Best Practice Guideline Procurement of Consulting Engineering Services

Best Practice Guideline: Procurement of Consulting Engineering Services Supported by the Construction Industry Development Board - CIDB

Introduction Background • The seminar is a culmination of the CE Procurement Indaba conducted under the banner of CESA during Feb 2008. • A task team was established to draft a simplified step-by-step Best Practice Guideline Manual for Procurement Consulting Engineering Services. • To be rolled-out to all the twelve regions of CESA. • Polokwane - marks the 8 th roll-out, where the manual is being launched. • The manual was drawn up in collaboration with the CIDB, (many thanks to CEO & Programme Manager : Procurement and Delivery).

Introduction (cont’d) Objectives: 1. To inform and capacitate clients and consulting engineers (trusted/ independent advisor / agent of client) with best practice in procurement 2. Enable CE’s to appropriately respond to calls for consulting engineering services and to deliver these services in a true value–added context 3. To assist both Client and CE to better understand implement the requirements of procurement contracts ito CIDB & Treasury legislation 4. To provide CE’s and clients a platform to make suggestions to the best practice procurement guideline manual (living document), which will be updated regularly to reflect the challenges faced by our industry. Manual is available on http: //www. cesa. co. za/ at no charge. Comments to wallym@cesa. co. za

Introduction (cont’d) Outline of the CESA Guide/Briefing Chapter 1. Project Life-cycle – background of typical project life cycle Chapter 2. Consulting Services - typical CES provided by CE’s Chapter 3. Procurement of Consulting Services - legislation and objectives Chapter 4. Scope - expanded description of elements of scope Chapter 5. Tender Documentation for CES - preparing tenders for CES Chapter 6. Value – Added Services – value of additional CES Chapter 7. Evaluation of tenders - Guidelines on evaluation of CES tenders Chapter 8. Performance monitoring – Suggested framework for CPE.

Introduction Summary • The technical briefings are geared towards creating a conducive sustainable procurement environment to enhanced infrastructure delivery. • Ensure that the right firm(s) are appointed for the right job • Appointment at a reasonable level of compensation • ensure continued existence and development of firm(s) and industry • serve the best interests of public Hence theme of our Technical Briefing today is, ‘Walking together towards a Sustainable Procurement Environment’.

Right firm for the right job Example – ‘right firm for the right job’ Three relatively easy questions for a ‘House & Bridge’ Consulting Engineer Question # 1: How much does a house weigh? Question # 2: How much weight can a rural two-lane bridge Hold? ? ?

Qualified firm for the right job “… otherwise house becomes a bridge”

Competent firm for the right job “… a bridge that cannot be used”

Appropriate Consultant for the right job “… a house that cannot be used”

Right firm for the right job And Question # 3 Would this be covered by PI, Home insurance, car insurance, or, does it come under the roadside accident fund ? ? ? We can all relate to this, e. g. “ 40 000 defective RDP houses to be flattened and rebuilt at a cost > R 1 -billion”. “… delivers questions rather than intended product”

Right firm for the right job We can relate to this: R 4 million bridge swallows a taxi! “… delivers questions rather than intended product”

Right firm for the right job Session 1

SESSION 1 1. 1 Consulting Engineers South Africa 1. 2 Consulting Engineering Industry 1. 3 The Foothold – Definitions 1. 4 The Project Life-Cycle 1. 5 Overview of Consulting Services

1. 1 Consulting Engineers South Africa

CONSULTING ENGINEERS SOUTH AFRICA (CESA) History: • • SA Association of Consulting Engineers (SAACE) established in 1952 Voluntary association of independent CE’s in private practice August 2008 - SAACE transformed to CESA Employing more than 22 000 people Members interests: CESA seeks to promote interests of Members and Clients by: • • Regular liaison meetings Publication of documents relating to profession Compiling Advisory Notes for Members and Clients Guidelines to Members on professional practice matters A peer review and quality management programme Publication of the Directory of Firms and newsletters Organisation of seminars, workshops and conventions Membership of FIDIC (International Federation of CE Associations)

CONSULTING ENGINEERS SOUTH AFRICA (continued) Professionalism and Integrity of Members: 1 In general: • ECSA registers professional individual engineers, technologists etc • CESA ‘registers’professional CE Firms through membership 2 Credibility of applicants • In business > 12 months • Nominated by an existing CESA member • CIPRO registered - bona fides, directors & governance structures • Not ‘fly-by night’ 3 Ongoing requirements • Subject to CESA Code of Conduct – gives Clients recourse • Disciplinary Committee - non-compliance • Ownership/principals > 50% Pr Engrs/Techno’s – engineering focus • No contracting work (construction) - no conflict of interest • QMS & BIMS in place – conduct affairs with competence & integrity • For more info please visit http: //www. cesa. co. za/becomemember. php

1. 2 Consulting Engineering Industry Ø Consulting Engineering Industry Overview Ø Construction Industry - Enabler & Regulator

Consulting Engineering Industry Overview

THE CONSULTING ENGINEERING INDUSTRY The birth • The word “engineer” first appeared in the 15 th Century, in reference to a particular group of professionals in the military • Associations formed to exchange experiences and to improve the status of engineers • It was then legalised – to safeguard the health and welfare of the general public • The licensing procedures were intended to stop people from selling engineering services when they were not trained or qualified in the practice of engineering.

THE CONSULTING ENGINEERING INDUSTRY The present • Take-over of engineering services by the un-qualified (e. g. tenderpreneurs) • Due to tendering process • Which disregard engineering ability/technical competence of CE

THE CONSULTING ENGINEERING INDUSTRY The future • Competitive tendering is here to stay [it must not be used to drive professional fees down] • The struggle continues – professionalism, reservation of engineering work and use of appropriate procurement methods “Change is upon us; there is no future in the status quo; industry must adapt. --- Firms must grow in capability and scope of services to meet the client demands. We must move ‘up the food chain’ to a new set of value-added services for our clients. ” FIDIC Report Engineering Our Future ü Up there with other professions(doctors, lawyer, CA, etc)

The Construction Industry Enabler and Regulator

The Construction Industry Development Board (CIDB) Established by and gets its mandate from the CIDB Act (38 of 2000) Aims: • Promote sustainable growth of the construction industry and sustainable participation of the emerging sector in the industry • Promote improved performance and best practice of public and private sector clients, contractors and other participants • Promote procurement and delivery management, the uniform application of policy throughout all spheres of government, uniform and ethical standards all guided by a Code of Conduct • Establish registers as a tool to systematically regulate and monitor the performance of the industry and its stakeholders o Register of Contractors(Ro. C) o Register of Projects (Ro. P) o Register of Professional Service Providers (Ro. PSP)

The Construction Industry Development Board (CIDB) Register of Professional Service Providers (Ro. PSP) Size of firm & No. of registered persons Empowerment Phase 1 (Database) Size / Value of completed projects & Financial Records Experience

The Construction Industry Development Board (cont’d) CIDB documentation/prescripts (www. cidb. org. za) • • Standard of Uniformity (SFU) Code of Conduct Practice notes Legislation Code of Conduct establishes certain standards of behaviour… ü ü ü Behave equitably, honestly and transparently. Discharge duties and obligations timeously and with integrity. Comply with all applicable legislation and associated regulations Satisfy all requirements established in procurement documents Avoid conflict of interest Not maliciously injure/ attempt to injure the reputation of 3 rd party

The Construction Industry Development Board (cont’d) Monitoring role - CIDB can: • • • Conduct investigations Sanction offenders Suspend offenders from the CIDB Ro. C Issue fines to Employers up to R 100 000 Intergovernmental Relations Framework Act – liaises with: Ø Treasury Ø Public Protector Ø Auditor General CESA/ CIDB Collaboration CESA consulted extensively with CIDB in compiling the Manual/Guide for Procurement of CES because CIDB: • Regulates public sector procurement (large CESA Client base) • Complies with applicable legislation/ regulations • Authority to enforce compliance • Good working relationship

1. 3 The Foothold – Definitions

THE FOOTHOLD – DEFINITIONS Conformity of Terminology • Terminology in Manual conforms with CIDB documentation and • ECSA Guideline Scope of Services and Tariff of Fees • Mainly aligned with CIDB’s Revised SFU in Construction Procurement Noteworthy Examples • Bid = Tender • Client = he/she who engages the Consulting Engineer (CE) • Construction Monitoring (administration of Construction Contract for verification only) – new term • Contract = Agreement between Client and CE • Contractor = not the CE

Noteworthy Examples (cont’d) • Engineering and Construction Works contract: includes construction, repair, maintenance, alteration, demolition etc of building and engineering infrastructures • Normal Services = Typical services as in ECSA guideline tariffs • Quality = “Totality of features of a service that bears on its ability to satisfy stated or implied needs” • Scope of Services = Services undertaken by the CE in relation to the Scope of Work • Scope of Work = Portion of the Works for which the CE is engaged • Tender Price = Price submitted including all payment conditions, costs and disbursements • Threshold = Monetary value of procurement contract above or below which a given procedure may be used

1. 4 The Project Life Cycle

THE PROJECT LIFE CYCLE (cont’d) Steps 1 to 3 : Identification, Definition, Feasibility • • Identifying the potential project – often by Owner, Specialist assistance And Defining the best project to meet the need Reject unsuitable solutions, shortlist suitable alternatives Select the best project, based on technical and financial feasibility Steps 4, 5, 6 : Concept & Viability, Design, Procure • Developing the project through all concept and viability stages, confirm viability • Detail design of the project to procure construction • Design can be a maintenance/operation assignment • Procuring a contractor to construct – proper tender/contract documents, proper evaluation of tenders

THE PROJECT LIFE CYCLE (cont’d) Steps 7, 8 : Construct, Operate and Maintain • Construction - from site handover to when Owner takes possession of the constructed project • Final handover after Defects Liability Period expired and defects rectified • Operation and Maintenance: Ø Usually by Owner - According to manuals and own procedures Ø O & M - May be contracted out Note: CE may be appointed for any one, or all, of the steps 1 to 8

1. 5 Overview of Consulting engineering services

OVERVIEW – CONSULTING SERVICES Consulting engineering services include many Engineering Disciplines inter alia: • • • Agricultural Civil Construction Management Construction Project Management Electrical Geotechnical Mechanical Structural Transportation Specialist Engineering Services

OVERVIEW – CONSULTING SERVICES (cont’d) Delivering Value 1 Early project stages: • Services deliver most value • Functionality & quality of the proposed service more important than Cost (Steps 1 to 3) 2 After project is well defined: • Services are easier to determine • Role of high level expertise reduces as project develops • Efficient more routine tasks more important • Correct/comprehensive contract documentation is vital

REQUIRED EXPERTISE OVER THE PROJECT CYCLE

Q&A - Session 2

SESSION 2 2. 1 How to Procure Engineering Services

HOW TO PROCURE CONSULTING SERVICES Procurement ≈ Tendering Less Optimization Competitive tendering here to stay Tendering of professional engineering is unique Services cannot be awarded based on price/lowest price only Low Expertise Low Development Lowest Price Poor Quality Poor Performance

HOW TO PROCURE CONSULTING SERVICES Important that Government recognises: • CE’s are an important pool of expertise and skilled resources • High standard of engineering and Infrastructure development vital for growth • National Treasury policy statements: “It is necessary that certain minimum standards of quality and efficiency be achieved when appointing consultants” • Need to maintain a basic policy of competitive selection Legal Environment for consulting engineering services: • Constitution of South Africa • System is to be Fair, Equitable, Transparent, Competitive, Cost effective • Adopted by ISO in ISO 10845 series for construction procurement

TABLE : PILLARS OF PROCUREMENT

HOW TO PROCURE CONSULTING SERVICES Balancing Competition & Compensation in Procurement COMPETITION Attractiveness & Development COMPETITION COMPENSATION

Primary Legislation Regulating Procurement Constitution of the Republic of South Africa (Act No. 108 of 1996) - Section 217 states that government procurement systems must be Fair, Equitable, Transparent, Competitive and Cost Effective Fair, Transparent, Competitive, Cost Effective Equitable Public Finance Management Act (Act No. 1 of 1999) Municipal Finance Management Act (Act No. 56 of 2003) Construction Industry Development Board Act (Act No. 38 of 2000) Preferential Procurement Policy Framework Act (Act No. 5 of 2000) Broad Based Black Economic Empowerment Act (Act No. 53 of 2004) PFMA MFMA CIDB PPPFA BBBEE Public Sector Clients Public and Private Sector Clients Point to Note : Compliance with CIDB’s “Standard for Uniformity in Construction Procurement” (SFU) – compulsory for organs of state Refer to Table 3. 2 (pg 11 -12) in Manual - 10 Acts)

Objectives of Procurement • Procurement is engaging skilled professionals – not purchase of a commodity • Purpose of competitiveness is to ensure long term value for money not short term low cost design • Transparency must encourage professionals to develop & maintain their skills and expertise • CIDB Guidelines can provide the necessary results Methods of Procurement 1. 2. 3. 4. • • Financial Offer plus Quality (Functionality) Financial Offer and Preference Financial Offer plus Quality & Preference Prescribed by CIDB Standard for Uniformity (SFU) Services must provide cost-effective & value-added performance Depends on innovativeness, expertise and competence Inclusion of Quality is ESSENTIAL

HOW TO PROCURE CONSULTING SERVICES – cont’d (2) CESA Recommends - Method 4 : Quality and Cost-based Selection (QCBS) Ø Ø Accords with CIDB’s SFU (Standard for Uniformity) Based on CIDB’s Best Practice Guidelines for Competitive Selection Method 4 applies in all but small minority of cases Method 4 is MANDATORY for public bodies

HOW TO PROCURE CONSULTING SERVICES – cont’d (3) Competitive Selection Procedures

HOW TO PROCURE CONSULTING SERVICES – cont’d (4) Points to Note: 1. Quoting from CIDB Best Practice Guideline A 7 - Procurement of professional services should be undertaken on: demonstrated competence & qualifications (for type of services required) • capacity & capability (to provide the quality of the service) • fair & reasonable Financial Offers (not only least cost) • 2. Constitution requires procurement to be cost effective & have best value outcomes in terms of: • • • quality, downstream & life cycle costs, timing Financial Offer least resources to effectively manage &control the procurement process. 3. Selection on basis of quality – does not necessarily mean the best quality available but quality appropriate for the assignment.

HOW TO PROCURE CONSULTING SERVICES – cont’d (4) Points to Note (cont’d): 4. Calling for/ preparation of Tenders: • Scope of Work and Services (SOWS): • fully describe SOWS - comparable tenders are received • fully describe SOWS - reduce time & effort for tender preparation • Total Input Cost – • can be considerable - small projects can be > potential fee & jeopardise Ø finances of the service provider Ø overall economy of the project. • Guideline: • • CE’s potential fee should be 20 times > cost of preparing tender alternatively, cost to prepare tender should not > 5% of potential CE fee has to cover - Staff costs, overheads, expenses and profit hence tenders should not be solicited for small projects,

4. Calling for/ preparation of Tenders (cont’d): The following procedure should preferably adopted by client or CE (as agent of client) • Consider grouping small projects together • Request proposals for term contracts - where consulting engineer can support the client on a partnership basis for all small to medium projects over a longer period • Listing manuals and procedures as requirements so lengthy technical proposals are not required (only proposed staffing & track record)

Q&A Tea Break Session 3

SESSION 3 3. 1 Scope of Services 3. 2 Tender Documentation for Consulting Services

3. 1 Scope of Services

SCOPE OF SERVICES Definition • Definition: “Services which a CE must provide in relation to scope of Work” • MUST be clearly defined to ensure proper pricing and clear and unambiguous understanding by tenderer • In many instances this is lacking – uncertainty and unrealistic pricing result • Recommended listing DELIVERABLES to be produced by the CE, i. e. products of his work (studies, reports, designs, drawings, documents etc)

SCOPE OF SERVICES (cont’d) Planning Studies, Investigations and Assessments (i) Consultation with the client or client’s authorized representative. (ii) Inspection of the site of the project. (iii) Preliminary investigation, route location, planning and a level of design appropriate to allow decisions on feasibility. (iv) Consultation with authorities having rights or powers of sanction as well as consultation with the public and stakeholder groups. (v) Advice to the client as to regulatory and statutory requirements, including environmental management and the need for surveys, analyses, tests and site or other investigations, as well as approvals, where such are required for the completion of the report, and arranging for these to be carried out at the client’s expense. (vi) Searching for, obtaining, investigating and collating available data, drawings and plans relating to the works. (vii) Investigating financial and economic implications relating to the proposals or feasibility studies.

SCOPE OF SERVICES – cont’d Scope of Services for Typical Design Stages

SCOPE OF SERVICES (cont’d) Detailed examples (Appendix A) • Refer to Appendix A, Numerous Normal Services tasks under Stages 1 to 6 • Includes Activities/Deliverables • Recommended as a reference or checklist per stage Principal Consultant • Refer to Appendix A, Additional Services to Normal Services • Includes Activities/Deliverables • Recommended as a reference or checklist per stage CIDB Register of Professional Service Providers • To be published by CIDB

SCOPE OF SERVICES (cont’d) Key Factors common to every scope, in Developing the Scope of Services § § § Obligations of the Parties Health and Safety Sustainability Information Available Scope MUST reflect Client’s intentions to enable tenderers to identify tasks and estimate times to be spent by personnel, and hence to quantify and price the tender Failure to prepare Scope of Services in sufficient detail § § § Tenderer has to make assumptions Misinterpret Client’s requirements Price unnecessarily for Risks Resultant prices too low or too high Fails the interests of Client, Consulting Engineer and Project

KEY FACTORS IN DEVELOPING SCOPE

THE SCOPE OF WORK Definition § Not the same as Scope of Services of the Consulting Engineer § Scope of Work = portion of the Works for which the Consulting Engineer is engaged or the document which specifies and describes the supplies, services engineering and construction works to be provided (by the Contractor) including special requirements, constraints etc. Example A client wishing to construct a Casino complex consisting of three distinct components being the Building, a Parking Area and an access road, may appoint a consulting engineer to undertake Stages 3 -6 of the normal engineering services for the Parking Area. In this case the scope of services can be defined as set out in Appendix A while the scope of work may only involve the Parking Area. Some thought will have to go into preparing the scope of work as it interfaces with other works such as stormwater runoff from the building and the interface with the access road and gate house.

THE SCOPE OF WORK (cont’d) ü The scope of work for each service provider should be carefully determined to ensure that no overlaps and duplication in terms of scope of work exist. ü In some cases the consulting engineer will be required to appoint specialist sub-consultants in which case the consulting engineer will ensure that no duplication in terms of scope occurs.

EXAMPLES OF SCOPE OF WORK

FURTHER EXAMPLES OF SCOPE OF WORK

3. 2 Tender Documentation for Consulting Services

TENDER DOCUMENTATION Purpose § In line with principles and documentation of the CIDB § To achieve uniformity, in interests of a more efficient industry Model for Uniformity § § CIDB’s “Construction Procurement Toolbox” Process of Offer and Acceptance Tenderers provide inputs to complete their submissions (offers) These = inputs to the contract to be concluded after acceptance of offer § Separation of component documents § Complete enquiry documentation = critical to project’s success CIDB tables to assist compiling documentation – See Appendix B

TENDER DOCUMENTATION – cont’d Documents relating to the Tender

TENDER DOCUMENTATION – cont’d Documents relating to the Form of Agreement

TENDER DOCUMENTATION (cont’d) Standard Coloured Pages/Dividers § § § T 1. 1 T 1. 2 T 2. 1 T 2. 2 C 1. 1 C 1. 2 C 1. 3 C 1. 4 C 2. 1 C 2. 2 C 3 C 4 Tender Notice and Invitation to Tender Data List of Returnable Documents Returnable Schedules Form of Offer and Acceptance Contract Data Form of Guarantee/Securities Adjudicator’s contract Pricing Data/Instructions Activity/Work Schedule Scope of Services and Scope of Work Site inspection White Pink Yellow White Yellow Blue Green

TENDER DOCUMENTATION (cont’d) References (i) Revised Standard for Uniformity in Construction Procurement (SFU) (ii) CIDB Construction Procurement Best Practice Guideline C 3 – Adjudication (iii) CIDB Professional Services Contract (iv) PROCSA Form of Agreement (v) FIDIC Client/ Consultant Model Services Agreement (vi) Standard Professional Services Contract by NEC

Q&A LUNCH Session 4

SESSION 4 4. 1 Value-added Services

VALUE – ADDED SERVICES Value, Financial Offer, Quality § § § § § Acceptance of lowest price denies opportunity to assess value Consulting Engineers are accustomed to tendering competitively Professional services, unlike products, are not well defined Requires careful descriptions in Scope of Services, Scope of Work Still a tendency to rely on price, ignore quality (Treasury: Functionality) Remuneration should reward desirable performance What performance is achieved from the lowest price? (examples…. . ) Life-cycle costs: Eng. 2%, Constr. 18%, O&M 80% (2% dictates 98% !) Financial offers should reflect effort to optimise costs of project Relationship between Financial Offer & Quality (Effort) is not linear

VALUE – ADDED SERVICES

VALUE – ADDED SERVICES cont’d Life-Cycle Cost and impact on Project Success The procurement of consulting engineering services has the greatest impact on the life-cycle cost of the project, yet it is the least costly component 10% 50% 40% Life-Cycle Cost 60% Engineering 20% Impact on Project Success Construction 20% Operations & Maintenance

VALUE – ADDED SERVICES – cont’d The Concept of “Value” should: § secure for the client value-for-money services § achieve minimum life-cycle costs (long term value for money) § Ensure the project will fulfill its intended purpose The tender process must allow the tenderer to show that: § § value-for-money services are offered minimum life-cycle costs are critical to the project’s success The Financial Offer will demonstrate the value of inputs offered Take Client’s quality evaluation criteria into account Quantifying “Value” § § Needs to be a factor in considering tenders Include in determination of tender score Assess Preference, Quality, and Financial Offer (Price) individually Consulting Engineer to tender accordingly

VALUE – ADDED SERVICES – cont’d Guidelines for Pricing of Tenders – the “Golden Rules” § Project success relies on acceptance by client of the Consulting Engineer’s financial offer and conditions § Consulting Engineer needs to have his interests protected § Client needs to be comfortable with contract financial arrangements § “Golden Rules” apply to preparation of the financial offer Golden Rule No. 1 – Know the project requirements § § No two projects the same – offer Must be a clear and unambiguous Scope – clarify if necessary Determine methodology, inc. innovation, value-adding procedures Take Client’s quality evaluation criteria into account

ILLUSTRATION OF TOTAL COSTS Golden Rule No. 2 – Know your costs involved

VALUE – ADDED SERVICES (cont’d) Golden Rule No. 3 – Know the Client’s situation § § § § Able to produce and adhere to a clear and sufficient scope Ability to fund or timeously secure funding for the project Adequate resources to administer the contract History of fees paid on time Sufficient technical capability for reviews and approvals Need for development (training, mentoring, etc) Experience in using consulting engineering services Able to responsibly evaluate & award consulting/construction contracts Finalising the Tender Price Feedback from Golden Rule No 3 is to be considered where aspects within Client’s ambit must be examined, for influence on level of the financial offer

VALUE – ADDED SERVICES (cont’d) Adjustments from Golden Rule No 3 § § § § Profit mark up Pricing for contingencies or risk Pricing work not called for but necessary (if not done by Client) Pricing for unrealistically tight or slack deadlines Pricing for work assumed but not required Adding a margin in lieu of qualifying the tender Provision for productivity delays to be expected in executing the work for the client Price Benchmarks § § § Important to test pricing against a norm and indicate adequacy of price Appropriate Benchmark: ECSA Guideline Tariff of Fees Percentage of Project Cost (sliding scale) x Factor for Stage and Type Also ECSA recommended hourly rates – arrive at “Benchmark Fee” Adjust up or down for project concerned, with a Benchmark Multiplier, to get an “Adjusted Benchmark Fee” considering specific circumstances

VALUE – ADDED SERVICES – cont’d Benchmark Multipliers Multiplier 0. 6 – 1. 0 – 1. 6 Circumstances “Favourable” “Normal” or “Reasonable” “Negative” Specific circumstances § § § § Is scope complete and clear? Is Client well versed in procuring consulting services? Does Client have adequate resources for competent tender evaluation? Does Consulting Engineer have a successful project record with the Client? Can hours be saved from earlier similar work, or previous experience? Is staff proposed well priced, ideally suited and competent for the project? Is the Consulting Engineer better placed than most for specialist services?

VALUE – ADDED SERVICES – cont’d Specific circumstances (cont’d) § Is project location advantageous for the Consulting Engineer? § Will the risks perceived be easy or difficult to handle? § Is level of complexity of the project normal or will it be very complex? § Does the Consulting Engineer have a low order book and need the work? § Will start date and duration require price adjustment, if no escalation?

VALUE – ADDED SERVICES – cont’d Specific circumstances Benchmark Multipliers [ Favourable (0. 6 – 1. 0)/ Reasonable ( 1. 0) / Negative (1. 0 – 1. 6)] F R Is scope complete and clear? 1. 0 Informed client 0. 9 Previous appointments Savings – Previous experience 1. 2 0. 6 Project location Staff – cost, suited & competent 1. 0 0. 8 1. 3 risks perceived be easy or difficult to handle? 1. 0 level of complexity of the project normal or will it be very complex? Does the Consulting Engineer have a low order book and need the work? AVERAGE ( this example) N 0. 7 0. 94

VALUE – ADDED SERVICES – cont’d Adjusted Benchmark (“Yardstick”) Fee § Average of the sum of all the particular fees used § Still based of ECSA recommended fee scales THERE IS NO SUCH THING AS A “DISCOUNTED” FEE

VALUE – ADDED SERVICES – conclusion “it is unwise to pay too much, but it is worse to pay too little. When you pay too little, you sometimes lose everything because thing you bought was incapable of doing the thing you bought it to do. ” John Ruskin (1819 – 1900), Author & Scientist, Oxford University

Q&A Tea Break Session 4

SESSION 5 5. 1 Evaluation of Tenders

EVALUATION OF TENDERS References § CIDB Best Practice Guideline No. A 4 : Evaluating Quality in Tender Submissions (guidelines) § CIDB Inform Practice Note No. 9 ; Evaluation of Quality in tender Submissions (overview) Evaluation of Tenders § Applies where Quality consideration is an essential part of the evaluation process – which should apply to the vast majority of tenders for Consulting Engineering services § Procurement Method 4 generally appropriate for Consulting Engineering services (Quality and Cost-Based Selection)

EVALUATION OF TENDERS Method 4 – Financial Offer plus Quality and Preference § Score Quality, rejecting all offers that fail to score minimum points for Quality, stated in Tender Data § Score tender evaluation points for Financial Offer § Confirm tenders eligible for preferences claimed and if so score tender evaluation points for preferencing § Calculate total tender points § Rank tenders from highest number of tender evaluation points to lowest § Recommend Tender with highest tender evaluation points for award, unless compelling reasons not to do so

EVALUATION OF TENDERS (cont’d) Evaluation criteria § Essential that tender documents state evaluation criteria and scoring systems to be used in tender adjudication § If a criterion is stated, clarity required how the criterion will be adjudicated and weighted, relative to other criteria § CIDB Standard for Uniformity Sect. 4. 4. 3 calls for specific Tender Data: Ø Method to be used in evaluation Ø Weighting between Financial Offer (W 1), Quality (W 2), and Preference (W 3) Ø Quantified descriptions of preferences incl. how granted and scored Ø (Refer also to Construction Scorecard (Construction Sector Charter, Govt Gazette: Board Notice 862 of 2009) Ø Details of Quality Criteria and Sub-criteria and manner of scoring

EVALUATION OF TENDERS (cont’d) Recommended Approach, to be Fair, Equitable, Transparent, Cost-effective § § § § § Quality of outputs/deliverables to satisfy client requirements Service with reasonable skill and care of professionals Advice independent of any affiliation causing conflict of interest Repeat/straight forward projects : Cost-effective design important Feasibilities, Complex projects : experience, expertise important Weighting, Quality / Financial Offer is less for repeat type projects All tenders to have a minimum number of Quality points, to proceed Ratio Quality / Financial Offer plus Preferences depends on project value Preferential Procurement Framework Act : Ø Assignments under R 500 k value, Ratio 80: 20 mandatory Ø For higher value assignments, Ratio 90: 10 mandatory Ø (Threshold as in Pref. Procurement Policy Framework Act Regs) Refer Tables based on CIDB references with certain CESA adjustments, pertaining to Scoring against Ratings

EVALUATION OF TENDERS (cont’d) Recommended Detail Procedure 1. Score Quality with 3 Quality reviewers, adjust if major scoring differences 2. Reject tenders not attaining minimum Quality score, inform them in writing 3. Inform tenderers of time & date for opening Financial Offers and announce these at the meeting 4. Calculate Final Evaluation Scores according to CIDB Standards for Uniformity 5. Apply Definitions and formulae (see next slide) 6. Mutually exclusive criteria recommended, to limit duplication 7. Black persons are addressed in allocating Preferences 8. Reviewers need to be experienced. If not available in the Client, then specialists or Consulting Engineers (unconnected with the tender) should be retained by the Client to assist with evaluations 9. See recommended Tables and Examples

EVALUATION OF TENDERS (cont’d) Definitions and formulae used: Nev = Total evaluated score Nm = Score for Price Nq = Score for Quality Np = Score for Preferencing W 1 = Weight assigned to price W 2 = Weight assigned to quality Nm = W 1 x Pm/P – where Pm is lowest qualified tender price received and P is tender price under consideration (2 decimal places) Nq = W 2 x S/Ms - where Ms is maximum possible quality score and where S is quality score for tender under consideration Nev = Nm + Nq +Np - Tenders ranked from highest to lowest Nev with tender awarded to tenderer with highest Nev

RECOMMENDED TABLES FOR EVALUATION OF TENDERS Table 7 -1 Nature of Projects (5 types are defined): 1. Feasibility Studies and Investigations (require specialised skills; deliverable a report) 2. Innovative Projects (require innovation, creativity, expertise and skills; specialist advice needed is often identified in the project) 3. Complex Projects (require high level of technical skills and resources; may require skills other than normal engineering) 4. Straightforward Projects (comprise straight forward tasks with standard technologies; may need strong capacity and resources if project is large) 5. Repeat Projects (Straightforward tasks with routine/periodic activities, eg maintenance to maintain Client’s assets The Descriptions of each type show that the tenderer’s experience and capability are key, particularly in types 1 to 4

RECOMMENDED TABLES FOR EVALUATION OF TENDERS (cont’d) Table 7 -2 Quality Criteria and Points Scale for small projects: 1. Quality plus Financial Offer/Preference ratio 80: 20 (i. e. . 20 points for BBBEE) 2. Maximum points shown for 5 Project Types from Table 7 -1 for BBBEE, Quality and Financial Offer, Financial Offer and Quality 3. Higher points used for Quality in more complex projects and lower points for Financial Offer 4. 9 Quality Criteria listed, from Adequacy of work plan to Demonstrable managerial ability 5. Quality maximum points from (2) allocated to 9 Quality criteria; allocation to 5 of the 9 Quality Criteria should suffice

RECOMMENDED TABLES FOR EVALUATION OF TENDERS (cont’d) Table 7 -3 Quality Criteria and Points Scale for large projects: 1. Quality plus Financial Offer/Preference ratio 90: 10 (i. e. . 10 points for BBBEE) 2. Maximum points shown for 5 Project Types from Table 7 -1 for BBBEE, Quality and Financial Offer, Financial Offer and Quality 3. Higher points used for Quality in more complex projects and lower points for Financial Offer 4. 9 Quality Criteria listed, from Adequacy of work plan to Demonstrable managerial ability 5. Quality maximum points from (2) allocated to 9 Quality criteria; allocation to 5 of the 9 Quality Criteria should suffice 6. Operation similar to Table 7 -2

RECOMMENDED TABLES FOR EVALUATION OF TENDERS (cont’d) Table 7 -4 Indicators to be used when scoring tenderers on Quality Criteria 1. Ratings, very good/satisfactory/poor (100/70/50/0) with descriptors, listed for 9 x Quality Criteria 2. Note “poor” scores zero – criteria are unacceptable for Consulting Engineering services (see descriptors) 3. Ratings for 9 x Quality Criteria are common to all Project types

RECOMMENDED TABLES FOR EVALUATION OF TENDERS (cont’d) Table 7 -5 refers to “Qualification and Competence of Key Staff” 1. To be completed by Client when issuing tenders 2. Shows 6 x typical staff posts – Project Leader, Design Engineer, Materials Engineer, Contracts Engineer, Resident Engineer and Assistant Resident Engineer 3. Shows 5 x Project types (Table 7 -1) for each post 4. Lists 6 x attributes for each post (qualification, experience thereafter , registration, experience thereafter, involvement on comparable projects (past 10 years), project values (past 6 years) 5. Client able to list preferred and minimum attributes, Tenderer fills in the Offer column 6. Although Titles of Job posts state “Engineer”, Client may choose to use Registered Engineering Technologist or Registered Engineering Technician, depending on nature of project

RECOMMENDED TABLES FOR EVALUATION OF TENDERS (cont’d) Table 7 -6 Assessment example 1. Shows a worked example for a complex project in the 90: 10 points system range with 5 of 9 x Quality Criteria addressed 2. Weight assigned to each Quality Criterion addressed. Total = maximum points for Quality 3. Rating indicators from Table 7 -4 applied to each Quality Criterion by 3 reviewers to give Reviewers’ scores and average scores 4. Weights applied to average scores to give points for Quality, with total = Points for Quality for tender under consideration 5. Table shows 2 x sets of points for Quality results : 1 st set : 2 outliers, 2 nd set : no outliers, after a repeat review by the reviewers

RECOMMENDED TABLES FOR EVALUATION OF TENDERS CESA recommended changes to CIDB Tables (in using Tables 7 -1 to 7 -6) § Table 7 -4 Ratings, very good/satisfactory/poor; CIDB uses 100/90/70/40. CESA recommend 100/70/50/0 because: Ø Descriptors for Poor (0) confirm unsatisfactory, i. e. unacceptable Ø Good/Satisfactory mean nearly the same; decrease Good to 70 to compare with Very Good (100) ; decrease Satisfactory 70 to 50. § Actual application of weightings, Quality / Financial Offer depends on relative value of the two criteria, e. g. Quality scoring 80 to 85 and Financial scoring 50 to 100%, Financial scoring can outweigh Quality scoring

Q&A Last Session 4

SESSION 6 6. 1 Performance Monitoring – Consulting Services

PERFORMANCE MONITORING This presentation: 1. 2. 3. 4. 5. 6. Introduction Performance Quality Assurance Evaluation of CE’s Performance process Pillars of PM Consultant performance evaluation scorecard Points to Note

PERFORMANCE MONITORING Introduction § Performance Evaluation of CE’s is crucial in upholding & advancing the standards of service from Consultants § Benefits of performance evaluation. ü The client will know the level of service being delivered or delivered ü The client will get an indication as to whether his choice for consultant was correct ü Ensures integrity of the QCBS process ü Assist in the pre-selection and bid evaluation ü raise the standard of consulting engineering industry

PERFORMANCE MONITORING Introduction § Other uses (by Client, CIDB, ECSA, NT, CESA, etc) § Disciplinary action – warning § Suspension of firm(s) registration § Cancellation of registration § Black listing the firm § Black listing the professional

PERFORMANCE MONITORING Performance Quality Assurance § CE have a Quality Management System ISO 9001 : 2008 QMS or of similar levels ( a condition of CESA membership) Ø ISO requires firms to conduct Client Satisfaction surveys, analyse to show trends and confirm improvement. Ø Enable flaws to be detected, thus avoiding more costly deviation corrections § CE have adopted the principles of a Business Integrity Management System, ( Part of CESA members Code of conduct)

PERFORMANCE MONITORING (cont’d) Evaluation of CE’s Performance process § NT assigns PM to CFO – suggest done with project manager or Town engineer § The process must commence from the time of appointment and must continue until final completion of the project. § Most important during the initial briefing of the consultant § The briefing must set a standard for performance and discuss the evaluation process, as well as describing the method of reporting required. § Client should provide feedback, so that the consultant could improve if necessary

PERFORMANCE MONITORING (cont’d) Pillars of performance monitoring § Criteria must relevant § Criteria clearly defined to allow consistent application confidential, rigorous and objective manner § Conducted according to the Pillars of procurement and CIDB’s Code of Conduct

PERFORMANCE MONITORING (cont’d) Consultant performance evaluation scorecard § CESA is proposing a comprehensive set of evaluation criteria for gauging the performance of CE.

PERFORMANCE MONITORING : EVALUATION SCORECARD

PERFORMANCE MONITORING (cont’d) Points to Note § Attributes – choosing engineering consultants § § § § Technical competence Managerial ability Experience on similar projects Dedicated personnel available for the project’s duration PROVEN PERFORMANE Local and/or local knowledge Professional independence & integrity § Conclusion - Turn to page 44

Q&A Closing remarks Thank you

CLOSING REMARKS This technical briefing has been presented in the interests of a more efficient construction industry, enhanced through the use of more effective and uniform procurement CESA and the CIDB would like to thank Consulting Engineers and their Clients for attending, and we wish you a safe onward journey