TENDERING #4
Session FOUR Face 2 Face (4 hours) Stage 2 Project appreciation & enquiries Introduction to subcontracting Why does a MC need subbies? How is the work split between the various parties? Self-directed (6 hours) Read before the session: Weebly ebook CIOB overview of subcontracting
ACTIVITY (20 MIN) Working with your peers Working with those around you, please evaluate the three samples provided in order to determine a BID / NO BID decision. Please keep a note of your queries / assumptions made for further discussion. Feedback will be requested.
Detailed Examination of Docs Adequacy of information in tender documents; Onerous or unusual conditions noted; Discrepancies; Specifications; Do they match the drawings? Could be main contract document (if no Schedule of Quantities) Constructional problems.
What kind of documents are we talking about? The Contract rules NZS 3910/5/6:2013 Schedule of Prices / Quantities Specifications Drawings Appendices i.e. consents; geotechnical reports
Project Appreciation View Drawings Visit Site & Locality: Visit site & prepare site report; Take photos (demolition, alterations, additions); Photograph surroundings i.e. buildings, fences, paths etc. Determine construction methods Prepare Preliminary Programme
CAN WE (THE MC) DO ALL THE WORK ON OUR OWN?
Aka What Packaging work with the Options MC do? Do it all within the contracting organisation!! Subcontract it all Construction Management approach Combination of own work & subcontract work packages Generally 30% own work 70% subcontracted Project & Contractor specific Most common approach
Objective of Packaging Strategies Obtaining competitive advantage through work package optimisation. Work packaging is the grouping of similar types of work processes to be carried out by one entity. Work Breakdown Structure (WBS) Trade Based packaging
Work packages Each work package should consist of work that would be done by a specific class of subcontractor.
Remember!! Increasing the number of subcontractors on the job reduces financial risk to MC but increases communication complexity and cash flow problems for the project team Decision to subcontract versus retain works is a risk/return optimization problem Retained work has potential for greater reward, but carries more risk Retained is less risky when you have long-term trades people and well-understood market
Enquiries to Subcontractors Which trade packages will require subcontract quotations send docs to subcontractors; Include all relevant info to enable technically accurate quotations; Terms & conditions detailed; Identify unique materials; Essential to indicate approximate time when goods / services required on site.
WHAT DO WE MEAN BY SUB CONTACTING?
A subcontractor is a construction specialist that generally contracts with the MC (using a contract called a subcontract) to perform some aspect of the MC s work (a particular portion / work package of the project)
WHAT LEAD TO THE DEVELOPMENT OF SUB CONTRACTING?
Technological Change Transaction costs Nature of the industry Just a few issues Employee Training Safety and Health Work Restructuring
General pressures Different types of projects - different skills required. Increasing technical complexity / diverse skill base requires increasing numbers of specialist inputs Perceived threat posed by trade unions.
Nature of Construction Industry Sites are geographically dispersed, some workers better placed for some sites than others. Traveling distances more inclined to employ from local workers.
Non-wage cost (transaction) of employment i.e. training, pension rights, sick pay, redundancy payments; If price of using SC s exceeds cost of internal utilisation of resources, firm will in-source. If, however, cost of in-house production exceeds that of contracting out work, firm will opt for outsourcing.
Advantages of using subbies Efficient and economical in the use of available resources. The prime contractor can obtain workers with the requisite skills when they are needed, without the necessity of maintaining an unwieldy and inefficient full-time labor force.
Advantages of using subbies Qualified subcontractors are usually able to perform their work more quickly and at lesser cost than can the main contractor. Many construction specialties have specific licensing, bonding, and insurance requirements that would be costly for the main contractor to secure for irregular use.
ACTIVITY (10 MIN) Working with your peers So, what do you think the disadvantages of subcontracting are?
Issues related to dealing with SC s Job spiking. Occurs when a SC signs up for more work than he can handle & then starts a little bit of each project to secure the work. The MC is left with a SC who simply does not have motivation or capabilities to pursue work in a timely manner. SC do not understand / care about the domino effect their non-performance causes.
Extensive subcontracting can seriously complicate the overall scheduling of job operations, lead to a serious division of project authority, fragmentize responsibility, make the coordination of construction activities difficult, weaken communication between management and the field, foster disputes, and be generally detrimental to job efficiency.
The MC remains responsible under its contract with the owner for any faulty performance by the subcontractor. The MC assumes complete responsibility to the owner for the direction and accomplishment of the total work including the responsibility of coordination and supervision of the subcontractors.
ACTIVITY (10 MIN) Working with your peers Identify and explain the difference between the various types of subcontractors.
Types of Sub-contractors Domestic Selected and appointed by the MC. MC responsibility to ensure delivery, quality, progress etc. Supply & fix all labour, plant & material.
Types of Sub-contractors Nominated Selected by Client Client negotiates a price with nominated subbie and then instructs MC to appoint them for that work. MC may make reasonable objection MC will include price as a prime cost sum, to which they can add overheads, profit and attendance. Declining practice
Types of Sub-contractors Named Subbie for a particular package selected from a list of acceptable subbies provided by the client. Allowed for in the tender docs by means of provisional sums for which the MC makes allowance for profit, attendance and programme within it s tender offer.
Named cont. Once appointed, the MC seeks tenders for the package from the named subbies, places a subcontract with successful tenderer, and provisional sum is replaced with tendered figure. MC responsible for performance Delays, performance etc MC also completes payment certificates.
Types of Sub-contractors Labour-only / Labour & plant only Materials provided by MC. Eg brickwork & concreting gangs; reinforcement steel SC. Selected & engaged as per Domestic SC. MC responsible for delivery, quality, progress etc
Subcontractor selection process
Three Stage Process Preparation phase Determine a bid list Public call or select Implementation phase Notification Analysis / tender phase Receive bids Evaluate the bids Choose the best SC Inform all bidders of results.
Preparation Phase - Determine a Bid List Most MC s maintain comprehensive records concerning suppliers & sub-contractors. History of past performance; Aka track record Perceptions of quality Financial stability Extent of geographical operation; Size & type of contract on which previously used; Information concerning contracts.
Implementation Phase Notification Provide info required by tenderers: Contract documents Tender information Tender format & submission date & time. Contact for further information Updates Clarifications
Method of Construction Alternative methods of construction, sequencing of work and site layouts need to be evaluated. Requirements for labour, plant & site facilities determined. Technical risks: Define construction methods before costing the work. If cost of failure high in relation to value of project insure against possible loss, or increase control.
Programme & Temp works design Done by specialists. You will need to work closely with them in order to develop your P&G costs.
Site Report Description of site Description of access to site Topographical details of the site Description of restrictions to / on site
Description of ground conditions Position of existing services Any problems related to security of the site Facilities for disposal / storage of soil Location of site amenities.
Description of any demolition work Description of temporary works Assessment of availability of labour
Identify Local Statutory Authorities Building surveyors City engineers Emergency services
Session FIVE Chris Prigg Face 2 Face (4 hours) Stage 3 Resource & Preparation of the Estimate Pricing Self-directed (6 hours)
Q&A YOUR ASSESSMENTS