Procurement and Tendering

Procurement

For the proposed development of the project site which includes a new building for office space, retail, and residential secure car parking, and a second pre-existing building which is being redeveloped into affordable housing the procurement route must be suitable for both components of the project. As well as the unique nature of the project the client’s experience level in redevelopment projects and preferences are important when considering the procurement route.

Items to consider:

Client (Berlin Hallam Developments)

Client’s experience level – they are an experienced mixed-use developer
Client’s preferences – sustainability within the project which could range from the building generating its own energy via photovoltaic panels, sustainable urban drainage systems, or creating an energy-efficient building envelope but could be choosing local suppliers for materials and labour for a sustainable local economy
Client’s preferences – meeting local objectives within the project linking to German policy for Berlin developments

Existing Structure

Refurbishment and repurposing of the structure – issues may arise when the refurbishment commences as unidentified issues could be apparent once work commences on site e.g., asbestos

New Structure

Complex site – high levels of ground water on the site evidenced by the overground pipe for controlling ground water levels increasing the level of risk for substructure design and construction.
Complex site – effective communications needed between design team and build team to overcome anticipated issues and would benefit from an integrated design team to improve buildability, programming of works, and value management.

From the items above it is assumed the developer considers time and cost to be of greatest importance as they are an experienced developer who will want to see a return from their investment (in either rent or sales) and maximise their profit by keeping project construction costs low.

Procurement Route Decision Matrix

It is preferable for Berlin Hallam Developments to select the design and build procurement route as it provides an integrated team which is advisable to overcome risks associated with the site location and is suitable for two-stage tendering where main contractors can outline their sustainability practices and experience in a pre-qualification questionnaire to ensure the preference for sustainability is met.

The benefits of using a design and build procurement route outweigh any shortfalls. Design and build procurement route has one point of contact for Berlin Hallam Developments to liaise with ensuring a consistent approach and an embedded design team within the main contractor structure which enables more effective communications between designers and engineers and the construction team which allows an environment for problems to be solved proactively from design phase with construction professionals consulted in this phase. The result of having an embedded design team is a project that is more likely to finish on time, within budge, and reduces the likelihood of disputes. This aligns to Berlin Hallam Developments strategy as an experienced mixed used developer where profit margins will be maximised where possible and projects kept on time to prevent any delays for recouping their investment through rental and sale of spaces.

As the design and build procurement route place more risk with the main contractor the tender bids received could be inflated. The bids received are inflated to account for the additional risks that are placed with the main contractor and to ensure the main contractor can cover meet overhead expenditure and profit margin. Although the tender bids are inflated so the main contractor has a large risk allowance, this can be managed through the contract selection and in the cost plan by adjusting the contingency allowance to ensure the client is not overpaying for the project.

To ensure the client maintains control throughout the design and build procurement route a comprehensive list of specifications should be compiled and communicated to the main contractor. The performance specification includes the materials to be used and level of workmanship. The specification can be more prescriptive for crucial elements of the design and construction (e.g., external walls composition and cladding), and less prescriptive for items requiring specialist design (e.g., lift installation) or less critical elements.

Traditional procurement is common within German construction projects but is not as effective as the design and build procurement route for completing projects on time. Traditional procurement has a separate design team and construction team therefore it is a slow process with design having to be finalised before going to tender stage. This slow progress in the initial stages impacts when work commences on site and delays the expected completion date with subsequent delays in receiving a return on the investment. Traditional procurement route also holds more risk with the client as there is a separate design team so design and build is more appropriate on the understanding of significant risks with high levels of ground water on the site.

Tendering

Two Stage Tendering

It is advised Berlin Hallam Developments use two-stage tendering as this is compatible with the complexity of the project site. As the project consists of a redevelopment of the existing building and a new building on land with high levels of ground water this is likely to limit the number of contractors who will submit tender bids. Two-stage tendering enables the limited appointment of the main contractor so works start and progress. In the second stage a fixed price is negotiated and agreed for the remainder of the contract. This tendering method is compatible with the procurement route and client’s requirements for completion on time and a level of cost certainty. Cost certainty is further supported as two-stage tendering typically has fewer variations/compensation events and claims.

Stage One

Pre-qualification questionnaire – including questions for these items:

Experience of redevelopment projects and conversions
Experience of similar project scale and cost
Sustainability questions to ensure materials waste is minimised and ensure use of local suppliers and tradespeople etc.
Financial stability of the contractor (solvency)

Invitation to Tender/Form of Tender

Include the period for tender preparation, deadline for submission, and how tenders should be submitted

Requirements/performance specifications
Scoring matrix

Outline how tender bids will be assessed in line with key project objectives and client requirements (best value rather than lowest price)

Appointment of contractor in accordance with The Construction Contract Procedures (VOB)
Initial design drawings to confirm the use and allocation of space within the existing building and new building
Main contractor to provide pricing schedule to cover overheads and profit
Main contractor to provide schedule of rates

Stage Two

Invitation to tender for chosen contractor from stage one
Agreed contract conditions to be applied to the second-stage tender

Include any relevant conditions

Agreed design fees, and overhead and profits
Schedule of rates to be applied to the second-stage tender
Detailed costs for preliminaries
Further details confirmed regarding requirements/performance specifications

Tender Vetting Process

The scoring matrix outlined in the tender documentation will be used to evaluate each tender bid. Providing the scoring matrix to the contractors and ensuring it is used in this evaluation of tender submissions means there is a high level of transparency. All tender bids will be evaluated in the equally using the scoring matrix to ensure consistency, remove any opportunity for bias, and ensure the client’s needs are the focus of vetting process. Following this vetting process the tender bids can be ranked in order of best value for money. Should the winning bidder not accept the contract the second-best options can be quickly contacted instead of recompleting the tender evaluation exercise.

Certain criteria will be reviewed in the pre-qualification questionnaire (outlined above). Overall, the following criteria is considered:

Price at stage two
Relevant experience (similar project size and/or complexity)
Compatibility to and understanding of set requirements/specifications
Previous performance on projects
Technical expertise
Resource availability (labour, material, and plant)
Project management, processes, and systems
Method statements (including compliance)
Compliance with the requirements/specifications outlined in the invitation to tender

Reporting on Tenders Returned

Following the tender process, including tender vetting, a full report will be provided to Berlin Hallam Developments. The report will outline which is the winning tender bid and rationale for selecting this (best value for money and most aligned with the client’s requirements). A second-best option will be outlined on the same basis and allows for a fast replacement should the winning tender bid not accept the contract. Alternative tender bids from contractors will be included so the client can review the justifications of why alternative tender bids were not suitable for the project.

Outcomes of tender bid submissions will be provided to tenderers and will include relevant feedback where criteria were not met/not met fully, and their weighting against the winning bid.

Kirsty Peach (QS)

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