Traditional Methods of

Procurement - Tendering
Year 2 Contract Procedures and Procurement


Dr. Margaret Nelson
Room M1-06
LECTURE OUTLINE
Module Overview
Traditional Methods of Procurement
Tendering
Types
Open tendering
Selective tendering
Two-stage tendering
Process
Documents
TRADITIONAL
Traditional Methods of Procurement
Open Competition
Selective Competition
Two-stage Selective Tendering
Competition and Negotiation
Continuity Contractual Arrangements and
Procurement
Cost Reimbursement Contracts
Measured Term Contracts
PROCUREMENT
TRADITIONAL PROCUREMENT
Method of procuring a building in which
independent professional (architects,
engineers, QS) are employed by the Client
to complete the design work. Separate
contract is entered into with building
contractor to construct the designed
building (Naoum)
CHARACTERISTICS OF TRADITIONAL
PROCUREMENT
Most common form of procurement for small and medium size projects
most suitable for buildings that use a traditional form of construction and provide
normal levels of performance
where the client places a high priority on aesthetic appearance and does not
need the new building to be produced very quickly.
Authority for design and that for construction are vested in the architect and
builder separately.
Architect - keeps a watching brief and monitors construction, but does not have
any responsibility for the construction process: responsibility is divided.
Client will normally commission consultants to prepare designs and
specifications for works that are then constructed by a contractor engaged
separately.
The contractor is likely to engage sub-contractors for actual construction on
site.
Traditionally, lowest bid would be awarded the contract.
Once the building contract is finished, the consultants and contractor have
limited long-term responsibility for the subsequent performance of the
building
Generally, the stages are sequential with little overlap, although in reality,
this is not always practical when some design work is carried out by
specialist sub-contractors.
CONTRACTUAL RELATIONSHIPS
ADVANTAGES OF TRADITIONAL APPROACH
Widely used so most building consultants and
contractors understand it and are experienced in using it.
Do not have to learn new roles and relationships
Tenders are on a like-for-like basis
Scheme fully pre-designed and specified
Early commitment to maximum price
Reduced estimating risk and therefore reduced cost to
employer
Provides contractually agreed prices for valuation of
variations
Cost control and analysis
Standards are easier to control
Can produce good, even great, architecture because it
gives the lead architect considerable freedom and
authority allows for real creativity.
DISADVANTAGES OF TRADITIONAL
APPROACH
Difficulty in utilising the full range of skills and experience of those
involved in the time available
Focus on initial rather than lifetime costs
Potentially adversarial contractual relationship with greater risk of cost
and time overruns
Blame culture built into the system
Difficult for developing and integration of project participants
Contractor may look for mistakes in the designs or documentation in order
to make claims for additional moneys through variations result - clients
being faced with demands for extra time and money.
Many public sector organisations tend to restrict their tender lists to four
or five old reliables
Advantage in reliability!
Ignores the potential benefits a new supplier could bring in terms of
innovation and reduced costs.
Few organisations have formal systems for pre-qualifying companies
and even fewer monitor supplier / contractor performance and feed the
information back into the tender process for subsequent contracts.

DISADVANTAGES OF TRADITIONAL
APPROACH (2)
The separation of the contractor from the design can mean missed
opportunities for contractor input (Mohsini and Davidson, 1992).
The sequential and fragmented nature of the procurement system can
result in lengthy design and construction periods
Poor communication between clients and the project team
Problems of buildability- It separates design from first hand experience
of construction and so tends to produce designs that are difficult and
therefore expensive to construct.
Uncontrolled design changes can lead to increased cost and delay.
Selection of contractors based on lowest price tendering is not in the
best interests of the client
The contractor or the clients professional team who spend time and
expense in negotiating to try to keep the job down to the agreed lowest
price.
The quality of traditionally produced buildings can be patchy with too
many defects when the building is handed over to the client, not all of
which can be put right.

TENDERING
COMPETITIVE TENDERING
Invites contractors to submit the lowest price for
which they are willing to carry out a project
Relies on the information contained in drawings,
specifications and bills of quantities prepared on
behalf of the construction client.
Types
Open
Selective
One or two stages
OPEN TENDERING
Allows any contractor to submit a tender to an advertised project
Process
Client advertises openly in the press or the trade publications inviting
contractors to apply for the project
Contractor that is able to under take the project would request a tender
document
After receiving the tender from the architect, the contractor may be
required to give a deposit and to ensure a bona fide tender. This is
done to filter out the contractors who are not interested in submitting a
tender.
Note:
Tenders are costly and time consuming overheads on successful
tendering will be passed on to the client.
When assessing tenders the client will probably look for a cheap
option or the best tender if quality is wanted
Client could also refuse all of the applicants if they dont suit the job.
OPEN TENDERING 2
Advantages
Maximum competition
Lowest price obtained
Disadvantages
Large waste of effort because too many
contractors are tendering
Contractor submitting lowest tender may not be
properly equipped to undertake the contract
Client may be inclined to accept lowest tender
irrespective of reputation of contractor
Poor quality building or bankruptcy may occur

SELECTIVE TENDERING
Where contractors of known reputation are selected to submit a
tender
The cheapest among them is selected to deliver the project
Commonest method of awarding a tender.
Process
A design team select a number of contractors (normally 6) that are
already known to them and invite them to tender for the project
Contractors tenders are usually based on a completed design
Project is awarded to the contractor with the lowest tender.
Note:
The National Joint Consultative Committee (NJCC) for Building
provides a useful Code of Procedures for single stage tendering, to
help with the awarding of contracts to contractors
SELECTIVE TENDERING 2
Advantages
As tenderers are known, selection of
cheapest bid is not as high a risk as in an
open tender
Disadvantages
Limiting the number of tenderers may
exclude new bidders who may offer more
innovative ideas or slutions
TWO-STAGE TENDERING
Aim - to speed up the procurement process by getting the architect and the
contractor to start the project as soon as possible.
With this approach the contractor will be able to start work (e.g. excavation,
foundations) on site as soon as possible.
Improve buildability - utilising skills of architect and contractor
Process
Usually a contractor will be chosen through a form of selective competition with a
simple bill of approximate quantities, these will be:
The preliminary items
Major items of measured work
Where contractors tenders are based on a partially developed consultants
design (Stage 1 tender). The contractor then assists with the final development
of the design and tender documents, against which tenders for the construction
works are prepared (Stage 2 tender). The first stage tenderer has the
opportunity to tender or negotiate the second stage
Specialist items used included as Prime Cost Sum, upon which contractors are
given the opportunity to include sums for profit and attendance.
The client will also ask the contractor to state their overheads and profits. These
prices will determine the price agreement that will be negotiated with the
successful contractor.
Notes:
first stage of the two-stage tendering proceedings, initial tenders containing their
proposals without a tender price
TWO-STAGE TENDERING 2
Advantages
Allows contractor to have input into design and
buildability and helps team-building, thereby helping
avoid future adversarial attitudes
Fast tendering
Speed of construction (build-ability)
Costs are known for quick negotiation
Disadvantages
The architect and contractor might not agree on designs
Due to problems with architect and contractor the project
completing time could suffer
CODE OF PROCEDURES
A certain level of standards needs to be placed where all parties
in the construction industry are familiar
No alteration to tender price without justification
Prior to the tendering all errors and alterations must be dealt with
For selective tendering, the number of firms invited to tender
must be limited
Selection process should consider:
The firms final standing order
The experience and reputation of the firm for the type of project
envisaged
The suitability of the management structure of the firm
Whether the firm will be able to undertake the contract at this time,
taking in to account its other commitments
Adequate time given for tendering, minimum 4 weeks
All conditions of tendering must be absolutely clear
All clients must be given all the necessary details about the
project

CODE OF PROCEDURES (2)
All tenders shall be submitted on the same basis
Tenderers should not be allowed to qualify their tender
All tenders must be submitted so that they have all been received by
the specified time.
A tender can be withdrawn at any time before a tender is accepted
(British Law permits)
Tenders must be placed into a hierarchy of the top 3 and the rest
must be notified that they have been unsuccessful
When the tender has been awarded, every tender should be
supplied with a list of the tender prices received
When the lowest tender exceeds the employers budget it is
recommended that the project continues and negotiation takes place
with the lowest tender. The client might not accept any tenders
price, and will not be responsible for the cost of tender preparation
Procedures should include measures for safeguarding the
confidentiality of all documents

TENDER EVALAUTION
Evaluation may be 2 stages
Pre-tender or Pre-Qualification (Pre-Qual)
Ensure that contractors are
Reputable
Capable
Experienced
Pre-Contract
Ensure that contractors
Fully understand the contract
Bid is realistic
Proposed resources are adequate
TENDERING
Invitation to Tender
must state the place where and the date and time by which the tender must be received
that the tender must be enclosed in a sealed envelope or package marked with the word 'Tender' followed
by the subject to which it relates and the deadline for tender receipt.
Adequate time must be allowed for the preparation and return of tenders depending on size of project.
Receipt, Custody and Opening of Tenders
All tender envelopes or packages received must be marked with the date and time of receipt and the initials
of the receiving officer, and recorded.
All tenders shall remain sealed in secure custody until the time appointed for their opening.
Any tender received after the specified time shall be recorded as such but must not be considered.
Tenders shall be opened at one time and in the presence of at least two officers who shall be independent of
each other and shall sign a complete record of all tenders opened, showing the date and time of opening
and the value of each tender.
Acceptance of Single Quotation or Tender Received
Where only one tender or quotation is received, the Project Director could determine for contracts up to a
certain price whether or not to accept the quotation or tender. For high value projects decisions need to
made jointly with project sponsors. The tendering exercise may be repeated.
Tenders should be opened as soon as possible after the latest time for receipt of tenders.
In the event of the lowest tenderer withdrawing his offer, the second and third lowest tenderers should be
informed that their tenders were not the most favourable received but their offers are being actively
considered.
Nominated Sub-Contractors and Suppliers
Where nominated sub-contractors are to be used, they must go through a similar process to the main
contractor

TENDERING (2)
Tenderers shall certify and give undertakings that:
the tender is genuine and intended to be competitive;
they have not fixed or adjusted the amount of the tender by or under or in accordance
with any agreement or arrangement with any other person*;
they have not done and will not do, at any time before the time and date specified for
the return of the tender, any of the following:
inform any person the amount or approximate amount of the proposed tender, except
where the confidential disclosure of the approximate amount of the tender was
necessary to obtain insurance premium or other quotations necessary for tender
preparation;
enter into any agreement or arrangement with any other person with the aim of
preventing tenders being made or as to the amount of another tender or the
conditions on which the tender is made;
offer to pay or give or agree to pay or give any sum of money or valuable
consideration directly or indirectly to any person for doing or having done or causing
or having caused to be done in relation to any other tender or proposed tender for the
Council any of the actions specified and described in this section;
cause or induce any person to do any of these things
TENDER DOCUMENTS
Covering letter
An invitation to tender
Instructions to bidders
Specifications and detailed descriptions of the goods and
services to be purchased including criteria for evaluation
Details of other professionals and parties involved
Draft of basic terms and conditions of contracts
Standard forms for tenders, including the quality and
price schedules, health & safety questionnaires
Details of information required from the tenderer as part
of the submission
READING LIST
http://www.nilta.org.uk/NILTA/groups/CIS/documents/ten
derin.doc
Bower, D. (ed) (2003), Management of Procurement,
London: Thomas Telford.
Cartlidge, D. (2004), Procurement of Built Assets,
Oxford: Elsevier Butterworth Heinemann.
CIC (1993), The Procurement of Professional Services:
Guidelines for the application of competitive tendering,
London: Thomas Telford
Naoum, S.G. Procurement and Project Performance: A
comparison of management and traditional contracting,
Occasional paper No:45, Berkshire: CIOB.
Sarah Peace and John Bennett, How To Use A
Traditional Approach For A Construction Project: A
Client Guide
Any Questions?
Next Lecture
Competition and Negotiation
Continuity Contractual Arrangements and
Procurement