Assignment on Estimating Tendering and Procurement

Running Head: ESTIMATING, TENDERING AND PROCUREMENT
ESTIMATING, TENDERING AND PROCUREMENT
Name of the Student
Name of the University
Author Note

1ESTIMATING, TENDERING AND PROCUREMENT
Executive Summary
The main purpose of this report is to develop a strategic approach for the procurement
process. The study has been supported by understand the tendering and estimation process of
building construction. It is recommended that, the client should use cost reimbursement
strategy for completing the project. This strategy is best for purchase of materials because,
generally the cost of materials is unknown during the contract. Therefore, this method will be
best for the unknown cost that can incurred during the project.

2ESTIMATING, TENDERING AND PROCUREMENT
Table of Contents
Introduction................................................................................................................................3
Discussions.................................................................................................................................3
A strategic approach to procurement.....................................................................................3
Alternative Routes of Procurement........................................................................................6
Advance Procurement Practices...........................................................................................11
Factors that can influence the development of procurement strategy..................................12
Benefits of adopting alternative procurement strategy........................................................15
Examples..............................................................................................................................16
Conclusion................................................................................................................................17
References................................................................................................................................18

3ESTIMATING, TENDERING AND PROCUREMENT
Introduction
The paper will focus on the role of client in the procurement process. The suitable
practice for the construction work has been discussed in the report. The overall evaluation of
various factors that could influence the procurement process has been discussed in the paper.
The last part of the paper has explained about the benefits of alternative methods of
procurement.
Discussions
A strategic approach to procurement
The new project planning of constructing a new building will focus on minimising the
errors in the project. The procurement process will be done on the basis of following strategy:
 University spend- The University is having a total budget of £10 million to spend in
the new building. Cost will be associated for purchasing or acquiring the physical
equipments. This includes, lightning facilities, dais floors, 200 number of fixed seats,
computerised facilities and other operators (Obrien 2019). Cost of operating the
building services will be related to utility cost, direct labor operator costs and other
maintenance cost of the building. Personal cost expenses related to labor training for
maintenance purpose.
 University needs- University is planning to construct a new building in the University
campus. The following will be the category positioning matrix for the building
constructions. The positioning of the commodities will be done in this matrix:

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Leverage Items
 Raw materials from suppliers
 Paints
 Installations
 Inner Floor
 LCD boards
Strategic Items
 Nails
 Stairs
 Timber
 Doors
 Environmental work
Non-critical Items
 Sanitary work
 Demolition and site clearance.
 Maintenance
 Floor coverings
 Rental equipment
Bottleneck Items
 Wooden furniture
 Tiles and fittings
 Special formwork
The procurement of strategic items will be a high-value materials. The time horizon of
this material will be long-term. For the procurement of these materials, the purchaser-supplier
relationship must be stronger. These are certain requirements that will be needed in building
constructions.
Supply Risk
Profit
Impact

5ESTIMATING, TENDERING AND PROCUREMENT
1. Market Conditions- There are certain environmental factors that may affect the
building constructions. Some of these factors are:
(a) Political factors- Political factors like documentation, permissions from the Vice
Chancellor of the University, changes in legislation during the work phase or after
completion of the work may affect the building.
(b) Economic factors- The labors may charge high demand and cost of supplies may
increase.
(c) Social factors- The theme of building may affect the cultural provisions of some
students.
2. Objectives- To estimate the cost involved in the construction work and accurately
analyse the cost information (Ferrario et al. 2017). The client want to finish the work
within £10 million by choosing the best procurement route. To complete the building
within the schedule and renovate the building in a best possible way.
Role of client in Procurement process
The client is responsible for designing, managing and providing financial services to
the procurement process. Clients provide all the required information during the tendering
process. They provide the required resources to the consultants and then help the consultants
to reach to the main contractors for making procurement process. The client’s decision of
building design will build a proper route to the procurement process. It mainly contains;
identification of the requirements of client, tender evaluation, tender selection and
implementation of the project (Saad 2017). Client provides sufficient information to the
tenders that avoid misunderstandings during the procurement process. Client appoints the
consultants to prepare an efficient design and then compile the design & tender document to
complete the project. Then, the contractor will estimate the cost of the project & accordingly

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design the details of the project. Therefore, client’s plays a very important role in adopting a
procurement route at the pre-contract stage.
Alternative Routes of Procurement
1. Traditional contract- This is also known as design-bid-build strategy. This is a single
stage type of strategy in which the consultant will have to work with the client to
develop a design for the building construction. Then a contractor is appointed under
lump-sum contract (Zhang, Hu and Shen 2017). The contractor will not be responsible
for designing the project or doing any temporary work.
2. The alternative route is management contracting procurement. The client has a main
contractor but can employ a management contractor who engage with other
contractors and do the work. The management contractor will provide advice for
properly managing the construction activity. They will not undertake the actual work
but will manage the overall work. The management contractor will act as a channel to
transfer the risks between the client & other subcontractors. The management
contractor will build a programme with cost effective plans along with the tender
process. Then, the recommendations will be submitted to the client’s to enter to the
contract. Then, management contractor manages the contract on behalf of the clients.
3. The client can go for time and material contract. They can purchase the materials
within an additional cost for the particular material that is required. This type of
contract is a fixed price contract (Iossa and Waterson 2019). It is also known as cost
reimbursement contract. The supplier can give invoices of this expenses to the clients
after the project has been done. The expenses will be related to actual cost of labors at
an hourly rates, actual cost of raw materials and the use of equipments, cost of
overheads and other profits.

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4. Two-stage tendering is another method of getting an appointment with the clients. In
the first stage, the contractor make an appointment on the basis of a consultancy
agreement and in the second stage, the contractor will set out all the tender items in
the contract. The first stage for the appointment includes;
 Per-construction programme
 Detailed staff cost
 Agreed price and other pre-construction services
 Design development
 Price or cost determination
In the second stage of the contract, agreed conditions of the contract has been applied.
5. Fixed price procurement contracts- This is a type of lump sum contracts in which a
fixed price is set during the contract and it can help both the client and the contractor.
This is very helpful because it doesnot require any adjustments of price on the basis of
the contractor’s experience. But, this may be sometimes risky for the contractor and
may result into loss.
6. Cost reimbursement contracts- In this type of contract, the contractor can reimburse
the actual cost that has been incurred during the work with an additional fee. This can
be done when the building construction or nature of work cannot be carryout properly.
The building is replaced by demolishing the old building. The land may not be
suitable to construct the older building. Hence, there is a doubt exists whether the
work can be carried out properly or not. In such case, cost reimbursement contract can
be helpful because the risk associated with the building construction is high. In such
case, tendering is done by estimating of the cost and simply drawing the outline
specifications (Diaz-Madronero, Mula and Peidro 2017). The direct cost and other
cost for reimbursement will be set during the contract.

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7. Private Finance Initiative (PFI) - In this type of procurement process, only single
contractor will be appointed for designing and building of the project. The contractor
will be having an expertise in the construction, designing, funding management and
facilities management. They finance the construction project and complete it with in
the agreed period.
Appropriate form of procurement strategy for this project
Cost reimbursement strategy is the appropriate form of procurement for constructing
the project. This strategy is best for purchase of materials because, generally the cost of
materials is unknown during the contract. Therefore, this method will be best for the
unknown cost that can incurred during the project. This method will provide accurate
measurement and will protect the interest of both the client and the contractor. He contractor
will be paid on the basis of material cost. The contractor can be profitable or loss in such
case. They can get the financial incentives based on the material performance. Therefore,
they can be a chance of more profit or less profit to the contractor and also same for the
client.
The building is constructed by demolishing the old building. Therefore, high site risk
is involved in the project (Yeager et al. 2018). Hence, the scope of work for this project is not
clear. Therefore, cost reimbursement contracts can be used in this project to maintain the
project flexibility. It will be beneficial for both the client and the contractor with related to
cost minimisation.
Importance of Tender Evaluation Techniques
Tender evaluation techniques is important to deliver the project outcomes. The client
face issues in selecting the best contractors or suppliers to do the project. Other than this,
price, capability of the suppliers and performance of the suppliers is the most important

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criteria of any suppliers. The suppliers or contractors must have experience and have
capability to do the project (Abdullahi et al. 2019). Other factors like cost of availability of
the suppliers and their capacity is also very important for successfully doing the project.
Tender Evaluation techniques is a key method of vendor selection process. These techniques
will help to select the best contractors in terms of quality and cost to the project. Procurement
process of a project examines the suitable tender for the project. The steps in tender
evaluation process are:
 Quotations
 Expression of interest
 Requests for more information
 Writing of specification to attract the tender bids
 Evaluation of the contractors or the suppliers
 Negotiation after post tender.
 Tender selection
 Tailoring the terms and conditions of the contract.
Therefore, tender selection process is very important process to select the best
contractor for the project.
Tender and estimating process
Estimation process is concerned with the various process that has been used by the
contract to establish cost for carrying out the construction work. In this process, the tendering
process is related to the contractors for obtaining the work form the Client. This process is
related to asking them for the tender and estimate a price for the overall project (Mahamid
2018). The contract measures and estimates the accurate cost that will be required to build the
building and provide a meaningful information of cost to the client.

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From contractor perspective:
The contractor makes accurate calculations of the cost of materials, labour and plant
to complete the project. Next, the tendering process will be done to obtain a price to the client
for completion of the work. The contractor analyse the size & value of the construction
project, the type of work needed to complete the work and the cost required to complete the
project. Other than this, the price, quality of tender and authority conditions are evaluated by
the contractor. The contractor checks the bill of quantities related to labour, materials and
price and cross checks their specifications. During the process, the contractor understands the
project, risks involves in the construction works before making decisions on the bid price.
From Client’s perspective:
Tendering process from client’s perspective is started from selection of the
contractors in the form of bid, then the next step is evaluation of the price of the contract and
the last step is issuance of the proper contractor. For successfully doing this project, firstly,
the client determines the expected budget require for doing the constructional work. Then, the
client takes this budget for tendering purpose in the project (Brook 2016). The client will
provide a bill of quantities for doing the tendering process. This bill will be prepared by the
project consultant.
Types of Tender process
Tender process are generally done by the four process:
 Open tender- In this type of tendering process, the tenders are invited through
advertisements or e-tendering websites. In this process, the tenderers will have to
demonstrate their experience, financial capability, skills and strengths to do the
project. This process can be adopted by the client to select the best client in their
project. This will be advantageous for the client to attract the best suppliers.

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 Selective tender- In this process, only limited tenders who are specialised in the work
are invited to do the project. The tenderers select those tenders who have qualified in
a specific work of building a project. For this, the tenderers examine the previous
records of the tenders (Spekhorst 2017).
 Expressions of Interest- In this process, the tenders are invited through public
advertisements for completing the particular project.
 Invited tenders- This type of tendering process is used in case of specialist works.
This type of tendering process is used in case of certain projects, where only a few
contracts have skills or experience to complete the project.
Advance Procurement Practices
Some of the modern procurement practices that can be adopted for delivering better
commitment to contracts. This indicates the use of advance tools for procurement process.
This replace the manual procurement practices. This can help in lowering the cost of the
project, improve the efficiency of the project. This includes the following practices:
 Digital procurement solutions- This includes doing the procurement practices digital
by the use of cloud-based procurement tools. This digital solutions can help in
supplier management, invoice approval, purchase requests, purchase orders, analytics
and integration with other essential software’s.
 Supplier’s engagement- This includes, identification of the suitable supplier,
scheduling the servicing, obtaining of voice and paying of vendor. This can be
successfully done by treating the suppliers as their strategic partners, usage of Key
Performance indicator for examining the supplier’s performance and collaboration
with the vendors (Islam et al. 2017). This will drive to supplier’s engagement in the
procurement process. This integration of suppliers in the procurement process will
help in making strategic partnerships with the suppliers.

12ESTIMATING, TENDERING AND PROCUREMENT
 High-end analytics- This will help in real-time analysis of the procurement process.
The use of artificial intelligence (AI) helps in determining the real time of the overall
project. It can take predictive analysis to find this and can make automated decision.
Supply analytics dashboards are also used as an advance procurement practices to
interpret the data and solve the problems related to procurement process. Advance
analytics will help in assessing the risk in more accuracy and identify the threats. It
will help in designing the cost or value of supplier’s integration in the procurement
process. Most importantly, this procurement practices helps in efficient planning of
the building construction by determining the total cost required for tendering process.
Factors that can influence the development of procurement strategy
Procurement strategy is a long-term plan of effectively manage the cost while
acquiring the supplies from the vendors or suppliers who deliver the raw materials to
complete the building construction. Various factors that can affect the procurement strategy
are:
 Purchase timeline- The project time line for completing the building construction is
for two years. Therefore, the overall satisfactory building design should be completed
before the building construction. All the resource must be available within the time
frame (Windapo and Adediran 2017). If the design is not completed before the
construction, then this may affect the procurement strategy process.
 Client’s characteristics- If the client is not properly involved in the construction
process and have no proper knowledge related to the procurement of materials, then
the cost associated with it can influence the procurement strategy.
 Cost issues- If the original estimation of the price is incorrect or if there is any delay
of the cost estimation when tenders are received, then it will influence the tender
process. Hence, this will affect the procurement process.

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 Available budget- The available budget for building construction is £10 million.
There is a risk involved in connecting this available budget with actual purchasing
behaviour of the project. In case, if the construction process will require more raw
material and other expenses and have chances to go beyond the available budget.
Then this can cause financial risk and can affect the quality of the procurement
process.
 Possible risk- other than financial risks, there are other risks involved in the
procurement process. If sufficient information is not given to vendors, then it can
affect the strategic partnership with them. In such case of emergency, the suppliers
won’t be ready to supply the materials (Wu and Chen 2019). There is also risk
associated with invoice fraud of the procurement process due to lack of proper
information. This factor will influence the procurement process.
 Total cost of ownership- Total cost ownership will provide lower pricing and this may
affect the indirect costs of the acquisition process. Sometimes, this may affect the
procurement process.
These are some of the factors that can influence the procurement strategy development
process.
Implementation of the factors in procurement process
 Purchase timeline- The time of the project will be evaluated before scheduling the
time for the project. Timing and cost trade off of the building construction will be
properly forecasted by scheduling the required inputs and other resources for the
building construction. Resource scheduling will help to easily complete the
project within the time frame according to the project duration.

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 Cost issues- The cost will be properly implemented during the tendering process.
This will be done by using two-stage procurement process. The first stage will
clearly determine the cost specifications of the raw materials (Mahendrawathi,
Zayin and Pamungkas 2017). Information related to price, quantity, quality, types
of materials required for the building construction will be clearly written during
the agreement. This will give a clear overview of the overall cost. Hence, it will
reduce the cost issues during the procurement process.
 Available budget- The overall budget will be controlled by controlling the cost
impacts on the budget. At first the true cost will be determined and then, a soft
budget will be prepared. Then the cost will be analysed and compared with the
actual cost of the project. The variance will be used to control the cost. Cost will
be cost by using standard costing technique. Control of cost will help to minimise
the expenses and complete the building construction within the available budget.
 Possible risk- The possible risk will be assessed by taking advice from an expert
in order to minimise the risk. The probability of financial risks will be analysed by
using various risk assessment techniques. Sufficient information related to
material specifications will be provided to the vendor. This will be done by
making a strategic partnership with the suppliers and the vendors.
Information required to control the cost of building design & construction
The total estimated budget information is the first thing which is necessary to design a
building. The information related to total contingency cost, cost of procurement process and
overall building cost is important to develop a budget. Information related to degree of
uncertainty with respect to client’s changes and other changes in the project is necessary
before starting the designing process. Hence the predetermination of total project cost is very
important for controlling the cost (Rischmoller et al. 2018). This will encourage the project

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team members to design the building according to the cost plan and according change their
development procedures for the project. It is generally determined that, 80% of the cost is
determined for building designing and 20% of the cost is used for the construction process.
Benefits of adopting alternative procurement strategy
1. Traditional contract- This type of procurement approach generally provides a highly
quality work and the tenderers produce tender on the basis of same information. This
method is easier to adopt as compared to other procurement process.
2. Management contracting procurement- It will suit in faster completion of building
projects because the construction manager will start engage in the project before the
designing has been finalised. The management contractor will efficiently control all
the equipments, items and resources and plan according to it.
3. Time and material contract- It will provide the client to complete the project with cost
transparency and properly verifies the invoices in order to ensure that costs are
correctly estimated and measured (Mohame and Tran 2019). Flexibility of building
construction will be more.
4. Two stage tendering- This is a very flexible procurement approach because it properly
define the technical specifications and give a clear scope to the work.
5. Fixed price procurement contract- This procurement process eliminates the
disagreements that can arise later during the work of project. It controls the effort
level because it works under the agreement at the first level.
6. Cost reimbursement contract- This procurement process is cheaper than others and
can list all the expenses of a project. This will help to complete the building
construction also in case of unknown situations.

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7. Private Finance Initiative- This will be benefited for the client on long-term basis.
They can adopt the single contractor for long-term basis and can exchange their
benefits within each other.
Best method for appointment of consultants and contractors
For contract selection- Bid system is the best method for the selection of a contractor.
Competitive bidding process can be used by the university for doing the construction
contracts and purchase of materials and goods. In this type of bidding system, all the
responsible contractors and who have interest can be known. Then the best contractor among
the interest can be selected for performing the work. The contracted sum can also be
negotiated between the university and the contractor. This method of selection will also save
the mobilisation cost and other problems related to these cost can also be avoided.
For consultants selection- Selection of a right consultant will improve the value of the
project. Individual consultants and consultancy firms can be selected for the project. They
can be selected on the basis of Quality-Based Selection (QBS) procedure. This means that,
the most appropriate qualification of the consultancy will be selected on the basis of
consultancy price. Fees for the consultancy will be fixed during negotiation. Then, the
appropriate consultancy can be selected on the basis of these factors (Gransberg and Tapia
2018). Hence, QBS procedure is the best method for selecting the best consultancy on the
basis of their experience and professional skill. It also focuses on cost of the consultancy
service before the selection process.
Examples
An example of benefits of procurement process of a design and build of project is
Novated D & B. In this project, a single team member is contracted and then the team is used
to build the project (Choudhry 2016). The process is known as novation. Another example is

17ESTIMATING, TENDERING AND PROCUREMENT
the prime contracting system, where the contractor has a strong supply chain to coordinate
with the sub-contractors.
Conclusion
Therefore, it can be concluded that, the client can select Cost reimbursement strategy
for completing the project. This strategy is best for purchase of materials because, generally
the cost of materials is unknown during the contract. Therefore, this method will be best for
the unknown cost that can incurred during the project. This method will provide accurate
measurement and will protect the interest of both the client and the contractor. He contractor
will be paid on the basis of material cost. For contract selection, bid system is the best
method for the selection of a contractor. Competitive bidding process can be used by the
university for doing the construction contracts and purchase of materials and goods.
Consultancy can be selected on the basis of Quality-Based Selection (QBS) procedure. This
means that, the most appropriate qualification of the consultancy will be selected on the basis
of consultancy price.

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