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Tendering and Contractor Selection


Selecting a contractor is such an important part of the construction process that it is well worth
investing plenty of time and resources in the task. A good relationship between the client or
employer and the contractor and other members of the construction team can materially affect
the outcome of a building project.

A few of the more frequent methods of selecting a main contractor are considered below.

Competitive Tendering

Many people are used to hearing about the advantages of competitive tendering, where several
suitable contractors are given a package of documents and asked to come up with a price bid
within a few weeks. Usually the contractor who offers the cheapest price is chosen. This may
provide the lowest price at the outset, but it can result in a contractor having under-priced the
work, subsequently looking for ways to inflate the price or experience financial difficulties.

The competitive tendering method requires careful preparation of comprehensive drawings,


specifications and preferably bills of quantities, upon which a contractor can base his price. It
can contribute to an adversarial relationship developing between the members of the team.

It should be remembered that tendering by several firms, each with its own subcontractors, will
result in about 90% of the resources committed to the process being wasted, since there is only
one winning main contractor. This waste of resources adds to overall costs.

Negotiated Contract

In this method, the client and advisers consider which contractors are best suited to the type of
work. A selection is then interviewed to determine their keenness and possible contribution to
the team. Usually the quantity surveyor sets out to agree a framework with the chosen
contractor, for the costing of labour, materials and profit and the selection of any specialist sub-
contract packages for pricing by others. If negotiations over prices break down at this early
stage, another contractor is selected. The quantity surveyor will work with the contractor to
update the cost plan or budget and report to the team.

There are a number of advantages to this method of selection. The contractor works as part of
the team and may provide practical assistance and construction knowledge that can influence
detailed design. The contractor will look for a design to be buildable which may sound
obvious, but it is surprising how often designers do not put enough thought into the practicalities
of working on a restricted site.

The contractor may also introduce specialist subcontractors to the table, each of whom may
have a particular contribution. Such specialists as lift engineers, kitchen specialists, door and
window fabricators, ironworkers, landscape gardeners and so on can all help with ideas and
advice to help produce a good result.

Design and Build


The popularity of design and build for major projects seems to have declined somewhat since
its heyday in the 1980s. This method of procurement originated back in the 1950s when it was
promoted by contractors as an alternative to the traditional method where the professional team
and the contractor were employed individually and separately by the client. Instead, the design
and build contractor would provide a package to include all necessary professional services.

In the 1980s an important contract-writing body known as the Joint Contracts Tribunal,
produced a form of contract called the JCT 1981 With Contractors Design and this heralded
an expansion of the design and build package being offered.

There can be advantages to having all the responsibilities for detailed design and construction
in one place, not least because the contractor can programme the supply of information and
details from his designers, reducing team conflict. The pre-contract process may be shortened
with this method of procurement.

Several high-profile cases have been reported where projects employing design and build
contractors have turned out to be a disappointment. Care and preparation are needed to make
sure this does not happen. It is likely to be necessary to have a design produced in outline or in
some detail and then apply various performance criteria and a specification, so the contractor
has a strict definition of what he is meant to bid for and how he must subsequently construct the
building.

There are many specialist firms offering design and build packages for small works such as loft
conversions or swimming pools and they can often be very successful and cost-effective in their
specialist fields. When it comes to larger projects, great care is needed in defining the design
and build package that is required.

Considerable skill is needed in setting up a design and build contract. Encompass Projects
can provide professional advice and assistance to contractors invited to tender on this basis, or
to clients wanting to consider the design and build procurement route.

Management Contracting

As part of the design team, a management contractor usually charges a fee for managing
construction work, whilst not actually carrying out the work itself. The method has been also
called a fee system of contracting. The management contractor will provide the preliminary
services such as cranage, hoisting and lifting facilities, scaffolding, welfare accommodation,
lighting, security, power and management staff.

The management contractors responsibilities are often to ensure that:

the design, together with the bill of quantities, specification and other documentation for
the project, is completed in order to ensure a successful programme
subcontractors are appointed to meet the programme and that their work is in
accordance with the specification
when the time comes all remedial work is expeditiously carried out and that the
completed project is handed over to the employer.

The management contractor is not responsible for the final cost, but it is incumbent upon him to
work with the design team and to use his best endeavours to try and ensure that the project is
completed on time and within the estimated cost.

Bovis were at the forefront, if not the inventors, of this system of contracting. The recently
completed Scottish Parliament building, designed by Enric Miralles, was built using Bovis Lend-
Lease as construction managers. Their fee was capped, but the cost over-runs on the project
were enormous. The management contracting method was chosen due to the nature of the fast-
track project where there was a high degree of design uncertainty.

Design uncertainty = cost uncertainty.

The cost of the Scottish Parliament Building rose from an estimated 195m in March 2000 to
over 430m in August 2000. This is more of a reflection on the uncertainty of the design and
changes made along the route, than it is on the management contracting system, which in some
circumstances may have distinct advantages over other methods.

Construction Management

An alternative to Management Contracting, in Construction Management the Client engages all


the specialist contractors directly. In this form, it is usual to engage an additional skilled
professional person as a Construction Manager to contribute to the management of the
process.

The Client is normally used to construction work and may well be expert and knowledgeable.

There is a JCT standard form of contract available for this method of procurement.

Encompass Projects can operate as Construction Managers.

Generally

Careful selection of a contractor and the production of a fair contract, backed up with adequate
information is just part of ensuring a successful project and avoiding disputes over building
work. The contractor should be regarded as a team member, not as an adversary. Encompass
Projects can help to ensure that the right contractor is selected for a project on the most
appropriate and effective terms.

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