AIQS Procurement Tendering - PPT-R2

PROJECT COST MANAGEMENT COMPETENCIES
CONTRACT DOCUMENTATION
& PROCUREMENT
Manoj Herath
MBA (Const Real Est), PG Dip (RICS), BSc (Hons) QS, MRICS, MAIQS, CQS
Trained RICS and AIQS APC Chairmen
AIQS
AIQS UAE Branch
COMPETENCY STANDARDS FOR QUANTITY SURVEYORS
OCTOBER 2005
GENERAL
BASIC SKILLS
 DESIGN COST MANAGEMENT, COST PLANNING & COST ENGINEERING
 CONTRACT DOCUMENTATION
 POST CONTRACT SERVICES
SUPPORT SYSTEM COMPETENCIES
ASSET FINANCIAL MANAGEMENT COMPETENCIES
SPECIALISED MANAGEMENT COMPETENCIES
SUPPORT ASSET FINANCIAL SPECIALISED

BASIC SKILLS PROJECT COST MANAGEMENT COMPETENCIES COMPETENCIES MANAGEMENT MANAGEMENT
COMPETENCIES COMPETENCIES

DESIGN COST CONTRACT CONTRACT
ADVICE, COST DOCUMENTATION ADMINISTRATION CORE UNITS SPECIALIST UNITS SPECIALIST UNITS
PLANNING & COST & PROCUREMENT
ENGINEERING

CORE UNITS 13. COMPUTER 21. FEASIBILITY 28. PROJECT
CORE UNITS SERVICES STUDIES VALUE
14. CONSTRUCTION 22. LIFE CYCLE MANAGEMENT
CORE UNITS
TECHNOLOGY COST 29. PROJECT

8. ACCOUNT 15. GOVERNMENT ANALYSES MANAGEMENT

MANAGEMENT REGULATION & 23. TAX 30. PROJECT RISK
5. GENERAL
9. CONSTRUCTION LAW DEPRECIATION MANAGEMENT
1. STRATEGIC PROCUREMENT
CHANGE
24. SPECIAL 31. QUALITY
PLANNING ADVICE
MANAGEMENT ASSESSMENTS ASSURANCE
2. BUDGETARY 6. QUANTIFICATION, SPECIALIST UNITS 25. AUDITS
PROCESS MEASUREMENT &
26. TECHNICAL
3. COST DOCUMENTATION
DUE
ESTIMATING 7. TENDER PROCESS
DILIGENCE
4. COST 27. COMPLIANCE
PLANNING SPECIALIST UNITS 16. ARBITRATION
17. EXPERT WITNESS ISSUES
/ EVIDENCE

18. BUSINESS
10. CLAIMS & MANAGEMENT
DISPUTE 19. RESEARCH &
RESOLUTION DEVELOPMENT
11. FINANCIAL 20. COST
AUDIT INFORMATION
12. RESOURCE DATABASE
ANALYSIS
www.aiqs.com.au | +61 2 9262 1822 | Level 3, 70 Pitt Street, Sydney NSW 2000 | contact@aiqs.com.au
COMPETENCY STANDARDS FOR
QUANTITY SURVEYORS – MAY 2012
GENERAL BASIC SKILLS
• DESIGN COST MANAGEMENT, COST PLANNING & COST ENGINEERING
• CONTRACT DOCUMENTATION & PROCUREMENT
• POST CONTRACT SERVICES SUPPORT SYSTEM COMPETENCIES
ASSET FINANCIAL MANAGEMENT COMPETENCIES
SPECIALISED MANAGEMENT COMPETENCIES
Core Competencies
2. CONTRACT DOCUMENTATION & PROCUREMENT
a. GENERAL PROCUREMENT ADVICE
b. QUANTIFICATION, MEASUREMENT & DOCUMENTATION
c. TENDER PROCESS
GENERAL PROCUREMENT ADVICE
ELEMENT PERFORMANCE CRITERIA
5.1 Collect information  Clients objectives established

required to specify and confirmed
procurement  Objectives of process specified
requirements  Market conditions evaluated and
options reviewed
5.2 Evaluate project delivery  Project delivery systems
systems reviewed
 Forms of contract reviewed
5.3 Undertake  Forms of construction analysed
constructability  Forms of construction costed and
analyses optimized
 Constructability recommendations
made
5.4 Provide input into the  Relevant data collected
development of the  Input into project brief provided
project brief
Why Procurement important in Construction?
 Risks in Construction
 Cost fluctuations
 Time
 Geographically dispersed
 Quality concerns
 Regulatory Authority Changes
 Unforeseen Risks on site
 Constructability & Buildability
 Technological advancement
 Risk Management Tool
What is Procurement/Project Delivery System?
What are the type of contracts available?
Contract Type
Cost
Lump Sum Re- Measured
Reimbursement
Contract Contract
Contract
Fluctuating
Fixed Fee Percentage Fee
Fee
Target Cost
GMP
Plus
What are the forms of contracts available/you are aware?
Form of Contract to be
used
FIDIC JCT ICE Other
Plant and
ICEC, 4th Construction EPC All 4 of FIDIC’s CoC for DB &
Design- Short Form
Edition Contract Turnkey 1999 & Turnkey
Build 1999
1987/1992 1999 1999 Contracts 1995
1999
What are the method of selection/tendering process available?
Tendering Process or
Method of Selection
Single Two Stage

Open Stage Selective Negotiated
Tendering Selective Tendering Contract
Tendering
Traditional Path
Advantages
 Quality is under Employer’s control
 Power to change (Avoid prohibitive cost
of change)
 Cost certainty
 Less contractor risk premiums
 Relatively low tender preparation costs
Disadvantages
 No one person is responsible for the
design and construction
 Time consuming
 Variations are expected
 Claims ….
 Buildability (Constructability)
Design & Build Path
Advantages
 Price is more certain prior to
construction
 Single point responsibility – less design
issues
 Less time consuming
 Buildability (Constructability)
Disadvantages
 Cost of the project? Risk Premiums
 Difficulty in comparing tenders
 Quality may be compromised (design
prestige)
 Variations might be costly
Management Contracting
Advantages
 Early start – early completion
 Contribution by experienced
contractor to manage
 Changes ? – yes !/Accommodate
later design decisions
 Buildability and economical designs
Disadvantages
 Cost certainty
 No single point responsibility for
design and construction
 Management costs might be high
Construction Management
Advantages
 Construction Manager is qualified
advisor to employer
 Direct contractual relationships
 Can be started early
 Cost could be controlled directly
Disadvantages
 More contractual responsibilities
 Cost certainty
 Complex coordination &
communication
Design and Manage
Advantages
 Single Point Responsibility
 Time
 Buildability
Disadvantages
 Quality
 No direct contractual control
Other Contracts
 Term Contracts
 Serial Contracts
 Continuation Contracts
 Prime Contracting
How do you select a procurement route/How do you advise
a client on selection of a procurement method?
4. Client’s risk taking ability
5. Complexity of the project
6. Need of variations
7. Client involvement
How do you select a procurement route/How do you advise a client on
selection of a procurement method? Cont’d
Parameter Objectives Traditional Management Construction Design and Prime Contracting Framework
Contracting Management Build Agreements
Timing Early Completion N Y Y Y Y Y
Cost Pre construction price certainty Y N N Y N Y
Quality Design prestige Y Y Y N N N
Variations Avoid prohibitive cost of change Y Y Y N N N
Complexity Technically advanced or highly N Y Y N Y N

complex building
Responsibility Single contractual link N N N Y Y Y
Professional Need for design team to report to Y Y Y N N Y

Responsibility Client
Risk Avoidance Desire to transfer complete risk N N N Y Y Y
Damage Recovery Facility to recover costs direct from Y Y N Y Y Y

contractor
Buildability Contractor input to economic N Y Y Y Y Y

www.aiqs.com.au
construction | +61 2 9262 1822 | Level 3, 70 Pitt Street, Sydney NSW 2000 | contact@aiqs.com.au
Contract Types
 Re-Measurement (Measure & Pay)
 Lump Sum
 Cost Reimbursement
– Fixed Fee
– Percentage Fee
– Fluctuated Fee
 Target cost plus
 GMP
Target cost plus
Forms of Contract
 FIDIC
– FIDIC 1987
– FIDIC 1999
 Rainbow Edition
– Red Book - Conditions of Contract for Construction for Building and
Engineering Works designed by the Employer (1st Edition 1999).
– Yellow Book - Conditions of Contract for Plant and Design-Build
– for electrical and mechanical plant, and for building works,
designed by the Contractor (1st Edition 1999).
– Silver Book - Conditions of Contract for EPC / Turnkey Projects (1st
Edition 1999)
– Green Book - Short form of Contract (1st Edition 1999)
Other typical questions
1. Scenario type of questions;
A. How do you advise a procurement path for the construction of a nuclear
plant?
B. If your client wants to make a high quality villa, what procurement
method you advise?
C. Client wanted to have a factory building & Prestige showroom (different
place), what is your advice for procurement selection?
2. What is your understanding about PPP?
3. How you can have the cost certainty in the Cost plus contract?
4. What is the advantage of cost plus?
5. What is partnering? What is the purpose of it?
PPP Basic Contractual Structure
Shareholders/Sponsors
Lenders
(Shareholders Agreement) Insurers
(Inter‐Creditor Agreement)
Loan Agreement
Equity Insurance
policies/agreements
Direct Agreement
Direct Agreement
AUTHORITY
Contractor Construction
Construction Agreement Contractors
(SPV)
Concession Agreement
(may include Land transfer
agreement or lease)
Operating Suppliers/
Agreement Subcontractors
Possibly collateral warranties
Operations and Suppliers/
maintenance
Subcontractors
Contractor
QUANTIFICATION, MEASUREMENT & DOCUMENTATION

ELEMENT PERFORMANCE CRITERIA

6.1 Establish Client 6.1.1 Client objectives, risk acceptance and other factors
requirements and advise on assessed
alternative contract
document types 6.1.2 Alternative contract document types explained to Client

6.1.3 Client agreement on selected contract document
obtained

6.2 Recommend and agree 6.2.1 Alternative method of measurement types explained to
method of measurement Client
and input document
requirements 6.2.2 Expected quality and timing of input documents
assessed

6.2.3 Client agreement on method of
measurement obtained

6.2.4 Input documents scheduled, time-tabled and prioritized

6.3 Develop management plan 6.3.1 Trade or other document breakdown determined
for resources and other
requirements 6.3.2 Appropriate resource levels quantified and allocated

6.4 Access and distribute input 6.4.1 Input documents validated and registered
documents
6.4.2 Input documents distributed to Quantity Surveying team

6.5 Prepare Bill of Quantities 6.5.1 Measurement (software) system established and set up

6.5.2 Items described, measured, signposted and quantified

6.5.3 Items sorted in appropriate sequence

6.5.4 Preliminaries, trade or other sections and subsection
headings added

6.5.5 “Rates to include” and other pricing and measurement
preamble clauses added

6.5.6 Item reference added

6.5.7 Elemental or other analysis codes added
List out the various Standard Method of
Measurement that you are aware of ..
Using Standard
methods
POM(I)
RICS –COMP
SMM7
CESMM3
NRM
Other typical questions,
6. "Why we need a standard method of measurement? What are the advantages you will
have by preparing a BOQ based on standard method of measurement?“
7. What purposes serve the BOQ?
8. Detailed Measurement Related Questions?
A. How to measure Provisional Sums in POMI vs CESMM3?
B. How do you measure rectangular ductwork under POMI?
C. What are the main differences between POMI and CESMM3?
D. How do you measure concrete under POMI and CESMM3?
E. What is your understanding of Method Related Charges of CESMM3?
TENDER PROCESS

7.1 Manage tendering process 7.1.1 Tender and contract documents prepared

7.1.2 Trends evaluated and analysed

7.1.3 Contracts negotiated

7.1.4 Changes evaluated and negotiated

7.1.5 Results of tendering process communicated to Client

7.2 Prepare documentation inputs 7.2.1 Advice on appropriate tender documentation provided
to the tender
7.2.2 Bills of Quantities or work breakdown structures to aid
tendering process prepared

7.3 Initiate tenderer selection 7.3.1 Tenderer selection criteria determined
process
7.3.2 Tenderer data accessed
7.3.3 Documentation for registration of tenderer interest prepared

and placed in appropriate publications

7.4 Advise on the selection of 7.4.1 Tenderers’ proposals and credentials analysed
tenderers against criteria
7.4.2 Possible tenderers listed and validity confirmed
7.4.3 Short list prepared
7.4.4 Client advised

7.5 Evaluate and award of 7.5.1 Data gathered using appropriate structures and
tenders procedures

7.5.2 Project objectives and parameters established

7.5.3 Tenders evaluated and negotiated

7.5.4 Project implementation and procurement plan
identified

7.5.5 Apply the ethics of professional practice

7.5.6 Analysis of financial and non-financial returns made
Methods of selection – explain in brief?
Negotiation
 Very tight deadline or emergency works
 Good Client relationship
 State of the construction market
 Continuation Contract
 Sole supplier/contractor for specialized product
 Sole supplier/contractor in the geographical area
Advantages
 Low selection cost
 Less time
 mistakes in pricing can be reduced
Disadvantages
 Accountability
 Value for money
Open tendering
 Open for the companies
 Invitation to Tender
Advantages
 Lower tender price
 Accountability
 New comers to the industry
Disadvantages
 Incompetent contractor
 Time
 Overall cost of abortive tendering to construction industry
Selective tendering
Single Stage Selective tendering
In this process the employer will use a list of tenderers to participate where by all the
prequalification evaluations were already being done or the selected tenders are well
known to the employer.
Advantages
 Technically qualified contractors
 Time
 Overall cost of abortive tendering to construction industry
Disadvantages
 Price
 New comers to the industry
 Less accountability
Types of Tender – explain in brief?
Selective tendering
Two Stage Selective tendering
1st stage
Two stage tendering is used to allow the early appointment of a contractor, prior to
the completion of all the information required to enable them to offer a fixed price.
In the first stage, a limited appointment is agreed allowing the contractor to begin
work and in the second stage a fixed price is negotiated for the contract.
The first‐stage appointment might be made on the basis of a bespoke agreement, a
consultancy agreement or a pre‐construction services agreement (PCSA), with an
appendix setting out all tender items to be applied to the second stage contract, and
a clause that makes it clear there is no obligation to proceed to the second stage, and
in such circumstances the first stage fee would be full and final settlement of the
contractor's costs.
Types of Tender – explain in brief (Cont’d)
The basis of the appointment for the first stage may include:
 Detailed preliminaries bill including staff costs.
 A schedule of rates to be applied to the second‐stage tender.
 Overheads and profit component.
 Labour, plant, material price schedule
 Agreed fees for the design and other pre‐construction services.
 CV’s for proposed site and head office staff.
 Tendering of any packages that can be broken out and defined.
 Agreed contract conditions to be applied to the second‐stage construction
contract.
 A pre‐construction and construction programme.
 Method statements.
Principle of Good Practice in Tendering (Code of
Tendering Procedure – NJCC)
 Clear procedures to be followed for fair and transparent competition in a single
round of tendering
 Process should ensure receipt of compliant and competitive tenders
 Tender lists should be short as possible and compiled systematically from number of
qualified contractors (6)
 Conditions should be same for all tenderers
 Confidentiality should be respected by all parties
 Sufficient time should be given for the preparation and evaluation of tenders
 Sufficient information should be provided to enable the preparation of tenders
 Should be assessed and accepted on quality as well as price
 Practices that avoid or discourage collusion should be followed
 Tender prices should not change on an unaltered scope of works
 Suite of contracts and standard unamended forms of contracts from recognised
bodies should be used where they are available
Tendering process
• Preparation of Tender
 Volume 01 – Instruction to Tenderers, Form of Tender, Appendix to Form
of Tender, Form of Agreement, COC part 01 & 02, Specimen forms
 Volume 02 – General & Particular Specifications
 Volume 03 – Pricing Preambles & BOQ
 Volume 04 – Drawings
 Volume 05 – Any other
• Pre qualification of bidders
• Short listing of bidders
• Invitation to Tender
Tendering process ‐ contd.
 Site visits  Tender opening
 Tender documentation  Tender analysis & reports
 Issuance of Tenders  Post Tender Clarifications
 Tender queries  Contract award
 Tender addendums
 Tender notices
 Tender submissions
Other typical questions
9. What are the inclusions of a Tender Document?
10. What do you mean by prequalification? How you do it?
11. Explain the tendering process?
12. Why site visit is important to a contractor?
13. How do you do a tender evaluation? Traditional and D&B?
14. What are the contents of tender analysis report?
15. How do you correct errors in tenders?
Contract Documentation and Procurement
involves the various processes by which a construction contract is achieved
including the use of
the appropriate project delivery system and
standard form of contract,
the method of tendering / contractor selection,
the provision of bills of quantities and the subsequent acceptance of a
tender.
Thank You
and
Good luck for your APC .

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PROJECT COST MANAGEMENT COMPETENCIES

SUPPORT ASSET FINANCIAL SPECIALISED

PROJECT COST MANAGEMENT COMPETENCIES

• DESIGN COST MANAGEMENT, COST PLANNING & COST ENGINEERING

• CONTRACT DOCUMENTATION & PROCUREMENT

• POST CONTRACT SERVICES SUPPORT SYSTEM COMPETENCIES

ASSET FINANCIAL MANAGEMENT COMPETENCIES

5.1 Collect information  Clients objectives established

FIDIC JCT ICE Other

Single Two Stage

Timing Early Completion N Y Y Y Y Y

Cost Pre construction price certainty Y N N Y N Y

Quality Design prestige Y Y Y N N N

Variations Avoid prohibitive cost of change Y Y Y N N N

Complexity Technically advanced or highly N Y Y N Y N

Responsibility Single contractual link N N N Y Y Y

Professional Need for design team to report to Y Y Y N N Y

Risk Avoidance Desire to transfer complete risk N N N Y Y Y

Damage Recovery Facility to recover costs direct from Y Y N Y Y Y

Buildability Contractor input to economic N Y Y Y Y Y

7.3.3 Documentation for registration of tenderer interest prepared

7.4.2 Possible tenderers listed and validity confirmed

7.4.3 Short list prepared

7.4.4 Client advised

including the use of

the appropriate project delivery system and

standard form of contract,

the method of tendering / contractor selection,

the provision of bills of quantities and the subsequent acceptance of a

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