Procurement

System

Tendering Methods

GROUP 2
DAPHNE TAN 0329055
ERIC WEE 0329601
FOO VAN JEAN 0330017
FOO ZHI FUNG 0320226
PROCUREMENT SYSTEM AND TENDERING METHODS
FOR A PRIVATE HOSPITAL
DESIGN
&
BUILD
PROCUREMENT METHOD | DESIGN & BUILD

Route of procurement

The client (or architect on his behalf) prepares his requirements.

“A” sent to a selection of suitable contractors.

Contractors submit their proposals on design, time and cost and

analysis of their tender sums.

The client accepts the most satisfied proposals and bind contract.

The successful contractor proceeds to develop his design proposals

and carries out work.
DESIGN & BUILD | ADVANTAGES

Contractor

✓ The client has only to deal with one firm, giving single point responsibility,
and significantly reducing the need to commit resources and time to
contracting with designers and contractors separately.
✓ Client risk is reduced due to the single point responsibility
DESIGN & BUILD | ADVANTAGES

✓ The strategy enables an integrated constructor contribution to the design and

project planning.

✓ Price certainty is generally obtained before construction starts, provided the client’s
requirements are adequately specified and changes are not introduced.

✓ The total project time of a design and construction route may be reduced, because
of overlapping activities.
DESIGN & BUILD | DISADVANTAGES

× The client is required to commit to a concept design at an early stage; often before
the detailed designs are completed.

× Bids are difficult to compare due to different designs, prices and the project
programme will vary between design.

× Lack of design evaluation, unless separate consultants are appointed by the client for
this purpose.

× Client changes to the scope of the project can be expensive.

MANAGEMENT
CONTRACTING
MANAGEMENT CONTRACTING| ADVANTAGES

✓ Work can begin on sites as soon as works packages have been designed.

✓ Reduce time requirement earlier return on client’s investment.

✓ Contractor is able to identify with client’s needs and interests.

✓ It doesn’t involve high risk

MANAGEMENT CONTRACTING| DISADVANTAGES

× Uncertainty to the final cost of project.

× Number of variations and amount if re-measurement required.

× It has limitation of contract time periods.

CLIENT
EVALUATION
RECOMMENDATION
EVALUATION OF CLIENT NEEDS

1. What’s the scale of the project?

- Assuming it is RM100Mil

2. Does Mr. Tan have any experience of managing construction work?

- Zero experience in related field.

3. Does Mr. Tan have time for additional involvement in dealing with subcontractors?
- Client prefers less time spend on hands on

4. Is certainty of construction cost a main consideration?

- Yes, important to secure a final amount for board of directors.
EVALUATION OF CLIENT NEEDS

5. Is the building too complex for contractor to develop the initial concept design
prepared by appointed consultant(architect)?
- Building design should be simple and straightforward.

6. Does Mr. Tan need a single point of contact?

- Yes, that person has to be in full responsibility.

Design Risk
Client Contractor
RECOMMENDATION | PROCUREMENT METHOD

Design & Build Management Contracting

Developer’s Experienced client with existing teams
Client relies on single point responsibility.
experience of advisors for decision making.

Scale of projects Small to medium. Large and complex.

Time for design & Reduced time period over traditional as Shortest total project team as early
construction phases design and construction proceed in start on site. Multiple elements
parallel. Longer pre-tender phase. proceed in parallel.

Management & control

High levels of buildability as contractor Highest levels of buildability as
of quality standards
completes design. contractor involved at early stage.

Flexibility to change Contractor flexibility in developing details Client retains flexibility for design
specification and proposing solution during tender & changes at any time until work
construction. packages completed.

No firm price at commitment to

Certainty of price High level of certainty.
construct.

Degree of client
Minimal involvement Require more hands on control
involvement

Better for time and cost Better for time and quality
 CONSTRUCTION
MANAGEMENT
Mr. Tan is a car manufacturer. Would you consider construction management in your
recommendation? Give reasons to support your advice.

Definition of Construction Management

- A Construction Manager is paid for a fixed

fee/ percentage fee of the estimate prime
cost to plan, co-ordinate, organize,
supervise and manage the construction
activities.

- A fast track strategy which reduce project

time by overlapping the project design and
construction phases.

- The Construction Manager will not undertake

the physical construction but will split the
project into works packages.

- The contractual relationships are placed

directly between the Developer and the
work package contractors/subcontractor.
CONSTRUCTION MANAGEMENT | RISK ASSESSMENT

• Difficulties in dealing with package contractors as the client has

direct contractual relationship with subcontractors.

• Time consuming for a non experience developer. More

involvement required.

• Risk of unforeseen cost incurred due to the open ended nature

of various CM contractual arrangements. Financial commitment
is uncertain until the last of the works contracts has been
signed.

• CM’s remuneration is not subject to competitive bidding. As a

result, the client is unlikely to be charged the lowest possible
“market rates” for these services.

• CM is not contractually committed to the construction cost

estimate - potential for significant unanticipated cost increases.
It also depends on his desire to maintain a reputation for
meeting budgets.
RATIONALIZATION

For better time, cost, quality and risk performance

time

risk

quality cost

• CM is for better time and quality , but if there is no experience, then the risk of delaying the
project and affecting the quality will be higher instead.

If Client insist on this method, then…

• Guaranteed maximum price to prevent cost over runs.
- A form of agreement with a contractor; the contract sum will not exceed
a specified maximum amount.

• Higher contingency cost

TENDERING
METHOD
TENDERING METHOD | OPEN TENDER

• Competitive public procurement method.

• Advertisement of the proposed projects will be placed via newspapers

or online by the client.

• Contractors who is interested to tender shall response to the

advertisement to collect the tender document.

• The contractor shall then returned the completed tender by the

stipulated date and time.

• The tenders shall then be analysed by the consultants which they

normally will choose the lowest bid.

• The client shall then decide whether to award based on consultant’s

recommendation or otherwise.
TENDERING METHOD | OPEN TENDER

Advantages Disadvantages

• No favouritism • High cost of tendering

• Open to all qualified bidders • Risk of employing novice contractors

• High competition in pricing • Underpriced tenders

• Opportunity for the new firms to enter • Time consuming process

into the market
TENDERING METHOD | SELECTIVE TENDERING
Selective Tendering
Single Stage Selective Tendering
• Client invites a few known and
reputable contractors to tender for the
project.
• The invited contractors are not
obliged to accept this invitation.
• 5-10 participants.
• Upon accepting the invitation,
contractors will fill in the tender
documents which shall then evaluated
by the consultants
• Client will then select the final lists of
tenderers.
Two Stage Selective Tendering
• Client chooses a few contractors by
pre-qualification.
• The selected contractors are chosen
based on their experience and
financial capabilities from the
company profile submitted.
• Contractors are not obliged to accept
this invitation.
• 10 participants, narrow down to 3-4
participants.
TENDERING METHOD | SELECTIVE TENDERING

Example of Prequalification Questionnaire

TENDERING METHOD | SELECTIVE TENDERING

Advantages Disadvantages

• Better quality of workmanship. • Higher prices

• Simplified tender evaluation • Favouritisms may occur in the short

listing

• Shorter tendering process

TENDERING METHOD | NEGOTIATED TENDER

• Only one contractor is selected due to his reputation and ability to

perform.

• The contractor shall then proceed to directly price the BQ.

• Upon completing the pricing, contractor will then enter a negotiation

stage with the QS for the best value for money possible
TENDERING METHOD | NEGOTIATED TENDER

Advantages Disadvantages

• Quality assurance. • Highest price

• High success rate. • Long negotiation period

• Suitable for emergencies.

TENDERING METHOD | RECOMMENDATION

Two Stage Selective tendering

Client needs : Certainty of cost

Final pricing should be more realistic. Final account tends to include fewer variations and fewer claims.

In case of Developer’s requirements are not sufficiently well developed for the contractor to be able to calculate a
realistic price.
>> The contractor will tender a fee for designing the building along with a schedule of rates that can be used to establish
the construction price for the second-stage tender.

Procurement method strategy Prequalification and second tender

• Low time risk interview will assist in selecting the most
• Low cost risk suitable contractor. Hence lower the risk
• High quality/design risk in quality/design.

Vs. Open Tendering :

Vs. Single Stage Selective Vs. Negotiated Tendering :
• Lesser time wasted
Tendering :
>> Getting the best out of early
• Non collusion and better
appointment of contractor.
• Non collusion and transparency
better transparency • Most suitable contractor.
• Simpler process.

• Lesser documentation cost.

thank you.