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Qualification - Pearson BTEC Levels 4 and 5 Higher Nationals in Construction and the Built Environment

Unit Name - Tender & Procurement

Unit Reference Number - J/615/1399

Unit Level - Level 4

Unit Number - Unit 13

Assignment Title - Tender & Procurement

Unit Credit - Credit 15

Learning Outcome 1: Define what constitutes a tender and the information required for this process

Answer: A tender is a formal offer to carry out work, supply goods, or buy property, submitted in response to a public or private invitation. It's a structured bidding process through which organizations or individuals compete to win a contract by submitting a proposal outlining their capabilities, pricing, and approach. The information required for this process typically includes comprehensive details about the goods or services being offered, such as specifications, quantities, and delivery timelines. Financial information, including pricing, payment terms, and any associated costs, is crucial. Proponents must also provide their company's legal and financial standing, relevant experience, past performance, and any required certifications or licenses. Furthermore, tenders often demand details on the proposed methodology, project management approach, and key personnel involved, alongside adherence to specific terms and conditions set by the inviting party.

Learning Outcome 2: Explain the procedures and contractual arrangements for tendering

Answer:  The tendering process generally involves several key procedures and is underpinned by specific contractual arrangements. It typically begins with the inviting organization (the buyer) finalizing project estimates and sanctioning the project. They then prepare comprehensive tender documents, including eligibility criteria, technical specifications, and terms and conditions. This is followed by the advertisement of a Notice Inviting Tender (NIT) through public platforms (for government tenders, like the Central Public Procurement Portal in India) or direct invitations (for private tenders). Interested parties (bidders/suppliers) then obtain tender documents, often attend pre-bid meetings for clarifications, and prepare their detailed proposals, typically split into technical and financial bids. Submissions are made by a strict deadline, usually in a sealed or online format, followed by a tender opening process. The buyer then rigorously evaluates bids based on predefined criteria, which may involve shortlisting, seeking clarifications, and post-tender negotiations.

Contractual arrangements are crucial throughout this process. The tender document itself, often referred to as a Request for Tender (RFT) or Invitation to Tender (ITT), acts as the foundational document, outlining the scope of work, technical specifications, payment terms, and legal clauses. While the tender submission is considered an offer, it is not legally binding until formally accepted. Upon successful evaluation, a Letter of Acceptance (LOA) is issued to the winning bidder. This LOA is often followed by the signing of a formal contract, which legally binds both parties to the terms and conditions outlined in the tender documents and any subsequent negotiations. These contracts frequently include clauses for dispute resolution, governing laws, performance guarantees (like earnest money deposit and security deposit), and timelines for project completion and payment. The specific type of tendering (e.g., open, selective, negotiated, two-stage) influences the level of competition and negotiation, but the ultimate goal is to establish a clear, legally enforceable agreement for the supply of goods or services.

Learning Outcome 3: Analyse the factors that affect the selection of construction procurement methods

Answer: The selection of a construction procurement method is a critical decision that significantly impacts a project's success, influencing its cost, time, quality, and risk profile. Several key factors are meticulously analyzed by clients to determine the most suitable approach. Firstly, project complexity is paramount; simple, well-defined projects might suit traditional design-bid-build, while highly complex, technologically advanced, or unique projects may necessitate methods like design-build or construction management for integrated expertise and flexibility. Secondly, time sensitivity plays a crucial role; if early completion is a priority, methods that allow for overlapping design and construction phases, such as design-build or fast-track construction management, are preferred over the linear traditional approach. Thirdly, cost certainty is a major consideration; clients seeking a firm price upfront often opt for traditional lump-sum contracts, whereas those willing to tolerate more cost fluidity for greater control or innovation might choose cost-plus or construction management. Fourthly, risk allocation is a key driver; clients aiming to transfer more risk to the contractor might select design-build, which provides a single point of responsibility, while those comfortable retaining more control and risk may lean towards construction management. Fifthly, the desired level of quality and control over design can influence the choice; traditional methods offer greater client control over design specifications, while design-build delegates more design responsibility to the contractor. Finally, client experience and internal resources, the availability of skilled contractors, market conditions, and regulatory requirements also weigh heavily on the decision, as unfamiliar or resource-intensive methods may not be feasible for all clients. Ultimately, the chosen procurement method must align with the specific objectives and priorities of the project and the client.

Learning Outcome 4: Calculate an estimate for a work activity.

Answer: To calculate an estimate for a work activity in construction, a systematic approach is employed, typically starting with breaking down the work into manageable tasks using a Work Breakdown Structure (WBS). For each task, the estimator identifies the quantities of materials required (e.g., cubic meters of concrete, square meters of tiling) and their current market prices, including delivery and waste. Next, the labor hours needed for each task are estimated, considering the crew size, productivity rates (often based on historical data or industry benchmarks), and labor wage rates, including social charges and benefits. Equipment costs are then factored in, calculating the hourly or daily rates for machinery (e.g., excavators, cranes) based on ownership or rental costs, fuel, and maintenance, multiplied by the estimated working hours. Subcontractor quotes are obtained for specialized tasks that won't be performed in-house. Finally, indirect costs (such as supervision, site establishment, temporary facilities, insurance, permits) and a contingency sum (for unforeseen circumstances) are added. A percentage for overhead and profit is then applied to the total direct and indirect costs to arrive at the final estimated price for the work activity. This process often involves using estimating software and detailed databases to ensure accuracy and consistency.

Introduction: For a client, the process of procurement, obtaining the services of a main contractor to construct their project, is often complex. The selection of a contractor that will meet the expectations of a client is essential, so that time, quality and cost constraints are met and no delays, overruns or budgets exceeded. Tendering is the process of obtaining a price for the designed and specified works. The importance associated with contractor selection cannot be overstated for the successful completion of a client's project.

The aim of this unit is to provide students with the knowledge to select a procurement route and an appropriate tendering method in the awarding of a project to a main contractor. Students will gain knowledge of how to prepare a tender package in procuring a contractor for a client's work. Many different procurement methods are available to achieve this: from open to closed systems.

Topics included within this unit are: tendering constraints and information, the documentation needed to send out a tender, the factors that affect procurement, and the procurement methods that can be used to select a contractor.

On successful completion of this unit students will be able to obtain an estimate for a client's project, at the design stage, using a suitable procurement method. In addition, students will have the fundamental knowledge and skills to progress on to a higher level of study.

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Content:
LO1 Define what constitutes a tender and the information required for this process

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Information required to produce a tender:
Decision to tender, preliminary information received, type of client or stake holder, private or commercial clients, stage of the design drawings, provisional timescale, pre-contract Health & Safety plans, elements required for tender, tender resource allocations, electronic or hardcopy tender process, type of work, capacity to tender.

Constraints on tendering:
Time allocated to the compilation of tender documentation, selection of list of tenderers, allocated tendering time, return date and time, resources implications in terms of hardcopy, poor tender presentation, insufficient information sent out to contractors, revisions to design.

Tendering documentation:
Design drawings, tender drawings, covering invitation letter, the form of tender, tender submission breakdown, list of drawings, specification, bill of quantities, preliminaries, pre-construction information, form of contract to be used on the project, contract conditions and terms, tender pricing document, employers requirements, nominated and named contractors, a building information model, tender return instructions, tender return envelope, references to any code of practice for tendering procedures, Building Information Modelling.

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LO2 Explain the procedures and contractual arrangements for tendering

Tendering stages:
Decision to tender, tender preparation strategy, tendering arrangements, pre- qualification questionnaire, compiling lists of prospective tenderers
Selection criteria: experience, references, professional association status, ISO registration, recommendations, clients, preferences, interview, presentation, financial accounts, Health & Safety record, rotation on a select list, listing against financial capacity, previous performance feedback.

Tendering processes:
Types of tendering: open, selective, negotiated, serial, framework tendering, single stage and two stage tendering, advantages and disadvantages of each approach applied to a project, criteria for the selection of tendering method, reference to type of contract, design and build, size of project, financial costs.

Contractual arrangements:
Criteria for the selection of type of contract e.g. forms and agreements, terms and conditions, schedule of rates, lump sum, design and build, legal responsibilities
Standard forms of contract: Joint Contracts Tribunal (JCT), New Engineering Contract (NEC), and any local contractual agreement or documents e.g. FIDIC, International Construction Contracts, level of information provided at tendering stage.

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LO3 Analyse the factors that affect the selection of construction procurement methods

Issues associated with procurement of projects:
Current issues (associated with procurement and contractual arrangements), issues originating from government, professional and statutory bodies and contracting organisations, recommendations from the sector and government- sponsored reports, differences between public and private procurement, developments and trends in practice e.g. Building Information Modeling L2 for public sector and asset procurement, aspects of practice, Official Journal of the European Union (OJEC), procurement strategy within Europe under the European Procurement Directives, International Trade Agreements and Government Directives.

Factors affecting procurement routes:
Time, cost, quality, client characteristics e.g. government or private sector, the project characteristics, time frame factors, level of risk associated with the project and what apportionment between client and contractor, environmental considerations, sustainability, financial planning, stage of the design (fully designed, partially), complexity of the building in terms of different services procured separately and nominated, OJEC rules and compliance with European bidders.

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LO4 Calculate an estimate for a work activity

Project parameters:
Client's budget, client's agreed procurement strategy, project balance, risk and project management, available procurement time against design detail completed, fast track construction and the stages when design information will be available, level of specified quality required, policy constraints (internal and external), cost constraints in terms of value and contractors approved lists, auditable value for money, political constraints, level of client knowledge.

Procurement methods and contractual arrangements:
Common methods of procurement: traditional contract, single and two stage design and build, management contract or contact management, lump sum with bill of quantities, lump sum with specification, prime contracting, associated contract with method of procurement, Building Information Modelling.

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