04_Procurement

Procurement:

 

Possible procurement routes:

 

Traditional (general contracting)

Design and Building

Management contracting

Construction management

 

·         Complexity and scale of project

 

·         Analysis the client’s attitude to risk

 

·         Certainty on cost , completion time, quality

 

·         Architects experience vs contractors involvement in design

 

·         Risk should rest with whoever can manage it best.

 

 

Notes Example:

 

·         In regards to this scenario, the choice of procurement route should reflect the complexity and scale of the project……..(insert project specifics)

 

·         The Clients past experience in the delivery of projects of this scale are…….. (insert past experience)

 

·         The client has expressed that time or/cost/or quality is of highest importance to them.

 

·         Our experience with design services of this scale is……(insert specifics). Requiring contractor involvement at (insert specifics) time of the project

 

·         Therefore the procurement method selected should allow the design and construction risk to rest with whoever can manage it best.

 

 

Traditional Contract (general contracting)

 

·         The architect would prepare design and contract documentation and assist the client in selecting a contractor by competitive tender or negotiation.

·         The contractor awarded the work would agree to complete the construction to the contract documents for a contract sum.

·         With a traditional Contract, a contract administrator is appointed (commonly the architect) to administer the contract impartially and the client has a mechanism to alter the design through variations, which may or may not alter the final construction cost and date of completion.

·         Areas that require specialist sub-contractor input could be facilitated through Contractors design proposals (CDP’s)

 

Advantages

 

·         Clear cut division between design and construction

·         Level of time and cost certainty from the tender stage.  Employer retains control of quality and takes on the risk of variation costs.

·         Contractor assumes responsibility for construction and takes on financial risk for this.

·         Client assumes responsibility for design team and takes on their performance risk.

Negatives

 

·         With control comes a level of risk with the risk of the final construction cost largely remaining with the client.

·         Late changes affect cost and programme

·         Design must be very progressed to tender the design and get surety on construction costs.  Therefore, could be considered a relatively slow form of procurement with time needed up front to properly define the design requirements.

·         Contractor not known during the design phase, hence note available for consultation.  These can be somewhat combated by the inclusion of CDP’s for limited contactor design input. 

 

Notes Example:

The advantage of the use of the contract is that the client will maintain a high level of control on the design, even when the project moves to site.  Using SC2011 as reference, clause 3.14.1 allows for the client to make variations to the design through the construction process through issuing variation orders.  The final construction cost can be altered to absorb these changes.  However, with control comes a level of risk with a disadvantages of this method of procurement is the risk of total construction cost largely remains with the client.  Although a lump sum will be agreed when the contract is signed this lump sum is subject to fluctuation in price if variations occur.

 

 

Design and Build – JCT DB

 

·         Using a Design and Build (D+B) Contract the client would appoint a Contractor to “design and Build” the project. 

·         Assuming the design team has already been appointed the most appropriate form of D+B contract would be one that notated the current design team, through a Deed of Novation, to the contractor once the Employers Requirements (ER’s) have been produced. 

·         The contractor would take the full design risk / responsibility for implementation of the Contractors Proposals (reflecting the ER’s)

·         The client can expect to pay a premium for the Contractor taking on this risk which may materialise in the form of higher construction cost compared with a traditional contract.

 

Advantages

·         Package deal – Client can unload more risk and control

·         Employer has one point of reference.

·         Design and Construction integrated within one accountable organisation

·         Relatively fast design and construction process with construction proceeding in parallel.

·         Guaranteed cost and completion date

 

Disadvantages

·         Employers requirements need to be robust to ensure the level of quality meets the clients expectations and maintains cost certainty

·         Less competitiveness

·         No independent administrator (hence less quality control)

·         Employer has no say in specialists

·         Not in contractors interest to spend time on design.

 

Notes Example:

As the main disadvantage to this procurement route in relation to the Cancer Center Project is the loss of control the client will experience by passing the design responsibility over to the contractor.  Although act gives price surety to the project, the client will have little control to vary any design element which is outside that stipulated in the Employers requirements.   This procurement route has the advantage of giving the Client both cost and time surety for the project completion but may not give them enough control on the quality of the final product.

 

 

 

Management

 

·         With this method of procurement the Client would appoint a Construction manager along side the design team.  The management contractor would be responsible for defining packages of work and then managing the carrying out of this work through separate trades or work contracts.

 

·         Management Procurement can take varied forms. Two of which are:

 

·         Management Contactor: JCT MC

·         Client appoints a management contractor who is responsible for managing the carrying out of the work and appointing works contactors to undertake the work. 

 

·         Construction management Appointment: JCT CM/A + JCT CM/TC

·         The trade contractors are appointed directly by the client meaning the client is directly and contractually responsible to the trade contractors.  The client therefore assumes a major role in directing the project, whilst leaving the management of it to the construction manager.

 

Advantages

·         The advantage of the Management procurement route is that the client retains overall design control through the professional team.

·         Detailed design can proceed in parallel with construction work and much of this might be of a specialist nature relating to specific packages.  As a consequence an early start on site is often possible, and time for the project may be reduced overall.

·         Design changes are possible as construction proceeds, always provided that the changes do not affect work packages already let do as to result in abortive work.

 

Disadvantages

·         There is no certainty over cost at the outset and work proceeds on the basis of the contract cost plan.

·         The client will need to appoint a contract administrator as part of the professional team

·         Speculative risk are largely with the client and this procurement method call for a measure of trust, goodwill and in-house expertise.  In terms of design and quality, it is a relatively low risk option for the client but there is generally a higher risk in respects to cost and time.

 

 

 

 

 

 

 

 

Recommending Traditional Contract:

 

·         In this scenario we would recommend to the client a traditional (general contracting) procurement method using a JCT SBC2011 contract with quantities.

·         As the client has identified that they wish to be fully involved in the deliver of the construction project, the traditional approach allows for a level of cost and time surety through a competitive tender process but also allows for a mechanism for client driven variations to the design through the construction process. 

·         With design control, the client’s allocation of risk regarding cost and extensions to the construction schedule is higher than a D+B Contract, however; from the information given it is clear that the budget and construction is secondary to the clients requirements for a quality state of the art center as a result. 

·         The architects experience are known to specialise in the design of healthcare facilities so will have prior experience in the design challenges that come with this.  Therefore, it may not me necessary to have contractor involvement from the early stages of the design (unlike the advantages of a management procurement route) and any

·         Specialist sub-contractor design elements could be deal with through CDP’s.  As it is stated that the client does not have a deadline for the building to be completed by,  it appears that a two stage tendering process would not necessary, allowing a more competitive tender result.

 

 

Possible Questions:

 

Architects role in traditional procurement method

 

With a traditional procurement route selected, it is likely that the architect will fill the role as administer of the construction contract.  The contract administrator’s duties to the employer are normally set out in an appointment and the role requires that administration of the construction contract impartially.  Key duties include:

 

·         Inviting and processing tenders.

·         Preparing contract documents for execution.

·         Administrating change control procedures.

·         Seeking instructions from the client in relation to the contract.

·         Issuing instructions such as variations, or relating to prime cost sums or making good defects.

·         Considering claims.

·         Chairing construction progress meetings.

·         Preparing and issuing construction progress reports.

·         Co-ordinating and instructing site inspectors.

·         Agreeing commissioning and testing procedures.

·         Agreeing defects reporting procedures.

·         Ensuring that project documentation is issued to the client.

·         Issuing certificates of practical completion and interim certificates.

·         Collating and issuing schedules of defects.

·         Issuing the certificate of making good defects.

·         Issuing the final certificate

 

Our it would be anticipated that the architects services agreement will also include a duty to visit the construction works.  This role is also reinforced by the RIBA and ARB Code of Conduct standard 6.

 

 

Tendering

 

Three methods:

Single Stage

Two Stage

Negotiated

 

Single Stage tendering

·         Single-stage tendering is the more traditional route, used when all the information necessary to calculate a realistic price is available when tendering commences:

Process

·         An invitation to tender is issued to prospective suppliers (perhaps following completion of a pre-qualification questionnaire and / or a pre-tender interview). The invitation to tender will include information describing the goods or services required in sufficient detail to enable prospective suppliers to prepare an accurate tender.

·         Tenders are prepared and returned by prospective suppliers (this may involve questions and answers and a mid-tender interview to clarify the client’s requirements).

·         Submitted tenders are then assessed and compared The preferred tenderer is selected and negotiations opened.

·         Subject to the outcome of those negotiations the preferred tenderer may then be appointed.

 

Two Stage tendering

·         Two-stage tendering is used to allow 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.

 

·         An also be used in Design and Build contracts

 

Negotiated

·         Negotiated tendering occurs when the client approaches a single supplier based on their track-record or a previous relationship and the terms of the contract are then negotiated.