Infrastructure Delivery
Management Toolkit:
2010 Edition
Practice Guide 2: Construction Procurement
Strategy
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cidb
development through partnership
Contents of this presentation
• Introduction
• Challenges in current construction procurement
practice
• Traditional approach to construction
• Alternative delivery options
• Alternative pricing strategies
• Framework Agreements
• Construction Procurement Strategy
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cidb
development through partnership
Challenges in the current construction practice
To name a few:
• Too many projects
• Few people to manage and monitor projects
• Too many relationships to manage
• Scarcity of professionals in the public service
• Consultant driven
• Low skill levels and poor quality
• Building in contractor development and job
creation objectives
• Too little time
• Long decision making processes – regulations &
policies
• Stop – start implementation
• Political influences
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development through partnership
Fundamental considerations in delivery
cost
Quantum service
delivery
targets
quality /
performance
delivery /
time
Bottom line – infrastructure delivery
needs to meet expectations
Current capacity constraints
CIDB (2006) attributed the SA capacity constraints within
government to deliver infrastructure to:
• the project approach where for each and every project,
consultants are appointed, briefed, directed and overseen
by a gradually disappearing cadre of skilled staff
• unbundling strategies aimed at reducing the size of
contracts in order to target small or local enterprises
which place increased demands on the client’s resources
to manage and oversee these small contracts
CIDB proposal
CIDB inform practice note No 1: SCALING UP DELIVERY
AND ACCELERATING EMPOWERMENT (August 2006)
In a nutshell
• Use larger contracts
• Use longer contracts
• Adopt a programmatic and a systems approach
What this does is to:
1) Reduce the work load of the SCM units
2) Reduce the number of relationships to a manageable
level which frees up government’s capacity to brief
service provides, manage contracts and to make
payments
3) Allow skills to be rapidly replicated and certain tasks to
be de-skilled
4) Improve job creation and SMME development outcomes
Search for alternative delivery models
Problem statement
Capacity constraints exist due to the continued use of an
outdated delivery approach
Solution
Require a delivery model which:
CIDB / National
Treasury IDMS 2010
• matches the capabilities and capacities of the client to
effectively oversee its implementation
• takes account of the capabilities of the private sector
• accommodates current socio-economic delivery
imperatives
Have in place well developed targeted
procurement procedures to address
this aspect of delivery
Traditional approach to construction
Procurement strategy for traditional approach to delivery
-
One project one contract (or a group of smaller
contracts)
-
Discipline specific consultants appointed on a
percentage fee basis
-
Open tenders are called for when the design is
complete
-
Contractors are contracted on a bills of quantities
basis
No need to consider procurement
strategy – a one size fits all
approach suffices
Traditional approach to construction
Fee based on percentage of cost of
construction – allows project to be
developed as it unfolds
Scope of work for
consulting
services contract
Outline
statement
Master
Procure consulting services
Stage 1:
Preparation
Scope of work for
construction work
contract
Stage 2:
Definition
Master –
servant
relationship
Stage 3: Design
Development
Procure
construction works
Stage 4: Production
information
Servant
Priced
contract
based on
lump sums
or bill of
quantities
Traditional approach to construction
John Smeaton in 1768 during the construction of the Clyde
Canel (Scotland) established the master / servant
between designers and contractors
Sir Joseph Bazalgette’s standard form of contract for
London’s major sewer projects and the embankments on
the Thames 1860s was adopted by the Metropolitan Board
of Works
Institution of Civil Engineers’s standard form of contract
published in 1945 based on the 1860 standard form of
contract
South African current traditional forms of contract based on
ICE form of contract
Are their different ways of delivery projects to improve
outcomes?
Design by Employer
Contract under which a contractor undertakes only construction
on the basis of full designs issued by the employer.
Suitable where:
• The client wishes to make significant technical inputs into
design process and design details.
• The client requires flexibility in the development of the design.
• The risks are to be balanced between the parties, or
• Reasonable certainty in cost and time is required before a
commitment to build is made.
• Suitable client accepted production information is available to
be incorporated into the scope of work for the contract.
Alternative allocation of design
responsibilities
Design and
construct
Develop and
construct
Contractor designs a project based
on a brief provided by the client and
constructs it
Contract based on a scheme design
prepared by the client under which
a contractor produces drawings and
constructs it
Alternative contracting strategies
Stage
1
Preparation
2
Definition
3
Design development
4
Production
information
5
Manufacture,
fabrication and
construction
information
6
Works
7
Handover
8
Close out
Award works
contract
Design and
construct
contract
Scope of work
based on concept
report
Note
Contractor responsible for later
design stages
Consultant reviews contractor’s
design against project brief
Design and Construct
Contract in which a contractor designs a project based on a
brief provided by the client and constructs it
Suitable where the employer requires
• Integrated design and construction and single point
accountability
• That most risks lie with the contractor in return for price
certainty, or
• The cost and completion date is almost guaranteed when a
commitment to build is made.
Suitable for simple and moderately complex projects,
particularly where the client has limited technical
capability.
Alternative contract strategies
Stage
1
Preparation
2
Definition
3
Design development
4
Production
information
5
Manufacture,
fabrication and
construction
information
6
Works
7
Handover
8
Close out
Award works
contract
Develop and
construct
contract
Scope of work
based on design
development
report
Note
Contractor responsible for later
design stages
Consultant reviews contractor’s
design against project brief
Develop and Construct
Contract based on a scheme design prepared by
the client under which a contractor produces
drawings and constructs it.
Suitable where the employer requires
• Integrated detailed design and construction and
single point accountability
• Reasonable certainty in cost and time before a
commitment to build is made.
Suitable for simple and moderately complex
projects
Alternative allocation of management
responsibilities
Management Contractor is responsible for planning
contractor
and managing all post-contract activities
and for the performance of the whole of
the contract
Management Contract
Contract under which contractor provides consultation during
the design stage and is responsible for planning and
managing all post contract activities and for the performance
of the whole of the contract.
Suitable where:
• The employer has limited capability or capacity to advance
the work beyond a strategic brief.
• The employer retains most of the risks
• The contractor needs to work alongside the design team to
develop the programme for construction design and tender.
Suitable for sophisticated projects, particularly where the client
has limited technical capability.
Management contractor relationship
Employer
Example
Management contractor
Subcontractor
(construction
work sub
contract)
Subcontractor
(construction
work sub
contract)
Subcontractor
(construction
work sub
contract)
Design
consultant
(professional
service
contract)
Design
consultant
(professional
service
contract)
Management contractor subcontracts
out the bulk of the work
Alternative contracting strategies
Stage
1
Award works
contract
Preparation
2
Definition
3
Design development
4
Production
information
5
Manufacture,
fabrication and
construction
information
6
Works
7
Handover
8
Close out
Alternative
Alternative
Management
contractor
Scope of work
based on design
strategic
Alternative
Note
Contractor can be made responsible
for all or some of the design and all
construction
Construction Management
Contract under which a contractor is responsible for
planning and managing all post-contract activities
and for the performance of the whole contract.
Where it is desirable to
• Have direct contracts with specialists trade
contractors or small contractors, and
• Manage the interfaces between interrelated
packages within a project.
• Suitable for projects where a number of trade
contractors are appointed.
Alternative pricing strategies
Starting point
Tender prices can be built up by considering a number of
components including:
• General items: items to cover the charges for
compliance with contractual obligations
• Construction (work) content: price of constructing all
the items that are to be constructed or built
• Overheads: operating (every day) expenses incurred in
the upkeep of the business and its offices that are not
directly attributable to individual contracts
• Risk allowance: an allowance (contingency) to cover
the perceived risk associated with uncertainty
• Profit
Bill of quantities
Build up of tender price
General item
or
Construction content – Overheads
Risk
labour, materials, plant
Profit allowance
and equipment
or
Subcontracted work
Item
No.
Description
Unit of Measure Quantity Rate
Total
Bill of quantities
•
is useful only to develop a tender price for the contract
•
cannot be used to control costs on site
Bill of Quantities
• Client takes the risk for changes
• Contractor takes the risk of rate changes
• Use where
• a clear, unambiguous scope of works exists,
which is complete save for uncertainty on
the actual quantity of work to be done e.g.
earthworks
• Where little or no change to programme is
envisaged
• The level of risk is low and quantifiable
24
Pricing strategies: Activity schedule
Break the scope of work down into activities related to a
programme and price each activity as a lump sum
TIME IN WEEKS: W1
W2
W3
W4
W5
W6
W7
Alternative pricing strategies
No
ACTIVITY
1
Establish
Out…
2
Excavation
3
Foundation Concrete &
Brickwork.
4
Superstructure
5
Roof
6
Services (1st; 2nd; Final)
7
External Works
8
Finishing and cleaning
9
Hand over to client
Site;
Set
W8
W9
Activity schedule
Item
No.
Programme Activity description
Reference
General item
or
Construction content –
labour, materials, plant
and equipment
or
Subcontracted work
Price excluding
VAT
Build up
of tender
price
Overheads
Profit
Risk
allowance
An Activity Schedule is a list of activities which represents
the activities expected to be carried out
The Contractor enters lump sum prices against each of
these activities (Total = contract sum)
Paid for completed activity
Lump sum
Lump
sum
Contractor is paid a lump sum to perform the
works
(Interim payments which reflect the progress
made towards the completion of the works
may be made)
Contractor is :
• at risk for costs associated with completing the contract
• not compensated for any errors or omissions of his own
Price list
Price list / Contractor is paid the price for each lump
schedule sum item in the Price List that has been
completed and, where a quantity is stated in
the Price List / Schedule, an amount
calculated by multiplying the quantity which
the contractor has completed by the rate
Contractor is only paid amounts in Price List for
priced work
Lump Sum, price list, activity schedule
Price-based strategy
• Contractor takes the risk for changes in quantities
• Client takes risk of change of scope
• Use where
• A clear, unambiguous scope of work exists, which is
complete in all respects and as such can be priced
with certainty.
• Changes to requirements are not anticipated
29
Bill of quantities vs other price-based
pricing strategies
The primary purpose of a bill of quantities is to arrive at a
tender price within relatively short time frames so that a
tender can be evaluated and a contract awarded
The employer is liable for increases in the tender price
arising from increases in quantities and mistakes in
compiling the bill of quantities
In lump sum, activity schedules and pricing list contractor
is at risk as price is all inclusive
What about other pricing strategies?
Price based:
•
•
•
•
bill of quantities
activity schedule
lump sum
price list
Cost based:
• cost reimbursable
• target cost
Cost Reimbursable
• Contract in which the contractor is paid for his
actual expenditure plus a percentage or fee.
• Use where an emergency exists
• the scope of work cannot be priced ahead of the
works
• the employer cannot transfer the project risk to the
contractor or the risk pricing is prohibitive
• the contract is likely to be disrupted by
uncontrollable events
32
Cost reimbursable contract
Fee includes profit
and overheads
Wages and
salaries
+
Fee
Site
overhead
percentage
Materials at
open market
rates
+
Fee includes profit
and overheads
Fee
Equipment at agreed
rates, market related
rates or percentage up or
down on a hire list
Subcontract costs
Target cost contract
Target Price (initial)
Target Price (final) adjusted for
compensation events
Final “cost”
pain
(share of
gain (share
cost
of savings)
overrun)
payment
to
contractor
(cost + fee)
Scenario 1:
Contractor gain
Sharing of
cost savings /
overruns
Scenario 2:
Contractor pain
Target Cost Pricing
• Cost reimbursable contract in which a target
cost is estimated and on completion of the
works the difference between the target cost
and the actual cost is apportioned between the
employer and contractor on an agreed basis.
• Use where:
• The employer wishes to reward strong contractor
performance, share financial risk or promote
collaboration
• An early contractor involvement is required to
make inputs into the design process
• Framework agreements are entered into
35
Target price contracts
Procurement of contractors
Option 1 (design is not sufficiently developed)
•
Tenderers tender cost parameters
•
Target price negotiated when sufficient information
available to price the works
Option 2 (design is sufficiently developed to price)
•
Tenderers tender cost parameters
•
Assumptions are made about any uncertainties so
that the tenderers can price the works (adjust target
if assumptions turn out to be incorrect e.g. quantum
of reinforcement)
•
Tenderer tenders a target price
Management contractor relationship
Employer
Example
Management contractor
Design
consultant
(professional
service
contract)
Subcontractor Subcontractor Subcontractor
Design
(construction
(construction
consultant
(construction
Management
contractor subcontracts
out the
bulk of
work sub
sub
(professional
sub
the work and work
is paid
on a costwork
reimbursable
basis i.e
contract)
contract)
service
contract)
contract)
subcontract amount plus a fee +
prices for work done by the contractor himself
This allows cost to be controlled
Pricing strategies
Activity schedule /
lump sum
Activity schedule (lump sum)
Price List
Min
Employer’s flexibility
to effect scope changes
Bill of Quantities
Bill
Employer’s
flexibility
to effect
change
Max
Pricing strategy
of quantities
Target
cost
Target
cost
Cost
Cost reimbursable
reimbursable
Min
Max
Employer’s riskrisk
Employer’s
Contractor’s incentive / risk
Contractor’s risk
Max
Min
The relationship between the employer’s risk and flexibility to effect scope cha
in the different pricing strategies
Benefits of Target Cost Pricing
• Allows early contractor involvement
• Facilitates collaborative / partnering / developmental
relationships
• Suitable for use in framework agreements because:
− allows the employer to procure work on an asinstructed basis over a set term without
necessarily committing to any quantum of work
− offers flexibility in attaining secondary
procurement objectives as requirements can be
adjusted from one package order to another
39
Lean construction
To provide higher value and less waste the fragmentation
in design needs to be addressed, preferably before 25% of
the design is complete
Target cost contracts can enable this to happen even
where a design by employer approach is adopted
This allows a specialist in construction to be appointed
at the same time as the design team
Such a contractor may or may not be responsible for
managing the design team
Consideration
Contracting strategy
Design by employer
Management contract
Develop and construct
Design and build
Pricing strategy
Activity schedule
NEC3
Yes
Cost reimbursable
Target cost
GCC
FIDIC
Yes
Yes
No
Red
Silver
Yes
Yellow &
Silver
No
Lump sum & breakdown
No
No
No
Lump sum
Bill of quantities
JBCC
Yes
Yes
Yes
Yes
Yes
Yellow &
Silver
Red
No
No
No
No
No
No
What is a framework agreement?
ISO 10845-1, Construction procurement – Part 1:
Processes, methods and procedures
A framework agreement is an agreement between an
employer and one or more contractors, the purpose of
which is to establish the terms governing contracts to be
awarded during a given period, in particular with regard
to price and, where appropriate, the quantity envisaged
Allows the employer to procure construction services
to provide work packages on an as-instructed basis
(call offs) over a set term without necessarily committing
to any quantum of work
Current paradigm
Client appoints a professional team to design the works
Open tenders are called once the production information
has been finalised by the professional team
(production information = final detailing, performance
definition, specification, sizing and positioning of all systems
and components)
Contractor prices the production information
Contractors are contracted on a bills of quantity basis for a
single project (which may or may not include budgetary
items to cover aspects of the works which have not been
finalised)
Packages in a framework contract
Hand over
works
C
o
n
c
e
p
t
Construct
works
Document
works
P
#2
P
#1
Scope works
Develop
concept for
works
Packages
delivered
over a term
by a single
contractor
Design works
P
#3
P
#4
etc
Procuring a service over a period of time
Package orders
University of the Witwatersrand
Package #1
Package #2
Start
November
2009
Start January
2009
Chamber of Mines –
fourth quadrant (R70 m)
Package #3
April 2010
Wits Art Museum (R68m)
Undergraduate Science
Centre– phase 1 (R178 m)
Package #4
Start
October2010
Refurbishment of Chamber
of Mines – (R45m)
Same contractor but
different professional teams
Principles of Framework Agreements
Framework agreements
• are entered into following a competitive selection
process
• need to establish the following as a minimum:
-
the basic terms of the contract
the term of the contract (3 -4 years)
the scope of the work which may form the basis
of a package order
the basis by which contractors are to be
remunerated for instructed work
the manner in which competition between
framework contractors may take place
Essential elements of a framework
• A package is works within the scope of work of a
framework agreement which is instructed within a stated
period of time (start and end date)
• A package order is an instruction to carry out a task and
may only be issued within the term of the agreement
Start date
Framework contract
Start
Start
End
End
Start
Package orders
•
End date
Start


End
End
A framework contract is only entered into with those who
have the capability and capacity to carry out the likely
work
Outcomes of Alternative Delivery Approaches
FROM
TO
• Master-servant relationship of
adversity
• Fragmentation of design &
construction
• Allowing risks to take their
course
• Short-term “hit and run”
relationships
• Constructability & cost model
determined by design team
and consultant only
• “pay as you go” delivery
culture
• Collaboration towards shared
goals
• Integration of design and
construction
• Proactive, collaborative risk
management and mitigation
• Long-term relationships
focused on maximising
efficiency & shared value
• Constructability and cost
model developed with
contractor’s insight
• Discipline of continuous
budget control
48
Key question
Question:
How does one appoint a contractor in the absence of
a scope of work?
Answer:
Look at:
•
•
cost based pricing strategies as apposed to price
based strategies
rates based contracts (where P and G costs are
fairly constant and work is very straightforward)
Pricing strategies for framework contracts
A framework agreement is a contract where the terms of
payment are agreed in the absence of a detailed scope of
work
Pricing strategies
Lump sum
Not suitable –require scope of
work to price the work
Bills of quantities
Activity schedule
Possibly in simple works but
need to deal with costs
Price list
associated with different sites
Cost reimbursable
Target cost
Yes – if linked to a management
contractor
Suitable – as cost parameters
can be pre-agreed and target can
be initially tendered and
thereafter negotiated
Standard provisions for pricing strategies
Look at NEC3
Lump sum &
breakdown
Consideration
Activity schedule / lump
sum
Bill of quantities
Cost reimbursable
Target cost
NEC3 JBCC GCC
Yes
Yes
Yes
Yes
No
Yes
No
FIDIC
Yellow &
Silver
Red
No
No
No
No
eThekwini AC secondary water mains
• identified a project for the replacement of
2500 km of AC water pipes over a period of
3 years
• appointed one programme manager + 4
design consultants + 4 contractors
Time frames
Feb 2007
- concept introduced and work shopped with
officials, consultants and contractors
Mar 2007
- calls for expressions of interest
May 2007
- shortlisted respondents invited to tender
May 2007
- tenders closed
June 2007 - tenders evaluated and awarded
1 July 2007 - work starts (new financial year)
eThekwini AC secondary water mains
Expenditure R400 million spent in first 14 months
Productivity: 80 km of water mains replaced each month.
Socio economic:
•
± 3800 temporary unemployed workers employed to
excavate trenches and are rotated every 4 months to
allow others to financially benefit
•
Temporary workers paid 21% of total project
expenditure.
•
16 subcontractors (or “co-contractors”) developed to
increase their share of the construction work from
10% to 20% over time (should double their
turnover over time)
•
A full time mentor engaged to assist the “cocontractors” in the establishing of business
systems
Staff demands on client: one staff member
eThekwini AC secondary water mains
Awards
•
won the coveted KAMOSO award for Best
Construction Project in the Infrastructure
category (Department of Public Works which
recognizes and rewards excellence in the
implementation of Expanded Public Works
(EPWP) programmes
• Philiswe Mthethwa of Abangani Projects, an
emerging sub contractor came third in the CIDB
National Women in Construction Excellence
Awards
All subcontractors have doubled their CIDB grading during
the term of the contract!
Construction procurement strategy
Construction procurement strategy is the combination of:
• delivery management strategy
• contracting arrangements
• procurement arrangements
A procurement strategy can be developed for:
•
•
•
a single project
a programme of projects
a portfolio of projects
It identifies the best way of achieving objectives and value
for money, whilst taking into account risks and constraints
Portfolio = the total extent of infrastructure controlled or used
by an institution
Portfolio of
projects over
next few
years
Programmes
packages
A strategic
approach
Package = works which have been grouped together for
delivery under a single contract or a package order issued in
terms of a framework agreement
The Benefit of Developing a Procurement Strategy
The central objective of developing a construction
procurement strategy is:
• to determine possible procurement and
contracting options
• that will maximise value-for-money,
• deal with capacity constraints
• and ensure long term sustainability
• Different options are most suitable under different
conditions
• The choice of options is dependent on local
conditions.
57
cidb
development through partnership
Construction
Procurement
Strategy
1
Gather &
Analyse
information
Version 1.1
March 2011
1 – Delivery Management Strategy
2
Formulate
procurement
objectives
3
Make strategic delivery
management decisions
4
Decide on
delivery mode
Package Works
5
Spend Analysis
Primary
Implementing Agent (IA - SLA)
FA opportunities
Organisational
Analysis
Programme of
Projects
Secondary
Another organ of state FA
Individual Projects
Packages
Market Analysis
Leasing
Outsourcing
Own Resources
Quality Strategy Options
 Specifications
 Life cycle costing
 Pre-qualification
 Evaluations Criteria
 Undertakings at tender
stage
 Preference
 Eligibility Criteria
Procurement Procedure
Options
 Competitive selection
 Negotiation
 Competitive negotiation
Targeted Procurement
Procedure Options
 Preferencing
 Incentives for KPI’s
 Mandatory
Subcontracting
 Contractual Obligations
PPP – follow NT PPP
procedures
Decide on
quality strategy
Decide on
procurement
arrangements
Decide on
targeted
procurement
strategy
Decide on
tender
evaluation
procedure
1
2
3
4
3 - Procurement Arrangements
1
Allocate risks
for packages
2 - Contracting Arrangements
Service
Requirements
Pricing Strategy
Form of Contract
2
3
4
Establish
requirements for
outsourced
professionals
Package
professional
service
contracts
Allocate risks
for professional
service
contracts
Contracting
Strategy
Type of Contract
Pricing Strategy
Form of Contract
Contracting Strategy
 Design by employer
 Develop & Construct
 Design & Construct
 Construction
Management
 Management
Contractor
Pricing
Strategy
 Activity based / lump
sum
 Bill of Quantities
 Cost reimbursable
 Target Cost
Form of Contract
 NEC3
 FIDIC
 JBCC
 GCC 2010
Decide on delivery management strategy
 Gather and analyse information
 Formulate procurement objectives
Meet need for works through:
 Make strategic delivery
management decisions
 Decide on delivery
mode (project or
programme)
 Package works
 a PPP
 an Implementing agent (IA)
 another organ of state’s
framework agreement (FA)
 leasing of property
 outsourcing
 own resources
Contracting arrangements
 Allocate risks for packages
Contracting strategy
 Design by employer
 Develop & construct
Options for services:
 Design & construct
 construction
 Construction management
 construction & maintenance
 Management contractor
 maintenance
Pricing strategy:
 construction, maintenance & operation
 Priced contract with a
priced list
CIDB
 Establish requirements
 Cost reimbursable
accepted
for outsourced
 Target cost
Form of
professional services
 Activity based / Lump sum
Contract
 Bill of quantities
 Discipline specific or
 Package professional service
multidisciplinary service
contracts
 Package specific, programme
related or framework agreement
 Priced contract, percentage of
 Allocate risks for professional
cost of construction, cost
service contracts
reimbursable or target cost
Contracting arrangements
Activity 1: Allocate risks for packages Options for service requirements
Option
Construction
only
Pricing strategy
 Activity based /
lump sum
 Bill of
quantities
 Cost
reimbursable
 Target Cost
Maintenance
only
 Priced contract
with a priced
list
 Cost
reimbursable
 Target cost
Maintenance
and
construction
 As for
maintenance
and
construction
services
 As for
maintenance
and
construction
services
Construction
maintenance
and
operation
Form of contract
 NEC3 Engineering and
Construction Contract
 NEC3 Engineering and
Construction Short Contract.
 FIDIC Conditions of Contract
for Construction and Building
and Engineering Works
Designed by the Employer
 FIDIC Conditions of Contract
for Plant and Design
 FIDIC Conditions of contract
for EPC Turnkey Projects
 FIDIC Short Form of
Contract General Conditions
(Short Form)
 JBCC Principal Building
Agreement
 JBCC Minor Works
Agreement
 GCC 2010
 CIDB General conditions of
contract
 NEC3 Term Service
Contract
 NEC3 Short Term Service
Contract
NEC3 Engineering and
Construction Contract with or
without NEC3 Term Service
Contracts
 FIDIC Conditions of Contract
for Design, Build and
Operate Projects
 NEC3 Engineering and
Construction Contract plus
NEC3 Term Service
Contracts
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development through partnership
Deciding on the procurement arrangements
 Decide on quality
strategy
 Decide on procurement
procedure
 Decide on targeted
procurement strategy
 Decide on tender
evaluation procedure
Step 1: Decide on Quality Strategy
Refer to Practice Guide 2, Section 7.2, page 41,
Table 14 for options and decision criteria for building
quality into the procurement arrangements.
Quality may be achieved through:
• Specifications
• Life cycle costing
• Prequalification
• Eligibility criteria
• Undertakings at tender stage
• Preference
• Evaluation criteria
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Step 2: Decide on Procurement Procedure
Practice Guide 2, Section 7.3, page 42, Table 15
You will select one of the three basic procurement
procedures, using the criteria set out in Table 15:
• A negotiation procedure where a tender offer is
solicited from a single tenderer
• A competitive selection procedure
• A competitive negotiation procedure
• Eligibility criteria (Call for expressions of interest)
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Options within Competitive Selection
•If you have chosen a competitive selection procedure,
you must make further choices:
• Nominated
• Open
• Qualified
• Quotation
• Proposal procedure using the two-envelope system
• Proposal procedure using the two-stage tendering
system
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Options within a Competitive Negotiation
If you have chosen a competitive
negotiation selection procedure, you must
make further choices.
Restrictive competitive negotiations
Open competitive negotiations
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Step 3: Decide on Targeted Procurement Strategy
There are four options for targeted procurement
procedures:
• Preferencing
• Incentives for KPIs
• Mandatory subcontracting
• Contractual obligations.
You will select one or more of the targeted procurement
procedures for your packages.
67
Step 4: Decide on Tender Evaluation Procedure
• Method 1: Financial offer
• Method 2: Financial offer and
preferences
• Method 3: Financial offer and quality
• Method 4: Financial offer, quality and
preferences.
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Document choices
A
B
data
data
data
data
data
data
Targeted
procurement strategy
Procurement
arrangements
Contracting
Procurement
arrangements arrangements for
strategy for
works
work
Quality strategy
Category Delivery
of spend management
strategy
Evaluation procedure
Procurement strategy for works
data data data data
data data data data
data data data data
Document choices
Procurement strategy for professional services
data
data data
data
data
A
data data
data
data
data data
data
data
data data
data
data
Evaluation procedure
data
data
data
Targeted procurement
strategy
Procurement
arrangements for
professional
services
Procurement
arrangements
Contracting
arrangements
for professional
services
Quality strategy
Category Delivery
of spend management
strategy
Document choices
Contents
1 Background
2 Delivery management strategy
2.1 Nature and spatial arrangement
of projects and clusters
2.2 Client organisation characteristics
2.3 Market characteristics
2.4 Primary procurement objectives
3 Contracting arrangements
3.1 Risk allocations for packages
4 Procurement arrangements
4.1
Quality strategy
4.2
Procurement procedure
5 Satisfying primary and secondary
procurement objectives
5.1 Construction procurement strategy
2.5 Secondary procurement
objectives
2.6 Delivery management plan
2.7 Delivery mode
2.8 Packaging strategy
3.2 Professional service contracts
4.3 Targeted procurement strategy
4.4 Tender evaluation procedure
5.2 Issues to be dealt with in the
contracts which are not
addressed elsewhere
Challenges
Envisaged challenges to rolling out the methodology
•
Client difficulty in deciding on objectives
•
Clients unwilling to balance opposing objectives
•
Absence of open-minded programme managers
•
Resistance to change, particularly from
professional service providers
Dr Sean Phillips
Construction symposium: The project management profession:
adding value
University of the Witwatersrand (August 2009)
Documenting a procurement strategy
The procurement strategy arrived at by applying the aforementioned
procedures needs to be documented in such a manner that the logic
behind the choices that are made at each step can be communicated to
and reviewed by others. Accordingly, the specific inputs and outputs of
the actions at each step in the stages of the development of a strategy
need to be documented.
A procurement strategy at a portfolio level should be documented in a
tabular form which links each category or portion of a category of spend
to a number of high level descriptions. Procurement strategies at a
programme level can be similarly presented, with perhaps, more detailed
descriptors. The strategic brief that is developed for a package during the
package information stage of the package planning phase must,
however, set out all the choices made in relation to the package in
sufficient detail to enable procurement documents to be drafted to
enable the necessary procurement processes to commence.
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Conclusion and questions
Thank you
cidb
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