School of Architecture, Building and Design

Bachelor of Quantity Surveying (Honours)

Semester March 2016

Professional Practice 1

Assignment 1 - Report

Student Name : Muhammad Hasif bin Alias

Student ID : 0316413

Lecturer : Ramar A/L Subramaniam

Content

1.0 Introduction

2.0 Procurement

2.1 Traditional Method

2.2 Design & Build (D&B) Method

2.3 Recommendation

3.0 Tendering

3.1 Open tender

3.2 Selective tender

3.3 Negotiated tender

3.4 Recommendation

4.0 Schedule of Work

5.0 References

1.0 Introduction

Taylor’s University is one of the best world class private university. It have operated over 45 years

in education and is a long- standing heritage with a tradition of excellence over 70,000 graduates, which

are leaders in their chosen field.

Recently, they contacted and appointed my quantity surveyor firm, Innovative Cost Consultant Sdn.

Bhd. as their consultant. They intended to build a branch campus in Kota Kinabalu, Sabah, which will be

operational in mid-2019. My company are tasked to provide advice on the procurement system and the

tendering methods that are available and suitable to be adopted in carrying out the project.

The management of the University has informed my company that the following requirements are

of priority:

Cost to completion to be within the budget fixed

Timely delivery of the facility in order to commence operation in mid- 2019

My consultant have prepared a report to Taylor’s University recommending the most suitable

procurement system and tendering method to be adopted, along with reasons of their advantages and

disadvantages.

2.0 ProcurementProcurement comes from the word “procure” which literally means “to obtain by care or effort”, “to

bring about” and “to acquire”. In this context, project procurement emphasized organized methods or

process and procedure of actualizing a construction project. Procurement process is the entire procurement

cycle starting from the identification of need, through to the completion of the contract.

2.1 Traditional Method

Traditional method is commonly used in Malaysia. The basic concept of how the procurement

system works is that the construction is separated from the design. The construction are only commenced

when the design and costs prepared by consultant are known. This form of procurement are commonly

known as “traditional contracting”. The Employer first appoints design consultants to produce full design

and documentation including drawings, work schedules and bills of quantities. Then, main contractors are

called or invited to submit tenders depending on which tender method chose, usually on a single-stage,

competitive basis. The client will award the tender to the main contractor and a contractual relationship is

formed between them. The construction process will begin. The contractor is not responsible for the design,

other than temporary works. Typically, the client retains the design consultants during the construction

phase to prepare any additional design information that may be required, to review any designs that might

be prepared by the contractor, and to inspect the works. Consultants will be appointed to administer the

contract.

2.1.1 Advantages of Traditional Method

1) Easily understood

The most basic method taught and learned by construction workers either through experience or workshop.

help to ease the procument process as all parties involved knows how to play their part.

2) Better facilitation and control

Contractor construct based on drawings designed and specified by the client and consultants without the

need to change or add adjustment by the contractor himself. A direct influence between the client and

design consultant will facilitate a high level of functionality and provide flexibility towards variations.

4) Cost certainty at award

The method enforced the design and cost to be finalized first, thus preventing further big changes which

may result in additional cost for the client.

5) Equity during tendering

The tender bid their prices based on the same drawings and specification, allowing the client to choose the

best value for money. This prevent the tenderer from giving tender consist of false quality and

specification to earn more profit.

2.1.2 Disadvantages of Traditional Method

1) Slow procument process

The method involved a long duration as the design and construct phases are consequential. The design and

documentation needs to be fully complete before contractor can tender and make preparation for

construction (pre-contract preparation).

2) Liabilities separation

Disputes may occur due to any flaws in design, in construction or in the contract itself. The traditional

method does not have a party to act as point of responsibility, because both design and construct are under

the client.

3) Weak line of communication

The communication between design and construct are kept at minimal because they dont have a

contractual relationship. Any information or report, must be directed to the client and the client will tell the

specific party and vice versa. This prolonged the construction process and additional cost.

4) No design or buildability input from contractor

Involvement of contractor in design is restricted, whereby their input may improve the constructability of

the project in terms of their cost and resources.

2.2 Design and Build (D&B) Method

A D&B contract is between the client and a single contractor under which the contractor manage

planning, design and construction in accordance to client’s requirements. The contractor hold the single

point of contractual responsibility for all aspects of design and construction. The contractor may higher his

own consultants or take over his client’s consultants (novation) during the process. It is advisable to

inquire information about who the contractor intends to use as designer. Adequate professional indemnity

insurance should always be a requirement. Thus, the appointment of consultants is highly recommended to

provide advice on the preparation of the requirements along with adequate time for this to be done

adequately. The construction may commence after the cost is established even if the design is still not

completed.

2.2.1 Advantages of D&B Method

1) Fast and efficient process

A quicker start on site, the close integration or overlap of design and build activities can result in more

effective schedule and reduce project period.

2) Cost Effective

D&B method offer certainty on the contract sum and bring cost benefits. The overlap design and

construction methods and the relative freedom of the contractor to use their purchasing power and market

knowledge effectively can provide a client with a competitive price. Allowing the project to be cost

effective - provided that the client does not create any variation in the document.

3) Single point responsibility

The client has to deal with one firm and reduces the need and liability to commit resources and time to

contracting designers and contractors separately.

4) Improved Constructability

Involvement of contractor’s input in design increased the constructability in following time and quality.

Furthermore, the contractor will perform much better as all liability solely fall into them.

5) Swift line of communication

The main contractor will be the only party that any party need to liaise with including the client, as the

responsibility solely fall onto the main contractor.

2.2.2 Disadvantages of D&B Method

1) Clients involvement

Client have minimal role to play during construction stage in this method which result in having lesser

influence and inflexibility to design. Furthermore the difficulties will be experienced by client during the

preconstruction stage, which require the client to prepare an adequate and sufficient comprehensive brief

or requirements. Any variation afterwards can be expensive.

2) Choosing tender

Difficulty in comparing bids since each design will be different, project schedule will vary between bidders,

and the prices for the project will have huge differences for each design.

3) Initial fee & Additional consultant fee

The main contractor need to be paid with a higher price than normal method as he have to handle all risk

and responsibility. Also, the client need to hire additional consultant in order to provide guide throughout

the preconstruction stage to avoid any error which may lead to additional cost.

2.2 Recommendation

Based on the prioritize given by Taylor’s management, my company would advice the proposed

project to use the Design and Build (D&B) method.

The reason is because in term of cost, D&B method is more cost effective. Assuming no variation

are made as a campus building is not a complex building, this method bring certainty to contract sum and

provide cost benefits. As stated by the Taylor’s management, with this method, the Contractor have the

relative freedom to use their purchasing power and market knowledge effectively to provide the client with

a competitive price, so that the price will stay within budget.

Besides that, in term of timing, D&B method provide swift line of communication along with fast

and efficient construction process. This method allow to construction to start as soon as the tender is

awarded even if the approved designs are not completed. Any sort of error and adjustment during

construction will be easily communicated to the Main Contractor in order to update and reason with the

Client.

Furthermore, passing full responsibility to the Main Contractor is part of this method advantages.

The Taylor’s management with less expertise in this industry do not want to be caught up in confusion if

disputes occurred among construction payers. Being a single point of responsibility, the Main Contractor is

paid to handle and take full responsibilities of whatever happening with the project.

Finally, D&B method motivates the Main Contractor in construction to increase their

constructability in providing great quality and ensuring the building is completed in time.

On the other hand, if the project uses the Traditional method, the process would most likely be slow

as line of communication and constructability are weak because of separation of liabilities and weak

construction management. In the end, it will result in confusion on site, start disputes and rendered the

project to be incomplete upon 2019.

3.0 TenderingFIDIC (1987) defines “Tender means the Contractor’s priced offer to the Employer for the

execution and completion of the Works and the remedying of any defects therein in accordance with the

provision of the Contract, as accepted by the Letter of Acceptance” . In construction, it means offering

process made by contractor to client, usually in competition which, if accepted by the employer, will form

a binding contract. There are many type of tender. The chosen three for this report purpose are Open,

Selective and Negotiated Tendering.

3.1 Open Tender

In an open tender, the Client invites potential Contractors through public advertisement (newspaper,

magazine, e-tendering websites) stating details of the proposed project such as :-

Type of work

Requirement to tender

Details of submission (time, date & place of submission)

Interested Contractors may respond to the advertisement to buy and collect the tender document

which are usually sold up to a week prior to closing of tender). Usually, a tender bond or deposit are

required to submit along with the tender document. The tenderers have to demonstrate their tender, skills,

resources, experience and strength and financial capacity to execute the project. This results in competitive

prices and very competitive tendering.

Upon tender closing and the tender documents are handed out to the Client, the Client and his

consultants shall evaluate and record the tender price of each tenderer. The complete report will be

submitted to the Client. Finally, the Client will decide which tender to award. He is not bound to accept the

lowest tender and can consider consultant’s recommendation.

3.1.1 Advantages of Open Tender

1) Familiar with the System

Open tender is a simple and traditional method which is a basic knowledge for all construction player.

2) High Competition

Open tendering secures maximum competition, allowing the Client to get value for money price from

contractors. The number of tenderers would prevent any Contractor from bidding outrageous price in order

to get maximum profit.

3) No Favoritism

Contractor would not have to worry of any form of bias or bribery to occurs as there is no restrictive list of

tenderers. This is to promote fairness and transparency because the tender are also viewable by local

authorities.

4) Allow new firms to enter market

Open tender allow any contractor to tender without taking accounts of company experience, thus allowing

new company to tender. Increased in number of company will result it better (lower price, good quality)

tender bidding as the competition get tougher.

3.1.2 Disadvantages of Open Tender

1) Risk of Selecting Newcomer

New firm might have poor workmanship (quality) or no experience on the type of works being tendered.

The tender document might be done wrongly, thus result in underpriced contractor.

2) High cost

Cost of tendering is high because, as the number of tenderer increased, the need of producing tender

document copies also increased. Paper bigger than A4 do not come cheap.

3) Longer tender period

The need to evaluate each and every one of the tenders will take a long time and cost. Furthermore, report

and recommendation must be thoroughly afterwards to present to the Client.

3.2 Selective Tender

In selective tender, there are two type which are single stage and two stage selective tendering. In

single stage, a list of contractors are proposed by consultants and only certain Contractors are invited to

tender, whereby in two stage, there is an initial selection process stage for tenderers known as

prequalification. Prequalified contractors will then be included in the final tender list. Generally, the lowest

priced tender will be awarded the project.

These Contractors are selected on their integrity, ability and characteristics before they are invited to

tender.The criteria also include:

Standard of workmanship

Size of company and grade class

Reputation to meet completion dateline

Financial capability

Capacity for current workload etc.

Past experience on similar works

Management strength

It follows that only firms of sufficient standing and experience in that particular type of work will be

invited. The other contractor firm usually do not know such tender is floated. Basically, the tender

procedure is the same as open tenders except it is not advertised in the press.

3.2.1 Advantages of Selective Tender

1) Qualified Contractor

Only acknowledged contractors will be allowed to tender, thus prevent the risk of awarding project to

newcomers. This provide better quality of workmanship and more professional management.

2) Guaranteed Quality

Through prequalification process and the proper contractors chosen, the quality of the construction can be

assured. Furthermore, they are paid more than average contractor.

3) Time and Resources

Tender evaluation is usually based on price only, thus the need to hire consultant or adding extra time to

work on evaluating tender are not needed. Furthermore, the number of tender document copies can be done

at optimum, preventing the need to end up cutting more trees.

3.2.2 Disadvantages of Selective Tender

1) Bid Rigging

Form of fraud in which a tender is promised to one party even though for the sake of appearance several

other parties also present a bid. This form of collusion is illegal in most countries. It is a form of price

fixing and market allocation. Basically, the Client is being toyed by the selected contractors into choosing

tender which he think is the lowest price, but it is actually much higher than estimated cost.

2) Longer Tendering Period

In the two stage, the need to go through prequalification and qualification stage prolonged the tender

process. The need to do thorough financial, resource and company background need more time than the

open tender.

3) Favoritism

The consultant may recommend the company that they either have contractual or past relationship with to

the Client. Or, the Client himself may already select who qualified to award the project before the

prequalification process even start. Favoritism may end up having good and bad consequences.

4) Higher cost

The selected contractors are most likely experienced/professional workers which require greater amount of

payment. Thus, the optimum price is not known as the contractors compete with their high price bid.

3.3 Negotiated Tender

In negotiated tendering procedure, the Client will approach one Contractor selected on merit to

submit a tender for the work. The method used to arrive at the pricing is usually left to the Contractor and

can be on the basis of a Bills of Quantities. Often the services of a Quantity Surveyor (consultant) is used

to advise on rates and prices during negotiations. It is based on one-to-one discussion with contractors to

negotiated the terms of contract. Usually, the reason to tender such way is because time does not allow for

normal tendering on open tenders or selective tendering.

3.3.1 Advantages of Negotiated Tender

1) Qualified & Trustworthy Contractor

Hand picked by the Client. Must have great experience and company background and most importantly,

more than capable of handling the Client's project requirements. Promotes partnering and serial contracting

in the future.

2) Higher Success Rate with Quality Assured

Project would not be delayed or left unfinished. The partnership with the client act as motivation for the

Contractor to provide the best quality and construction management.

3) Emergencies, Securities Reasons

Can be done during the time that does not allow for normal tendering on open tenders or selective

tendering. Any technicalities around the design and development of details may require the specialist

knowledge of qualified Contractor. Also, as solution to project where the final cost requires to be

established at an early stage of development and the design will be controlled by the costs.

3.3.2 Disadvantages of Negotiated Tender

1) Higher Cost

The lack of competitor and a one to one negotiation allow the Contractor to have full power towards

pricing the BQ rates. Furthermore, the one negotiated most likely a proper experienced Contractor which

result in higher payment than average contractor.

2) Failure Risk

If the tender failed, this would result in loss of valuable resources, and the need to get additional time to

complete negotiation with another Contractor.

3) Longer process period

One to one negotiations must be done thoroughly before award of tender, thus resulting more time taken.

This sole purpose is to ensure that all requirement are acknowledged and approved by the Contractor.

4) Public View

The contract is void from public knowledge, thus allowing the Contractor to simply price the rate of the

BQ. This result in question of the accountability and integrity for both parties by which could be apprehend

by law.

3.4 Recommendation

Based on the analysis done, my company would highly suggest the selective tendering process.

Since Taylor’s University is building a branch campus, it is important to ensure that the building is

complete on time with optimum cost needed while sustaining the look of a private college through quality

works.

A university campus project should not be awarded to newcomer as it result in more risk than

goodness. A more qualified and experienced contractors would suffice the requirement of time, as they can

manage the project well to ensure it is completed within time. However, it is high advisable for the

management to keep track of any bid rigging.

The cost might be higher than an open tendering process, however, the extra cost give benefits. This

tender chose proper contractors who can provide great workmanship, so that the branch campus would

look more outstanding and attract more student to enroll.

Furthermore, the tendering process cuts down time and resources needed in order to award the

project. The selective tender only emphasized on the price and may no require any thorough evaluation on

the tender document. Also, the number of tenderers are at definite amount, thus preventing additional cost

of producing tender document copies.

The reason why negotiated is not chosen, is that the branch campus completion need to be assured,

any risk of failures, the alternative contractor must be present. Secondly, building a campus definitely

requires competition during tendering process, in order to get the best value price from it.

4.0 Schedule of Works

5.0 References1. RICS (1996). The Procurement Guide. Royal Institution of Chartered Surveyors, London, UK.

2. Walker, A. (2015). Project management in construction. John Wiley & Sons.

3. Elyamany, A. (n.d.). METHODS OF CONTRACTOR SELECTION. Retrieved May 16, 2016, from

http://drahmedelyamany.weebly.com/uploads/7/0/1/0/7010103/3._contractor_selection.pdf

4. Essays, UK. (November 2013). Types Of Tenders And Tendering Process Construction Essay.

Retrieved from

https://www.ukessays.com/essays/construction/types-of-tenders-and-tendering-process-construction-essay.

php?cref=1

5. V. (2008, May). BEST PRACTICE GUIDE FOR TENDERING AND CONTRACT MANAGEMENT.

Retrieved May 16, 2016