Main Procurement Routes
The following is a brief summary of the main procurement routes which are generally adopted.
Fully detailed design information is prepared and tendered to a selection of contractors deemed suitable to carry out the works. All contractors price and programme the works on the same schedule of quantities and design information. The design, and associated risk, remains with the client to develop into construction information. Each procurement stage, design, tender and construction, is completed in stages with no overlap.
Design and Build (D&B)
Tenders are sought for contractors to provide the combined service of design and the construction of the works for an agreed price. Design information can be minimal or fully detailed at tender, with design and construction overlapping. The contractor price includes the acceptance of design risk to complete the works.
With management contracts, the client appoints a professional team and a management contractor who is responsible for managing the works. The design typically overlaps with construction. The management contractor would appoint the trade contractors and are contracted to one another. The management contractor assumes responsibility for time and cost for each package once developed and agreed. The design risk would remain with the client.
All packages of work are tendered through the Construction Manager who is paid a fee to coordinate all the works packages to deliver the finished project. All packages are contracted directly to the client. The construction managers liability is one of ‘reasonable skill and care’, rather than him bearing the full financial (and programme) risks of the project.
The above strategies can be modified to adopt a single or two stage tendering.
Single Stage Tendering is the more traditional route. Client requirements are developed where tenders are sought from a selection of contractors for a lump sum price.
Two stage tendering entails an initial tender based on deliverables including a construction programme, detailed preliminaries pricing and overheads and profit. The first stage may also include the competitive tendering of some work packages, together with lump sums for preconstruction services, design fees, risk margins for work that will not be tendered in the second stage and perhaps even a not to exceed price (NTE). A preferred contractor will be appointed via a pre-construction services agreement (PCSA) prior to completion of a contract at the end of Stage Two. The second stage typically relies upon an element of co-operative negotiation and concluded with the agreement of a lump sum contract sum. The basis of the price built up from the competitive tender of between, say, 70 and 80% of the value of work packages.
These contract strategies differ from each other in relation to:
- The degree of control that the client has over the design and construction process
- The information required at the time construction contract is let
- Organisational arrangement
- Client exposure to financial and programme risk