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Newark Leisure Centre
Transcript of Newark Leisure Centre
Negotiating with a single supplier may be appropriate for highly specialist contracts, or for extending the scope of an existing contract. It can reduce the costs of tendering and allow early contractor involvement, but the competitive element is reduced, and unless the structure of the negotiation is clearly set out there is the potential for an adversarial atmosphere to develop, even before the contract has been awarded.
Single-stage and two-stage tendering
Single-stage tendering is used when all the information necessary to calculate a realistic price is available when tendering commences. An invitation to tender is issued to prospective suppliers, tenders are prepared and returned, a preferred tenderer is selected and following negotiations they may be appointed.
Two-stage tendering is used to allow early appointment of a supplier, prior to the completion of all the information required to enable them to offer a fixed price. In the first stage, a limited appointment is agreed to allow work to begin and in the second stage a fixed price is negotiated for the contract
What is a Tender
A tender is a submission made by a prospective supplier in response to an invitation to tender. It makes an offer for the supply of goods or services.
In construction, the main tender process is generally for the selection of the contractor that will construct the works. However, as procurement routes have become more complex, so tenders may be sought for a wide range of goods and services (for example on a construction management contract the works are constructed by a number of different trade contractors each contracted to the client) and contractors may take on additional functions such as design and management.
There is also an increasing tendency for suppliers to be aggregated into single contracts, for example, 'integrated supply teams' on public projects may include; the main contractor, designers, sub-contractors, suppliers, facilities mangers and so on.
Irrespective of the nature of the goods or services that are being sought, the process for securing tenders may take a number of different basic form
Open tendering allows anyone to submit a tender to supply the goods or services that are required. Generally an advert will be placed giving notice that the contract is being tendered, and offering an equal opportunity to any organisation to submit a tender.
On larger projects, there may then be a pre-qualification process that produces a short-list of suitable suppliers who will be invited to prepare tenders. This sort of pre-qualification process is not the same as selective tendering (see below).
Open tendering has been criticised for attracting tenders / expressions of interest from large numbers of suppliers, some of whom may be entirely unsuitable for the contract and as a result it can waste a great deal of time, effort and money. However, open tendering offers the greatest competition and has the advantage of allowing new or emerging suppliers to try to secure work
Serial tendering involves the preparation of tenders based on a typical or notional bill of quantities or schedule of works. The rates submitted can then be used to value works over a series of similar projects, often for a fixed period of time following which the tendering procedure may be repeated.
Serial tendering can reduce tender costs, and may encourage suppliers to submit low rates to secure an ongoing programme of work.
Selective tendering only allows suppliers to submit tenders by invitation. A pre-selected list of possible suppliers is prepared that are known by their track record to be suitable for a contract of the size, nature and complexity required.
Consultants or experienced clients may maintain ‘approved’ lists of prospective suppliers and then regularly review performance to assess whether suppliers should remain on the list.
Selective tendering can give clients greater confidence that their requirements will be satisfied and should reduce the wasted effort that can be involved in open tendering. It may be particularly appropriate for specialist or complex contracts, or contracts where there are only a few suitable firms.
However, it can exclude smaller suppliers or those trying to establish themselves in a new market.
Clients that are continuously commissioning work might reduce timescales, learning curves and other risks by using framework agreements. Such arrangements allow the client to invite tenders from suppliers of goods and services to be carried out over a period of time on a call-off basis as and when required.
Framework tender documents are likely to include a request for a schedules of rates and time charges and a breakdown of resources and overheads to be applied (including any proposed subcontractor or sub-consultant details).
One or more suppliers are then selected and appointed. When specific projects arise the client is then able to simply select a suitable framework supplier and instruct them to start work.
Where there is more than one suitable supplier on the framework, the client may introduce a secondary selection process to assess which supplier is likely to offer best value for a specific project.
The advantage of this process to the client is that they are able instigate a selection procedure for individual projects without having to undertake a time-consuming pre-qualification process. This should also reduced tender costs
Public projects or publicly-subsidised projects may be subject to OJEU procurement procedures, enacted in the UK by The Public Contracts Regulations.
The regulations set out rules requiring that contracts must be advertised in the Official Journal of the EU (OJEU). This is of particular importance because the time taken to advertise contracts can be up to 52 days. The regulations also describe allowable procedures for the selection of contractors.
Tender Constraints apply to the tender process
There are many constraints in a tender including
Contractual documentation required to support the tender process
The tender document issued to the tenderer's for tender may include the following:
Notes to Tenderer
General Conditions of Tender
Special Conditions of Tender
Conditions of Contract
Special Conditions of Contract
Form of Tender
Bills of Quantities
The term 'profitability' refers to the profit-earning capability of a business, product, project or programme. When all expenses and taxes have been paid, the revenue that is left is the profit.
To maximise profitability, a business must determine which of their activities are proving successful and which require improvement. An effective profitability strategy can only be developed if the key factors determining profitability are understood.
To maintain profitability in the construction industry, businesses must overcome the challenges posed by volatile material, labour and equipment costs and the complexity and risk of bidding on projects with long durations against tight competition.
The 2015 UK Industry Performance Report suggested that the profitability of the construction industry was around 3%, up from around 2% the previous year, but well the peak of 9.9% in 2009.
Boom and Bust
A number of profitability ratios can be used to measure the ability of a business to generate revenue relative to the expenses incurred.
Net profit margin measures the business’ ability to generate revenue. Net profit margin = (net income / net sales) x 100.
Gross profit margin measures the cost of production. Gross profit margin = (gross profit / net sales) x 100.
Operating margin is a measure of the percentage of revenue left after covering additional operating expense, i.e. those unrelated to the actual work itself, such as office rent. Operating margin = (operating profit / net sales) x 100
Strategies for increasing profitability will vary depending on the type of business, the nature of competition, the state of the market, and so on.
However, some general techniques that businesses can adopt to increase profitability include:
Effective analysis of potential new projects prior to tendering.
Reflecting on previous projects to make improvements and efficiencies.
A good understanding of risks and mitigation strategies.
Accurate cost planning.
Control of fixed cost overheads such as; rent, utilities, equipment, salaries, and so on.
Making more effective use of resources.
Maintaining a tight control on variations and change orders.
Use of accounting software and establishing robust accounting practices so that invoices and so on can be processed accurately and efficiently and cash flow maintained.
Implementing staff training so that employees can grow their skills and responsibilities rather than finding work elsewhere.
Investing in new technologies and systems and adapting them effectively to the business.
Factors effecting profitability
Gross versus Net comparison
Meaning The term gross refers to the total amount made as a result of some activity. It can refer to things such as total profit or total sales. Net (or Nett) refers to the amount left over after all deductions are made. Once the net value is attained, nothing further is subtracted. The net value is not allowed to be made lower.
Taxation Salaried people now pay income-tax on their gross income as per Income-Tax Act of 1961. Businesses and self-employed persons pay tax on their net income as per Income-Tax Act of 1961.
Gross vs Net Income Gross income is calculated by subtracting the cost of goods sold from revenue. Net income is calculated by subtracting expenses such as SG&A (selling, general and administrative expenses), interest payments and taxes from gross income.
Gross vs Net Margin Gross margin = Gross income as a percentage of revenue
Net margin = Net income as a percentage of revenue
Gross vs Net Weight In the context of weight, gross refers to the weight of the product and the packaging. In the context of weight, net refers to the weight of the actual product (without the packaging)
Health Safety and Welfare Plan
The requirement for a Health and Safety Plan for construction was established by the Construction (Design and Management) Regulations (or 'CDM Regulations') in 1994.
The regulations came into force on 31 March 1995.
The regulations were introduced to ensure that health and safety issues are properly considered during a project’s development so that the risk of harm to those who have to build, use and maintain structures is reduced.
However, the CDM Regulations were substantially revised in 2007. Amongst many changes:
The role of Planning Supervisor was replaced with a new, more hands-on CDM Co-ordinator.
The Pre-Tender Health and Safety Plan was replaced with Pre-Construction Information, provided by the client and checked by the CDM Co-ordinator.
The Health and Safety Plan was renamed the Construction Phase Plan (CPP), developed by the Principal Contractor.
The regulations require that, before the construction phase begins (that is, before the construction site is set up), the client ensures that a construction phase plan is drawn up by the contractor if there is only one contractor, or by the principal contractor if there is more than one contractor.
If there is only one contractor, the contractor must either draw up a plan themselves, or make arrangements for it to be drawn up.
The construction phase plan records arrangements for managing significant health and safety risks associated with the construction of the project and is the basis for communicating those arrangements to those involved in the construction phase.
It outlines the health and safety arrangements and site rules taking into account any industrial activities taking place on site, and, where applicable, must include specific measures concerning any work involving the particular risks listed in Schedule 3:
Work which puts workers at risk of burial under earthfalls, engulfment in swampland or falling from a height, where the risk is particularly aggravated by the nature of the work or processes used or by the environment at the place of work or site.
Work which puts workers at risk from chemical or biological substances constituting a particular danger to the safety or health of workers or involving a legal requirement for health monitoring.
Work with ionizing radiation requiring the designation of controlled or supervised areas under regulation 16 of the Ionising Radiations Regulations 1999.
Work near high voltage power lines.
Work exposing workers to the risk of drowning.
Work on wells, underground earthworks and tunnels.
Work carried out by divers having a system of air supply.
Work carried out by workers in caissons with a compressed air atmosphere.
Work involving the use of explosives.
Work involving the assembly or dismantling of heavy prefabricated components.
Construction phase plan
Managing health and safety in construction, Construction (Design and Management) Regulations 2015, Guidance on Regulations suggests the following topics should be considered when drawing up the plan:
A description of the project such as key dates and details of key members of the project team.
The management of the work including:
The health and safety aims for the project.
The site rules.
Arrangements to ensure cooperation between project team members and coordination of their work, eg regular site meetings.
Arrangements for involving workers.
Fire and emergency procedures.
The control of any of the specific site risks listed in Schedule 3 where they are relevant to the work involved.
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Pre-qualification questionnaire PQQ for construction contracts
A pre-qualification questionnaire (PQQ) sets out a series of questions for potential tenderers to answer regarding their level of experience, capacity and financial standing. The answers to these questions enable the client to produce a short list of suppliers that are likely to be most appropriate for their particular project. Short-listed suppliers may then be invited to tender for the contract.
The pre-qualification questionnaire has the effect of reducing the number of potential tenders to those that are genuinely appropriate for the project, thus saving a great deal of wasted time for potential tenderers who would not have any realistic chance of winning the contract. It also saves time for the client processing and assessing inappropriate tenders.
Pre-qualification questionnaires should be focused and simple to complete, (perhaps with limits to the number of words that can be submitted in response to each question) otherwise they may just replicate the tender process itself. They should also make it very clear what the tender process is for, so that potential tenderers can properly assess whether they have the appropriate experience, capacity and financial standing.
Where possible a scoring and weighting system should be prepared for rating submitted information and potential tenderers should be informed of the details of the system that will be used
The information requested should be straight-forward, relevant and proportionate to the size of the contract. It might request:
Company details (including legal status).
Details of insurance cover.
Financial information (such as recent accounts).
Information about technical and professional ability.
Information about capability and capacity.
Health and safety policy.
Quality assurance policy.
Environmental management policy.
Equal opportunities policy.
A BIM assessment to determine BIM capability, gaps in skills and training needs.
Systems such as Construction Line go some way to standardising and simplifying the tender process by allowing tenderers to provide pre-qualification information just once that can then be presented to multiple potential clients.
The government requires public clients to use PAS 91, a standardised wording for pre-qualification questionnaires.
NB In December 2013, Enterprise Minister Matthew Hancock set out how a range of measures intended to make it easier for small businesses to grow in Small Business: GREAT Ambition. Measures were announced to tackle late payment and to remove the barriers to public contracts by abolishing pre-qualification questionnaires (PQQs) for low-value contracts and mandating the use of core PQQs for high value contracts