Construction Process

Management
Week 3
Tender / start of Construction stage
Pre-contract programming
 The design stage continued
As the design stage develops it will progress from
the scheme design to the detailed design stage.
At this stage the Client should commit to approval
and the brief should not be modified after this
point. Any further changes may incur additional
expense and may affect the remainder of the
design program.
At the end of the design period the design should
be frozen since any further changes will inevitable
result in abortive work
Pre-contract programming
Pre-contract programming
Production of contract information
As the final design proposals draw to a close
other information such as;
• scheme plans,
• elevations and the
• coordination of components and elements
will be finalised to allow the commencement of
the production information stage.
 Production information stage
The purpose of production is to enable the
tender documentation and application for
statutory approvals to be completed.
Production information will include;
•Detailed drawings
•Schedules
•Production of specifications
•Bills of quantities
•Appointment of nominated contractors
Pre-contract programming
 Tendering Procurement and
Contractual arrangements
The most brilliant design remains just that,
a design, unless turned into reality by
building operations. Those operations
generally, and always in the public sector
context, require a formal agreement which
sets out who does what for how much,
how it should be done, and allocates the
risk – a contract.
 Tendering Procurement and
Contractual arrangements
Depending upon the Client’s brief and the time
available for the total design and building
process, there may be a number of different
ways of dealing with the design, development of
production information and tendering /
procurement methods.
It is important that a decision on the method to
used, given the circumstances, is agreed at the
earliest opportunity.
 Procurement
The transition from a successful design to a
successful building requires the selection
of a contract which reflects the aspirations
of the Parties and meets the demands of
the project. An essential skill of a Contract
Administrator is the selection and
management of the building contract
 Choice of procurement route
The choice of procurement route depends on
the Client’s required balance of time /cost /
quality and an analysis of how that can be
achieved. This is in the context of the Client’s
other requirements, not least being his required
level of involvement in the design and
construction process and the extent to which he
may change his mind or wish to alter the
specification during construction.
 Choice of procurement route
For each project, key criteria must be considered
and risks allocated, before the form of contract
is selected. That selection can be made from a
range of standard forms of contract.
 Choice of procurement route
Those considerations promote a useful set of
criteria for selection of the form of contract. In
this guide each contract form is summarised in
terms of the following key criteria:
• Speed - design and construction
• Cost certainty
• Dealing with complexity
• Client’s involvement
 Choice of procurement route
• Capacity for variations
• Clarity / settlement of disputes
• Separation of design and management
 Management of risk
The formation of a contract involves acceptance
of an offer, an intention to have a legally binding
agreement, performance and payment.
“Transfer of risk” is often referred to but, in
reality, the allocation of risk, not its transfer, is a
major element in any contract.
 Management of risk
The offer includes a proposed allocation of
risk, which is agreed in making the
contract, and the agreed payment includes
consideration for the risk taken in
performance of the contract. For example,
“price certainty” is bought, by paying the
contractor to accept the risk of fixing a
price in a commercial, changing market.
 Management of risk
The degree of risk involved in certain key
aspects of the project must, therefore, be
assessed in respect of whether it is more
economic for the Employer to take a risk or for
him to pay the Contractor to take it for him.
This is an essential consideration in selecting a
contract form in support of a procurement route
which achieves “best value”.
 Procurement methods
There are various methods of procurement
which can be broadly classified under the
following headings:
• Traditional
• Design and Build
• Two Stage Tendering
• Public Private Partnerships / Private Finance
Initiative
 Forms of contract
• Management Contracting
• Construction Management
• Framework Agreements

Each method has different aspects of risk

transfer and no one method can be classed as
best overall.
Procurement methods

Source RICS
 Types of contracts
There are a number of standard forms of
building contract available for this purpose.
The most common form of building contracts
are usually in the from of JCT (Joint Contracts
Tribunal) format
 Traditional Procurement
Traditional procurement involves the Client
produces a full set of contract documents upon
which the Contractor prices. The Contractor
builds to a defined scope of works for a fixed
price lump sum. The client retains the
responsibility for the design and the project
team. The contractor is normally appointed
following a tender process or negotiation.
Both the Client and Contract are subject to a
legal contract for the works.
 Design and Build Procurement

In a Design and Build the Contractor becomes

responsible for part or the whole design of the
project. Standard forms of contract are available
for to ensure that the building is completed to
an agreed cost and programme. The Contract
may be let on a Client led or Contractor led
basis.
Contractors can be chosen through a tender
process or through negotiation.
 Design and Build Procurement

In Client led designs the Contractor is appointed

when the design process has been developed.
This allows the Client to retain control of the
important elements of design and specification.
The Design Team will be transferred over to the
Contractor with their contractual obligations to
complete the designs on behalf of the Clinet.
This process is called Novation.
 Design and Build Procurement

In Contractor led appointments the Contractor

becomes responsible for the full works design
and package.
The Client can appoint a consultant to oversee
the works. Maximum risk is transferred
following this method of procurement.
However Clients need to constantly liaise with
the Contractor to ensure they receive a building
which satisfies their requirements .
 Partnering
Partnering is a form of collaborative working
between customers (Clients) and suppliers
(Contractors).
In contrast with traditional 'arms-length'
procurement and contract management
approaches, partnering is characterised by a
greater degree of openness, communication,
mutual trust and sharing information.
 Partnering
The aims of partnering arrangements are often
expressed in terms of business outcomes rather
than specific outputs or improvements; their
success is particularly dependent on the people
and relationship aspects.
The management of a partnering arrangement is
usually proactive rather than reactive. Both
parties work together to identify optimum
solutions and to anticipate and resolve problems
in a constructive, collaborative way.
 ‘Partnering agreement':
A 'partnering agreement': this is usually created
as a 'charter' to complement the formal contract
terms. A partnering facilitator leads a workshop
that helps both parties together to set out the
principles, attitudes and ideals that will
characterise the arrangement. These could
include the degree of openness, the spirit in
which problems will be handled, the desired
'tone' of the relationship, principles for
communication, the behaviours of staff and so on.
 Partnering
Open book accounting: there could be open
book accounting for both parties, together with
other measures that continually evaluate and
demonstrate value for money, not lowest price.
Actual costs and agreed profit margins are made
visible, while also creating an understanding of
the customer's budgetary restrictions. The
degree of 'openness' needs to be carefully
considered at the outset.
 Two Stage Tender Procurement

The Contractor is appointed as part of a 2 Stage

tender package. The first stage determines the
level of overhead and profit for each Contractor.
The successful Contractor then works with the
Project Team during the second stage to develop
the designs and establish detailed costings for
separate project work elements. This process
will provide for a fixed price on a detailed design
basis.
 Two Stage Tender Procurement

The Contractor can then enter into a contract on

this fixed price basis and also pursue the
opportunity to novate the Design Team as with
the Design and Build Procurement route as
previously noted. This process requires a long
second stage period in which to design and
tender the different work elements and
therefore a start on site would occur later than
normal.
 Public Private Partnerships
Public Private Partnerships (PPP), particularly
Private Finance Initiatives (PFI) projects were
created to provide a service i.e. a school which
would be managed by the PFI contractor for a
period of years. The Client did not own the
capital asset of the building. At the end of the
term i.e. 30 years the Client would be given the
option to acquire the building.
 Public Private Partnerships
Most PFI projects are design and build projects
which are funded by the PFI contractor. The
Client / user repays the investment monies plus
service charges over the agreed contract period.
The PFI contractor will be responsible for
acquisition of the land, design, construction and
maintenance of the building life throughout its
‘lettable’ life.
 Public Private Partnerships

This procurement route is expensive and

requires negotiation rather than competitive
tendering. In comparison with other
procurement routes the time from
commencement of the project to attaining a
start on site is substantially longer.
 Management Contracting
This is a fast track strategy which overlaps the
design and construction stages and allows early
elements of the construction process to be
commenced before design has been completed.
The Management Contractor is engaged to
manage the overall contract in return for a fee.
The Management Contractor can therefore be
appointed early in the design and can advise on
buildability and programming.
 Management Contracting

In addition to the contract with the

Management Contractor, the contracts for the
individual work packages are between the
Management Contractor and the individual -
contractors. A cost plan is utilised to control the
development costs although actual costs cannot
be obtained until the final work package has
been awarded.
 Construction Management

This is also a fast track strategy where individual

elements of the project are let before the design
of later work packages or elements have been
completed. The provider will appoint a
Construction Manager to manage the overall
contract in return for a management fee as with
Management Contracting. Also, as before, the
project can benefit from early involvement of
the Contractor.
 Construction Management

In this process the contracts for the sub-

contractors are placed directly between the
Client and the sub-contractor and the Client will
need to have a high level of involvement during
the design development and the construction
phases of the work. As with Management
Contracting, the final costs will only be known
once the final work elements have been
awarded.
 Framework Agreements
Framework Agreements can be established with
single suppliers or with a limited number of
suppliers. Frameworks can allow suppliers to be
brought together with the relevant expertise
and experience which can result in savings to
both parties where a number of projects are
involved. These agreements can cover different
forms of procurement including Design and
Build, Traditional, etc.
 Open procedure
Under an open tender procedure all suppliers
who respond to an advertisement are supplied
with tender documentation, which they can
return as appropriate.
 Restricted procedure
The restricted procedure can best be described
as a two-stage approach in which the Council
invites interested suppliers to undergo a pre-
qualification assessment to draw up a shortlist
before inviting those on the list to tender. This is
the most common approach used by the Council
when tendering.
 Tendering
Tendering is the process which is undertaken to
obtain offers to create a contract between a
client and a contractor (Turner, 1997). Types of
construction tendering differ from each other in
the way in which contractors are selected. There
are two means of choosing a contractor namely
competitive tendering and negotiated
tendering. Competitive tendering is where a
number of contractors compete to win a
construction contract.
 Tendering
This method allows the client to get the lowest
possible price. Competitive tendering may be
done by open tendering, selective or serial
tendering. Tendering may also be negotiated
rather than competitive. Negotiated tendering is
a non-competitive approach where the client
enters into contract and negotiates a price with
a specific preferred contractor (Smith, 1986).
Contractors by value
 Evaluation of tenders
In order to preserve the integrity of the
competitive process, it is imperative that the
evaluation of proposals is undertaken
objectively, consistently and without bias
towards particular suppliers. Accordingly
evaluation of tenders is undertaken by an
evaluation panel, comprising a minimum of
three members, to ensure a fair and objective
decision is reached.
 Evaluation of tenders
Because of the nature of contracts it is unlikely
that they will be awarded on the basis of price
alone. The Client should award the contract to
the supplier it considers offers value for money.
For this reason our main evaluation criterion will
be the "most economically advantageous
tender" (MEAT) as determined by the criteria set
out in the tender documents.
 Evaluation of tenders
The award criteria will vary depending on the
type of contract. Examples of award criteria are
experience, technical merit, financial viability,
flexibility to future changes to our requirements,
speed of project delivery etc.
THE CONTRACTORS RESPOSNSE
 Tendering – Pre-qualification
Before being allowed to tender for a project the
Principal / Contractor will be expected to go
through some form of pre-qualification process.
The pre-qualification process, usually in the
form of a Pre-Qualification Questionnaire (PQQ),
is used as a means of short listing potential
Contractors , before allowing them to go on to
the next stage of the tendering process, or for
assessing an organisation’s suitability to become
part of preferred contractor lists.
 Pre-qualification
The range and depth of information will depend
upon the Client’s requirements but generally the
following information is required;
Financial Information
• Information on the tenderers latest trading
performance, and that the contractor is
financially stable and that they have the
necessary financial resources to complete the
contract.
 Pre-qualification
Experience and Technical Ability
• details of similar contracts completed over
recent years as well as providing contact
details of referees with whom confidential
references can be directly obtained
 Pre-qualification
Insurance
• You will be advised of the insurance requirements in
the pre-qualification questionnaire and insurance
cover must be in place before a supplier/contractor
can commence work for Bristol UWE. If you do not
have the required cover in place at the time of
completing the PQQ you will be asked to provide an
assurance that, should you be selected for standing
lists or awarded the contract, you will ensure that
your insurance cover is appropriate.
 Pre-qualification
• Organisation
• We will ask about your organisational
structure to establish whether you have the
appropriate resources to fulfil the contract.
We may also ask for information on
professional qualifications held by staff and
professional or trade bodies to which your
organisation belongs.
 Pre-qualification
Health and Safety
The CDM regulations (reg 4 competency) require
the Client to ensure that only competent
contractors are employed to undertake work on
its behalf.
Clients are therefore a required to assess the
Contractors’ systems for the control of health
and safety. Some Clients employ agents such as
CHAS to carry out such assessments on their
behalf.
 Pre-qualification
Equal Opportunities
Clients are required to ensure that contractors
do not discriminate in either their employment
practices or in contract delivery.
There is a legal framework surrounding
equalities, which all employers have a duty to
follow, including:
• Race Relations Act 1976 and Amendment Act
2000
• Disability Discrimination Act 1995
 Pre-qualification
• Sex Discrimination Act 1975
• Employment Equality (Religion or Belief)
Regulations 2003
• Employment Equality (Sexual Orientation)
Regulations 2003
 Pre-qualification
Environment
Most Clients have policies re; Sustainable
development. Their procurement decisions have
a direct influence on how well they can meet
their sustainability aims. Contractors will be
expected to show that they themselves have
sound environmental performance and
improvement policies.
 The tendering process
From the Contractors point of view the tender
planning process begins with the receipt of the
tender enquiry and ends with the submission of
the tender.
As with all other processes tendering is a series
of interrelated stages which include;
1. contacting suppliers to identify the cost of
the material content of the project
 The tendering process
2. obtaining specialist quotations from
contractors,
3. calculating the cost of labour element
including on-costs such as national insurance,
holidays etc.
4. pricing the bill of quantities
5. establishing the overall time for the contract
6. estimating the cost of on site preliminaries
 The tendering process
7. producing a summary of the tender bid foo
the directors
 The various stages of tendering
1.Enquiry summary; A summary of the major
contractual details e.g. The name of the
client , architect, description of the main
elements of construction, contractual
conditions, etc., should be prepared,
together with an approximate estimate of
the total price/value based on either a
summary of the major quantities or upon
approximate prices per m2.
 The various stages of tendering
•1 Cont’d; from the overall picture the senior
member of the estimating /building team will
consider factors such as profit margins on
labour, plant and materials and the subletting
of any elements of the works and how they
are to included in the overall price.
 The various stages of tendering
•2, Analysis of the bill of quants. Once the
scope of the works have been
established material and contractor
invitations can be sent out by the various
members of the estimating team. Other
duties such as site inspections etc can
also be allocated.
 The various stages of tendering
•3, Pricing of rates; the bill of quantities
can be broken down into their various
components and each priced separately.
Material elements can be built up from
suppliers quotations. Allowances will be
included for items such as wastage,
conversion factors i.e. mixing or
consolidation, and anticipated profit
margins.
 The various stages of tendering
• 3 Cont’d. Labour and plant elements will be
complied from a library of known outputs,
schedules of rates or rates included from
estimated past knowledge.
The bill rates will be ‘worked up’ and
collected to establish the basic price.
 The various stages of tendering
• 4 Financial analysis; when the actual price of
constructing the works has been established
the price will broken down to produce a
financial analysis indicating the preliminary
tender total identifying; labour, plant,
materials and profit, contractors work and
profit, prime cost and provisional sums
including profit and preliminaries.
 The various stages of tendering
• 5 Financial considerations; the financial
analysis combined with a summary of the
build-up of the major items can then be
presented to the directors for consideration.
Factors such as market conditions, the current
work load and the availability of labour, plant
and materials can be carefully considered and
the price modified accordingly
 The various stages of tendering
•6 Records of success; records of successful
/unsuccessful tender bids should be kept to
provide feed back to the estimators. This
information can be used in the future when
submitting work especially against similar
contractors. Similarly it can be used to
analyse trends in the percentage of successful
bids against the general market.
Programme of tender activities

Source; Cooke & Williams