or by avoiding paying too much to get rid
of the risk ( as risk is not shed free of charge ).

Paul Morrell, The Commercial Offices Handbook.

Procurement

Selection
 Procurement – Selection.
„ In order to demonstrate:
– Best practice
– Care
– Effort
„ It is essential that we follow a process in
selecting a suitable route.
„ The following option is from a UK
Government sponsored report which has
become a ‘standard’ for the construction
industry there
 Procurement – Selection.
„ Whilst being a ‘standard’ there are
other guides, but all cover very similar
ground.
Procurement

„ Eight (8)
Procurement
Assessment Criteria
(PAC) - provides a
platform for
assessing the
CLIENTS priorities.
 PAC
1. Timing 5. Price certainty
2. Controllable 6. Competition
Variations 7. Responsibility
3. Complexity 8. Risk Avoidance
4. Quality level 22
11 33

88 44

77 55
66
 PAC - Time
„ How important is early completion to
the success of your project?
„ Crucial?
„ Important?

„ Not important as other factors?

PAC – Controllable Variation
„ Do you foresee the need to alter the
project in any way once it has begun on
site, for example to update machinery
layout?
– Yes?
– Definitely not?
 PAC - Complexity
„ Does your building (as distinct from
what goes in it) need to be technically
advanced or highly serviced?
– Yes?
– Moderately so?
– No, just simple?
 PAC – Quality level
„ What level of quality do you seek in the
Design and Workmanship?
– Prestige?
– Good, but not special?
– Basic?
 PAC – Price Certainty
„ Do you need to have a firm price for
the project construction before you can
commit it to proceed?
– Yes?
– A target plus or minus will do?
 PAC - Competition
– Do you need to choose your construction
team by competition?
„ Yes, for all works?
„ Construction and management teams?

„ No, other factors more important?

 PAC - Responsibility
– A) Can you manage separate consultancies
and contractors, or prefer one firm to be
responsible?
„ Can manage separate firms?
„ Must have one firm?

– B) Do you want professional responsibility

to you from designers and consultants?
„ Not important/
„ Yes?
PAC – Risk avoidance.
– Do you want to pay someone to take the
risk of cost and time slippage from you?
„ No, prefer to retain risk and control?
„ Prepared to share agreed risks?

„ Yes?
 Procurement
„ ‘Rose tinted specs on’
– Now all we have to do is map the Clients’
responses to those questions and presto, a
preferred procurement route pops out.

– This may look like the following slide:

 Procurement
1

3
4

8
 Procurement
„ Task:
– What impact does the type of project have on
procurement option?
– For example would any of the following projects
have a ‘natural’ procurement route?
„ Four star hotel
„ Office
„ University teaching block
„ Factory unit
„ Listed building
 Procurement
„ Task:
– The following slides contain brief details
from completed projects.
– Consider them and:
„ Recommend a procurement route, and
„ An appropriate Contract Form

for each of them.

– It may be that you provide a hierarchy of
routes.
 Procurement – Project A
At-
At-a-glance guide
Project Upgrade and remodel Hemel Hempstead Sports Centre, a 1970s council council facility with
outdoor pool
Client Dacorum Borough Council
Project significance
•Development of large modern facility at a fraction of the cost of
of new construction
•Largest English lottery grant for sports building refurbishment
•Seven distinct pools totaling 900 m2 of water area, plus sports hall and dry sports
facilities
•Attendance up by 80% since opening
Project challenges
•To make a exciting building
•To attract users of all ages across a range of sports
•To unify additions
•To introduce views and natural light into building
•Phased work to keep building in use
•Asbestos removal
Construction cost
•Estimated total is £5 759 000 for 7860 m2 building
Client's brief
The 1970s sports centre needed remodeling to boost visitor numbers
numbers and to enable it to compete
with new facilities in the borough. Although it featured a 50 m long, nine-
nine-lane outdoor pool, the
centre had an off-
off -putting cellular plan of changing rooms and ancillary accommodation,
accommodation, and a
rabbit-
rabbit-warren of corridors. The structure and fabric were in good repair,
repair, but the building lacked
up-
up-to-
to-date facilities, such as an aerobics room.
Procurement – Project B
Project
High-density inner-city social housing scheme of 59 new homes
Location
South Bank, London SE1
Architectural features:
•High density housing layout at 334 habitable rooms a
hectare, conforming with revised PPG3 guidelines
•Mix of large family and small household homes plus two
corner shops
•All homes have gardens, terraces and/or balconies
overlooking a communal courtyard garden
•Commercial car parking retained in basement to cross-
subsidise housing
•Architectural treatment responds to urban setting – hard
brick screen on the outside, soft timber and landscaping
on the inside
•Low energy and sustainable design principles
Cost and procurement features:
•Unit construction cost of housing at £1018/m2 is 36–
104% higher than average social housing schemes, as a
result of high density and quality specification
Construction period
18 months
Procurement – Project C
At-a-glance guide
National Energy Centre
Project
Budget price low-energy offices and exhibition space of 1000 m2
Client
National Energy Foundation
Location
Davy Avenue, Knowhill, Milton Keynes
Construction cost
£983 590 at £959/m2, excluding VAT and fees. Unit cost of £140-240/m2 below
HQ building average
Energy features
High insulation, natural ventilation and natural daylight
Cost and procurement constraints
Budget was halved following a change of site, which led to a radical redesign of
the original scheme
Client's brief
The new brief was for 1000 m2 of mainly office space with an exhibition and
seminar area. The building had to act as a visitor centre for individuals and
groups wanting to discover more about energy issues. Exhibitions in the building
were to continue into landscaped areas. The building was required to achieve a
"very good" rating on the Building Research Establishment Energy Assessment
Method scale.
Procurement – Project D
At-a-glance guide
Innovation and Technology Transfer Centre
Project Flexibly serviced start-up accommodation for 34 high-tech
businesses
Construction cost £2 240 000 for gross internal floor area of 3120 m2.
Unit cost of £639/m2 (excluding site works) is in the middle of the cost
range for the building type
Special design features Naturally lit and ventilated spaces beneath
distinctive arched roofs
Contract period 36 weeks
Client's brief
The centre consists of a range of flexibly serviced office, laboratory and
workshop spaces. The centre also provides general business support
from a permanent secretariat, a central reception, meeting rooms,
conference facilities and a tenants' common room with limited catering
facilities.
The accommodation consists of nine 30 m2 units, 16 60 m2 units and
nine 90 m2 units. The brief stipulated that the design and configuration of
the building should:
· allow synergy of activities
· provide a social environment for lively interactions
· use technology and passive energy
· permit internal flexibility
· provide a high-quality environment in a cost-effective way
 Procurement - Answers
„ Project „ Procurement Route
& Contract Form
–A –.

–B –.

–C –.

–D –.
 Procurement
„ In order for you to have carried out the
previous tasks you will have to have
related the PAC to the project and then
matched them to your knowledge of the
Procurement Routes.

„ Use the following slides to test your

knowledge and understanding.
 Procurement
•Traditional
-Single Stage

-Two Stage

-Design & Build

-Management

-Partnering

Slow OVERALL SPEED Fast

Enter a ‘bar’ for each route as you see fit.

 Procurement
•Traditional
-Single Stage

-Two Stage

-Design & Build

-Management

-Partnering

Low QUALITY High

Enter a ‘bar’ for each route as you see fit.

 Procurement
•Traditional
-Single Stage

-Two Stage

-Design & Build

-Management

-Partnering

Early COST CERTAINTY Late

Enter a ‘bar’ for each route as you see fit.

 Procurement
•Traditional
-Single stage

-Two stage

-Design & Build

-Management

-Partnering

Basic SUITABLE FOR Complex

COMPLEXITY
Enter a ‘bar’ for each route as you see fit.
 Procurement
High High
•Traditional
-Single Stage

-Two Stage
CLIENT RISK CONTRACTOR RISK
-Design & Build

-Management

-Partnering
Low Low

Enter a ‘X’ for each route as you see fit.

Procurement

Reporting
Procurement – Reporting.
„ The output from this analysis is usually
a Procurement Report to the Client.

„ This can be a standalone fully

independent report or a report on
behalf of all the consultants.
Procurement – Reporting.
„ The usual format tends to be:
– Introduction.
– Procurement Options
„ 1
„ 2

„ 3

„ 4

– Recommendation
 Procurement
„ You should now have:
–Questioned the
procurement process
–Reviewed current
Procurement options.
–Reminded yourself of
key procurement
principles
–Considered other
industries experience of
procurement