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Winning tenders / securing tenderers in a
competitive construction market
November 2016, Nottingham
Winning tenders / securing
tenderers in a competitive
construction market
A joint seminar by
Browne Jacobson and Turner & ...
Overview
• In this talk we will consider:
• Regional market conditions in the East Midlands
• What do employer’s want from...
Tendering – ‘What do you want?’
Outputs
EmployerEmployer ContractorContractor
• Competition / Multiple Tender Returns
• Co...
Employer and Contractor objectives –
bridging the gaps
• Flexibility (such as voluntary termination and omission of works)...
Regional market conditions
East Midlands
Tender Price Inf lat ion Index: C omparison of C ompet it or Forecast
0%
2%
4%
6%...
Regional basket of goods
East Midlands
4.6%
4.9%
4.7%
4.1%
4.3%
4.5%
8.6%
10.8%
2.5%
3.6%
5.2%
6.5%
2.8%
0% 5% 10% 15%
Plu...
Regional market conditions
East MidlandsOrder Book Completion
93.1%
40.1%
22.5%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
2016 2...
Regional market conditions
East Midlands
 75% of surveyed contractors
expect the market to remain
at current levels
 Equ...
How do you get what you want?
EmployerEmployer ContractorContractor
• Select a Consultant Team
• Select an Appropriate Con...
Risk profile – standard of design
• Professional indemnity insurance linked to ‘reasonable skill and care’. Fitness for pu...
Risk profile – ground and site risk
• Employers may desire contractors to accept responsibility for unforeseeable
ground a...
Risk profile - general
• Indemnities:
• Are they required?
• If so, in relation to what loss or damage?
• Security:
• What...
Incentivisation
• Choose the right contractual payment mechanism, i.e. lump sum fixed price,
cost reimbursable, pain/gain
...
How do you get what you want?
EmployerEmployer ContractorContractor
• PQQ is to Establish Capability
• Direct the Question...
Process and policies
• Employers need to make clear which policies and process it requires contractors
to comply with, i.e...
How do you get what you want?
EmployerEmployer ContractorContractor
• Place Risk where Appropriately Managed
• Incentivisa...
Conclusion
• Some Uncertainty in the Market Place. Employers are more careful with money &
don’t want to take undue risk, ...
Thank you
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Winning tenders / securing tenderers in a competitive construction market - November 2016, Nottingham

This seminar looked at:
(1) how employers can make their tenders attractive in an increasingly competitive market, and
(2) from a supply chain's perspective, what employers are looking for from tenderers.

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Winning tenders / securing tenderers in a competitive construction market - November 2016, Nottingham

  1. 1. Winning tenders / securing tenderers in a competitive construction market November 2016, Nottingham
  2. 2. Winning tenders / securing tenderers in a competitive construction market A joint seminar by Browne Jacobson and Turner & Townsend
  3. 3. Overview • In this talk we will consider: • Regional market conditions in the East Midlands • What do employer’s want from their tendering contractors? • How can employer’s make their tenders attractive in an increasingly competitive market? • Key points to take away from this talk are: • Preparation • Sensible attitude to risk • Having clear expectations
  4. 4. Tendering – ‘What do you want?’ Outputs EmployerEmployer ContractorContractor • Competition / Multiple Tender Returns • Completely Aligned with Requirements • Risk Transfer • Flexibility • On Budget / On Programme • Delivered Safely • Zero Defects • Attention of their Supply Chain • Realistic, Unambiguous Requirements • Risk Transfer • Repeat Business Opportunities • Interesting Projects • Clauses / Contract Terms that are relevant to the project • Certainty / Profitability To ensure we do the right thing, we need to understand the wider market place
  5. 5. Employer and Contractor objectives – bridging the gaps • Flexibility (such as voluntary termination and omission of works) versus certainty (guaranteed work and income) • Different attitudes to risk – risk should be placed with the party best placed to manage it • Appropriate payment mechanism and periods for payment
  6. 6. Regional market conditions East Midlands Tender Price Inf lat ion Index: C omparison of C ompet it or Forecast 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Average exc T&T T&T G&T Gleeds AnnualPercentageChange(%) 2016 2017 2018 2019 2020 Assorted Consultants Tender Price Inflation Forecast Overview of Market Conditions 3Q2016  Fairly busy with effects of ‘Brexit’ not immediately felt  Uncertainty looking ahead  Good visibility of future projects  Cautious approach is unfolding to investment decisions and to tenders  Tender price inflation 2.2% over coming 12 months  Material price fluctuations  Single largest supply chain challenge is availability of labour, placing upward pressure on cost
  7. 7. Regional basket of goods East Midlands 4.6% 4.9% 4.7% 4.1% 4.3% 4.5% 8.6% 10.8% 2.5% 3.6% 5.2% 6.5% 2.8% 0% 5% 10% 15% Plumber/Electrician Carpenter/Bricklayer Carpet layer, Tiler,… General Labourer Site Foreman Concrete Reinforcement Bar Structural Steel Aluminium Curtain… Aluminium Composite… Copper Cable Sheet Metal 50t Crane Percentage increase (in nominal terms) of construction costs in the last 12 months 4.3% 4.8% 4.5% 4.3% 4.5% 4.9% 6.8% 8.7% 3.9% 4.6% 4.9% 5.0% 3.5% 0% 5% 10% Plumber/Electrician Carpenter/Bricklayer Carpet layer, Tiler, Plasterer General Labourer Site Foreman Concrete Reinforcement Bar Structural Steel Aluminium Curtain Walling Aluminium Composite Panel Copper Cable Sheet Metal 50t Crane Expected percentage increase (in nominal terms) of construction costs in the next 12 months
  8. 8. Regional market conditions East MidlandsOrder Book Completion 93.1% 40.1% 22.5% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 2016 2017 2018 Percentage(%) Tendering Conditions Lukewarm, 50.00% Warm, 50.00% Cold Lukewarm Warm Contractor Portfolio Single Stage, 36.9% Two Stage, 14.4% Negotiated, 21.3% Framework, 24.4% Other, 3.1%
  9. 9. Regional market conditions East Midlands  75% of surveyed contractors expect the market to remain at current levels  Equal split of remainder suggested cooler or warmer
  10. 10. How do you get what you want? EmployerEmployer ContractorContractor • Select a Consultant Team • Select an Appropriate Contract Form • Develop / Understand Your Brief • Establish a Clear Attitude to Risk • Warm up the Market Place • Establish Timescales • Identify the Opportunity • Track the Opportunity • Establish a Clear Attitude to Risk • Plan Resource to Respond Preparation Stage
  11. 11. Risk profile – standard of design • Professional indemnity insurance linked to ‘reasonable skill and care’. Fitness for purpose is generally uninsurable, alternative may be to produce a more detailed specification • Contractors (and their insurers) will likely refuse to accept any deviation from the standard of reasonable skill and care • The standard of design must be clearly drafted “The contractor warrants to the employer that: (a) the design has been and/or will be carried out with reasonable skill and care; (b) the design will, when completed, comply with any performance specification or performance related requirements included or referred to in or forming part of the contract documents; (c) the works will, when complete, comply with the Statutory Requirements and the Consents; and (d) the various elements of the design of the Works shall be properly coordinated and integrated.” • Note that only bullet point (a) is tied back to the standard of reasonable skill and care, the rest are absolute obligations. • Important distinction between standard of ‘architect’ and ‘design and build contractor’
  12. 12. Risk profile – ground and site risk • Employers may desire contractors to accept responsibility for unforeseeable ground and site risk. This should be applied in the context of specific project risks, for example: • Does the project involve a clear demolished site, or does it involve work to an existing structure? • What information can the employer provide the contractor in relation to the site and is the contractor allowed to rely on that information? • What is the employer willing to pay for the contractor to accept responsibility for ‘unforeseeable’ site and ground risks?
  13. 13. Risk profile - general • Indemnities: • Are they required? • If so, in relation to what loss or damage? • Security: • What does the employer require? • What is the contractor able to offer? • What are the costs • Specified perils • Responsibility for the Employer’s Requirements: • Design and build – can the employer procure novations of the design consultants? • Traditional – if contractor is responsible for Employer’s Requirements, from a practical perspective the contract drawings which do not form part of the contractor’s designed portion should not be included in the Employer’s Requirements. • Third party agreements
  14. 14. Incentivisation • Choose the right contractual payment mechanism, i.e. lump sum fixed price, cost reimbursable, pain/gain • Consider the length of the contract and who should bear the risk for changes in fluctuation costs • Cash flow – agreeing appropriate payment durations • Employers must illustrate confidence in themselves and their projects to tendering contractors • KPIs or continuous improvement
  15. 15. How do you get what you want? EmployerEmployer ContractorContractor • PQQ is to Establish Capability • Direct the Questions Appropriately • Easy for the Contractor to Complete • Consider Processes & Policies • Issue on Time • PQQ is a Process of Exclusion • Answer the Questions • Demonstrate Experience • Consider the Relevance of Your Response Pre Qualification Stage
  16. 16. Process and policies • Employers need to make clear which policies and process it requires contractors to comply with, i.e. anti-bribery, freedom of information, data protection, modern slavery act • Contractor’s must ensure they have appropriate procedures in place – don’t fall at the first hurdle! • Browne Jacobson can provide a Modern Slavery Act toolkit
  17. 17. How do you get what you want? EmployerEmployer ContractorContractor • Place Risk where Appropriately Managed • Incentivisation • Timescales – Know the Market & Inputs • Be Open • Answer the Questions • Demonstrate Experience • Consider the Relevance of Your Response • Avoid Standard Corporate Literature • Don’t be Afraid to Ask Questions • Share Innovation / Opportunity • Be Open Tender Stage
  18. 18. Conclusion • Some Uncertainty in the Market Place. Employers are more careful with money & don’t want to take undue risk, but don’t have the resource to manage it. This is fuelling an increased behaviour of risk transfer. • Contractor’s and supply chain don’t want to take on high risk projects. • Employers should: • Prepare tender documents • Have a sensible attitude to risk • Have clear expectations on what they expect for their project • Contractors should: • Prepare for tender responses and thoroughly review contract documents • Have a sensible attitude to risk • Have clear expectations on their key drivers for the project
  19. 19. Thank you

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