SUPPORTING NOTES

Rewarding a Project - Framework

Start with a brief explanation of the tendering process, and explaining different types of tendering methods by using real-case scenarios. Understanding how to prepare a set of contract documents by showing an example of a set of drawings, specifications, and Bills of Quantities. The presentation is mainly categorized into 5 parts:

1. Tendering Process/ Flow

2. Types of Tender and Scenario Demonstration

3. Tender Documents

4. Forms of Contract

5. Tips for Awarding Tenders – By Mathew Pryor

6. Conclusion

PART 1: Tendering Process

The tendering process for each project will be different, depending on the needs of your clients and the nature of the project. However, it could be generalized into a simple single flow.

1. Selecting the method of tendering (types)

2. Invite tenderers/ advertise the tender

3. Tender return

• Tender addendum

• Pre-tender meeting

• Tender queries

• Tender extension

4. Tender evaluation

• Pricing error

• Tender pricing

• Tender qualification

• Technical submission

• Tender negotiations

• Tender report

5. Acceptance/ notice to unsuccessful tenderers

6. (Depends) Second stage tendering

PART 2: Types of Tender and Scenario Demonstration

There are three major types of tender,

• Negotiated Tendering

• Open Tendering

• Selective Tendering

Additional, there is one type of tender can fit in the above types of tender,

• Serial Tendering

2a. Negotiated Tendering

What is Negotiated Tendering?

Negotiated tendering occurs when the client approaches a single supplier based on their track-record or a previous relationship and the terms of the contract are then negotiated.

The contract price is negotiated between the Client and contractor and is used when: -

- the contractor has an established working relationship with a client;

- time for construction is limited;

- there are specialised building techniques involved and the contractor's expertise could be valuable;

- an existing project involves additional work.

What are the Advantages of Negotiated Tendering?

• Useful when time is limited and an early appointment of contractor is desired.

• Potential cost or time savings

• Useful when contractors expertise is known and required for design development.

• Useful when client/design team and contractor have an established relationship.

What are the Disadvantages of Negotiated Tendering?

• High price The submit prices will be higher since there being less competition and also due to the higher caliber of the tenderers

• Cost uncertainty Design uncertainty at the appointment stage can lead to cost uncertainty.

2b. Open Tendering

What is Open Tendering?

Open tendering is a bidding process that is open to all qualified bidders and where the sealed bids are opened in public for scrutiny and are chosen on the basis of price and quality.

In HongKong, the open tender invitation publishes in the Government of Hong Kong Gazette every Friday, on the Internet or in the local press and selected overseas journals.

What are the Advantages of Open Tendering?

• It can obtain competitive prices.

• It provides diversified choices for firms.

• It can eliminate potential malpractice ( Each firm knowing other tenders )

• No price-fixing rings.

What are the Disadvantages of Open Tendering?

• Lowest tenderer might be unsuitable, financially unsound or make errors.

• The total cost of tendering is increased ( as all tenderers have to recoup costs eventually in successful tenders )

2c. Selective Tendering

What is Selective Tendering?

Selective tendering only allows suppliers to submit tenders by invitation. Several suppliers are invited to tender. Employer advertises his project and invites contractors to apply to be placed on a selected list of contractors who will be invited to bid for the project. Contractors applying are given a list of information they should supply about themselves to be ‘pre-qualify’

What are the Advantages of Selective Tendering?

• Shorter tendering process

• Low cost of documentation

• Better quality of workmanship

• Simplified tender evaluation

What are the Disadvantages of Selective Tendering?

• Can cause higher price since there being less competition and also due to the higher caliber of the tenderers

• Employer might incurs resources

2d. Serial Tendering

What is Serial Tendering?

Serial tendering is a combination of competitive and negotiated tendering often used where there will be a number of similar repeat contracts. The contractor tenders for a project knowing that, if their performance is satisfactory, they will be awarded subsequent contracts.

What are the Advantages of Serial Tendering?

• Less time on assessing tenders

• Have a better quality with a lower cost

• Known performance of the contractors

What are the Disadvantages of Serial Tendering?

• Anti-competitive

• Less formality

• Less responsibility

PART 3: Tender Documents

Preparation of tendering/bidding documentation is undertaken after design development is complete.

Tendering documentation can be divided into 3 aspects describing their function:

3a- Drawings – Where?

Illustrate the layout and assembly of the components of the design

Why we need drawings?

• All construction contracts require some drawings which may form part of the contract documents.

• Drawings illustrate the layout of the project and the construction and assembly of the specified materials.

• They provide an accurate presentation of the work required in a consistent and clear format to communicate effectively with all members of the design and construction team.

3b - Specification – What?

Is a description of the quality in terms of materials, construction and workmanship

What is a Specification?

A specification provides information to the contractor about key requirements for construction and detailing. Depending on the procurement route adopted the specification can describe the final product in terms of its quality and workmanship or its future performance.

Who Prepares Specifications?

Specifications are prepared by the designer.

If sub-consultants are employed for the design of parts of the works, they should prepare the specification for the part for which they are responsible.

3c - Schedules / Bills Of Quantity – How Much?

Schedules - Tabulate Information

Schedules are used to augment the drawings and assist in the preparation of bills of quantities.

Bills of Quantity / Schedules of Rates – Quantify the Works

Schedule of rates work are used where the actual work required is not known at the outset and is re-measured and valued only when it has been completed. A schedule of rates is usually used for serial tendering / measured term contracts.

Schedules of Works – List of the Works

A Schedule of Works document lists all of the main sections of work to be undertaken by the contractor. It is read in conjunction with the specification and the drawings and is required to be priced by the tenderer on a lump sum basis.

PART 4: Forms of Contract

The contract defines the relationship and cooperation between the client and the contractor or the consultant.

The Definition of Contract

The contract, in brief, is an agreement between individuals and projected by the law of contract so it also presents a legal relationship. This law-protect document is the base of any kind of construction project in the field.

Three Essential Criteria for Contract

• An intention to create a legal relationship between you and the party you want to work with;

• Consideration for the conditions beforehand, including potential risks and time;

• Statement of the offer and acceptance clearly on paper so there should be no dispute on the statement in principle.

The Basis of the Contract

The contract is built upon an agreement between the client and the contractor, requiring to finish the work in accordance with everything written on paper.

The contract is a document that bound the scope of works which the contractor needs to follow, the actual document given to the contractor is the contract documents, regard as details of the project scope.

When the work has been undertaken and completed in accordance with the contract, the client has the responsibility to pay the work.

The terms and conditions of the contract are rules set up and agreed by both client and parties, outlined the rights and obligations in processes covered by the contract.

Forms of Contract in Hong Kong

Hong Kong Government Standard Forms of Contract

• General Conditions of Contract for Civil Engineering Works, 1990 Edition ( Remeasurement)

• General Conditions of Contract for Building Works,1999 Edition ( Lump Sum)

• Sub-Contract for Building Works, 2000 Edition

• General Conditions of Contract for Design and Build Contract 1999 Edition ( Design-Build)

MTR Standard Forms of Contract

• Conditions of Contract for Civil Engineering and Building Works Construction

HKIA/ HKIS Standard Forms of Contract

• Standard Form of Building Contract with Quantities/ without Quantities ( Lump Sum)

• Standard Form of Building Contracts Conditions of Nominated Sub-Contract

Other Standard Forms of Contract

• JCT Standard Form Of Building Contract ( Includes options for traditional, design and build, management, construction management, measured term, and framework)

• New Engineering Construction Contract ( Includes options for Priced, Target Cost, Cost reimbursement, Management)

• ICE and now Infrastructure Conditions of contract ( Remeasurement)

Reasons for Standardizing Forms of Contract

• The ability to allocate risk equitably between parties;

• The exposure to uncertain risk is managed and minimized for efficiency and cost-effectiveness;

• Important especially the construction is complex and with high value.

Advantages of Standard Forms of Contract

The standard form clearly outlined the requirements, saving cost and time for negotiations.

Take it, or else leave it.

The standardization allows people to work on the field to be familiar with the rules. It saved time for explaining and understanding the conditions.

For both the client and the contractor

The standard forms of contract have been designed for particular kinds of projects.

Part of the profession is to pick the right standard

PART 5: Tips for Awarding Tenders

Interview with Mathew Pryor, the Head of the Division of Landscape Architecture, The University of Hong Kong.

Mathew Pryor is Head of the Division of Landscape Architecture and an Associate Professor (Teaching) within HKU’s Faculty of Architecture . He teaches Design Studio as well as technical courses in professional practice, planting and ecology and sustainable development practices. Mathew is a Fellow and Past President of the Hong Kong Institute of Landscape Architects, and Chair of their Publications Committee. He is also a Registered Landscape Architect in Hong Kong, and a Chartered Member of the Landscape Institute in the UK. He is also a Certified Arborist.

Strategies to respond to specific client's needs or their concepts

Depends who you are but if you're a tenderer you will know from the tender document what the focus of the client is. If the tender document is set out in a way where you are just being asked for your price.

You know that the game is the lowest price and that's because the nature of the works is well known. Everybody knows what they have to achieve, it's not a lot of variation in quality.

Work with government

The government system the two enveloped system of tendering consultants. The first envelope that they open is the technical bid which sets out the quality of the tenderer, if you meet that score they will take that. You know the minimum score. They will then open the second envelope which has the money in it.

It's quite a complicated system, these two envelope systems, but it allows the government to have some measure of quality control and some measure of price control.

Work with the property developers

Property developers tend not to worry too much about the price but their focus is really on quality and that manifests itself in the way that they invite people to tender. They won't invite you to tender unless they think you're good enough.

The property developer will typically have: these are the five consultants that I'm happy to work with, so they use a pre-qualification mechanism for making sure that they're going to get the quality that they want. If it's a special flagship project for them, they would typically just choose a designer and then they will negotiate the price. The selected designer knows that it's not a competition anymore.

If they're a beginner they've been selected and the property developers have very good negotiating teams, the negotiation is down to price. And, of course, most property developers in Hong Kong have lots and lots of experience so they know what is a reasonable price but they're not looking for the cheapest they're looking for the best quality.

Handling mistakes There are some very sad examples of consultancy firms going bankrupt because they screwed up one contract and then they couldn't be invited to tender for any other contract. You know you need to have a very high level of professional competence. The message there is don't screw up.

The government never says that's the end. You can always re-establish your reputation but it can take decades. The government has a very long memory. If you screw up, the government doesn't want you working on their projects again, then you have to rely on private work or you have to be conceived yourself as another firm.

Close down one firm and everybody just moves into a different office, gives themselves a new name but then you don't have the reputation in the back catalog of projects to show.

Conclusion This diagram helps to summarize the key point of the tendering process, tender documents and contract forms.