Lec3 Modern Project Procurement Methods Prof Dr Attaullah

Lec-3 Modern Project Procurement Methods Prof. Dr. Attaullah Shah

Some quotes about procurement n Labor was the first price, the original purchase - money that was paid for all things. It was not by gold or by silver, but by labor, that all wealth of the world was originally purchased. Adam Smith n “Property may be destroyed and money may lose its purchasing power; but character, health, knowledge and good judgment will always be in demand under all conditions. ” Roger Babson n “Men use care in purchasing a horse, and are neglectful in choosing friends” John Muir. n Purchasing power is a license to purchase power. ” Raoul Vaneigem n “Excellence in any department can be attained only by the labor of a lifetime; it is not to be purchased at a lesser price. ” Samuel Johnson

Some quotes…. . n Passion can never purchase what true love desires: true intimacy, self-giving, and commitment” n “Experts agree that the best type of computer for your individual needs is one that comes on the market about two days after you actually purchase some other computer. ” Dave Barry n It takes me a long time to make a big purchase. Jessica Chastain If a man will make a purchase of a chance he must abide by the consequences. Richards n

“Self-pity is our worst enemy & if we yield to it, we can never do anything wise in this world” - Helen Keller 5

CITY UNIVERSITY OF SCIENCE AND INFORMATION TECHNOLOGY, PESHAWAR

Bio details of the Speaker n Dr. ¨ ¨ Attaullah Shah Vice Chancellor City University of Science and IT Peshawar Previously Director ( Planning and Projects AIOU) § pdaiou@yahoo. com. pd@aiou. edu. pk, www. drshahpak. weebly. com § +92 -333 -5729809, +92 -51 -9057212 n Qualification n Ph. D Civil Engineering , M. Phil Eco , MSc Structure Engg MBA, MA Eco, MSc Envir Design, BSc Civil Engg (Gold Medal), Post Grad Dip Comp (Gold Medal) n Professional and Field experience: n ¨ n Research Publications in refereed journals and conferences: ¨ n 25+ Years 25 Journals publications+55 Conference publications Areas of interests § Structural Engineering § Sustainable built Environment § Construction project Management

Various Project Procurement Methods

n n n Best Value Procurement (BVP) is a relatively new procurement process for public agencies, A process of acquiring construction-related services or commodities that mirrors the long-used practices of design-build and negotiated agreements in the private sector best (best) adj. Superlative of good. 1) Surpassing all others in excellence, achievement or quality; most excellent. value (val´yoo) n. An amount, as of goods, services or money considered a fair and suitable equivalent for something else; a fair price or return. A common definition can be suggested as follows: A method of procurement that matches project requirements, as defined by the construction documents, with a contractor that is best able to complete the project, factoring in contractor qualifications, experience, technical competency, construction planning, and cost, using a formulaic scoring methodology.

n n Time and again, the Supreme Court has expressed concern over the system for awarding contracts and the opportunities it has afforded public officials for abuse, fraud, and favoritism. As a result, the competitive bidding process became so narrowly defined that public agencies had little or no opportunity to make subjective decisions. The PEC procurement Rules allowed for the first time to use Design and Build (D&B) in 2010 The Public Procurement Rules-2004, introduced the Two Envelop procedures to ensure best value procurement. The qualification based procurement, includes short-listing contractors by qualifying potential bidders on the basis of various technical and performance/financial parameters.

Best Value Procurement n n Best-Value Procurement—a procurement process where price and other key factors are considered in the evaluation and selection process to minimize impacts and enhance the long-term performance and value of construction. These primary concepts are: Parameters, ¨ Evaluation criteria, ¨ Rating systems, and ¨ Award algorithms. ¨ n n Where: x = weighting A = Cost, B = Time , P = Performance and Qualifications Q = Quality Management, D = Design Alternates

Build Operate and Transfer (BOT)

Design-Build Delivery What is Design-Build? n A project delivery method that overlaps the design and construction phases n Phases are concurrent rather than sequential like traditional Design-Bid-Build methods n New project and quality management approach n New roles and responsibilities for Owners and Contractors

Design-Build Delivery

Design-Build Delivery What are the Advantages and Disadvantages of Design-Bid-Build? Advantages n n Long history of acceptance Open competition Distinct roles are clear Easy to bid Disadvantages n n n n Innovations not optimized Cost overruns Disputes between parties Owner retains most risks Usually low bid; incentive for change orders Owner responsible for errors and omissions Linear project delivery process

Design-Build Delivery What are the Advantages and Disadvantages of Design-Build? Advantages n n n n Shorter delivery time Reduce user costs Innovation by contractor, designer and owner Allows flexibility in design Innovative material selection and construction methods Contractor selection process can be based on technical and financial proposal evaluation Minimizes the impacts on residents and businesses Disadvantages n n New method; unfamiliar process Owner needs to make quicker decisions Not for every job Bid processes can be more expensive

Design and Build Variants

Design-Build Delivery When do you use Design-Build? n Project that need to be “fast tracked” because of safety, emergency, funding or political reasons n Projects that allow for innovation in the design and construction n Packaged projects (several smaller combined into one larger project) n Projects with complex designs, staging and traffic control n Projects where in-house staffing cannot meet the project demands

Design-Build Delivery Types of Pilot Program Example Projects: Large box culvert projects n Bundled bridge projects n Mill and overlays n Intersection upgrades (signals, paving, curb and gutter, etc. ) n

Design-Bid-Build Roles and Responsibilities Owner / Agency n Environmental Approvals n Complete Design (Plans and Specs) n Right-of-Way n Contract Administration / Construction Management (inspection, testing, etc. ) n n Contractor n Construction n Safety Contract Owner/Agency provides the plans and specs in the form of a proposal Contractor with the low-bid is awarded the contract

Design-Build Roles and Responsibilities Owner / Agency n Environmental Approvals n Preliminary Design n Design Oversight n Right-of-Way n Construction Oversight n n n Contractor n Final Design n Utilities and Permits n Construction n Quality Control / Assurance n Inspection/Testing n Safety Contract Owner / Agency issues RFP Contractor submits proposal Contractor awarded by “best value” or lowbid

Project Delivery Method – Market Share

Design Build – Market Size in US

Design-Bid-Build Feedback Cycle Contractor Architect Consultants Program Re-Program Design Re-Design Trade Contractors Test Phase Long Delay Effect of Delayed Feedback • Design Effort Wasted • Design/Project Schedule Extended • Options Constrained • Upward Drift in Project Cost

Design-Bid-Build

Feedback in Design-Build Projects Design/Builder GC + Architect Consultants & Key Subs Test • Continuous Cost Data • Rapid Estimation (BIM) Key Subcontractors • From Engaged Contractors

Disadvantages Designers of record and contractor on same team n Prequalification process can extend contract award process n Owner does not pick A/E directly n Criteria/Bridging A/E cannot propose on design-build team n

Determining The Right DB Strategy n Strategies available ¨ Best Value ¨ Lump Sum n n Design competitions Stipends ¨ Why pay a stipend ¨ How to determine the amount of the stipend n How far to take the criteria/bridging documents

Develop DB Agreement To Achieve Project Objectives n Deal Point Summary ¨ Project objectives and goals ¨ Compensation ¨ Project management ¨ Communication flow ¨ Change orders ¨ Dispute resolution process ¨ Project charter/teaming agreement

Team Composition Skills Technical expertise ¨ Problem solving/decision skills ¨ Interpersonal skills Diversity ¨ Experience & knowledge ¨ Creative tension Size (5 -9) ¨ Small = efficient = 4 or 5 ¨ Large = creative <=12 ¨ Smallest team necessary Personality ¨ Collaboration (1/3 not collaborative) ¨ Command control ¨ Firm culture ¨

Team Organization Cross-functional teams § Interdisciplinary ¨ Systems or areas § Discrete whole ¨ Cost, scope and responsibility § Design, construction, cost, schedule, commissioning Duration § Dependent on function § Package work to teams, not teams to work Teams within teams External or internal coordination

Team Agreement n n n Mission Statement Value Statement ¨ What is most important to team Behaviors ¨ Process & strategy n n n Measurable Goals ¨ Value ¨ Goals ¨ Target ¨ Metric Communications Teams ¨ Leadership ¨ Cross-functional

DBE Selection– A Two-Step Process n Step 1 - RFQ/Pre-Qualifications ¨ Process ¨ Establishing requirements ¨ Scoring SOQ’s ¨ Shortlisting (5 -6 teams) ¨ Interview proposed teams ¨ Notice to qualified proposers n At least 3 and no more than 5

DBE Selection (Continued) n Step 2 – RFP ¨ RFP must be clear and concise ¨ Define the process ¨ Confidential meetings ¨ Evaluation/scoring of proposals n Evaluation criteria n Weighting of evaluation criteria n Criteria compliance ¨ Interviews ¨ Selection ¨ Award

Criteria Compliance Log - Sample

Facilitating Design Process n Basis of Design ¨ Proposal n presented to all stakeholders Program Verification ¨ Owner/stakeholder n involvement Systems Confirmation ¨ Conformance with criteria Target Value Design Process n “Construction Documents” n

Quality Control n Design Quality ¨ Design issues log ¨ Requests for clarification ¨ Requests for information ¨ Design reviews n Construction Quality ¨ Submittal reviews Action n Information n

Design Issues Log - Sample

Quality Control n Inspection & Testing ¨ Inspector of Record ¨ Testing & Inspection n n Start-up & Testing Punch-list

Commissioning & Acceptance n Commissioning ¨ Compliance with criteria Beneficial Occupancy n Full Occupancy n Transition Plan n Warranties & Guarantees n

Design and Build under PEC bidding Doc and Two Stage Two Envelop Procedure n For all works with estimated value of more than Rs. 25 Million. ¨ ¨ ¨ Instructions to Bidders Bidding Data General Conditions of Contract, Part-I (GCC) Particular Conditions of Contract, Part-II (PCC) Specifications - Special Provisions. Specifications - Technical Provisions. Letters of Bid & Appendices to Bid Sample Price Schedule. Form of Bid Security Form of Contract Agreement Form of Performance Security/Bond & Mobilization Advance Guarantee/Bond Drawings (Conceptual Design-Indicative Line Diagram)

Specifications-Technical Provisions n n Employer to prepare and incorporate the brief specifications to provide guidelines and enable the Bidders to design the Works. Bidders shall prepare the detailed technical specifications, to be approved by the Employer, in line with the design. A clause setting out the scope of the Works is often included at the beginning of the Specifications, and it is customary to give a list of the Drawings. As the Contractor is responsible for the design of the permanent Works, the extent of his obligations must be stated.

Drawings: n n n An Indicative Line Diagram and brief specifications are to be prepared and incorporated by the Employer The bidders shall provide preliminary design drawings, design criteria and technical details as part of their Technical Bid under TSTE Under SSTE, the employer to prepare, in advance, the conceptual design drawings which would be attached by the Employer under the title of Drawings

Bids: n Bid to include, the prices for all the works including design, execution and completion of all the works as required under the Price Schedule. n SUBMISSION OF BIDS FOR TWO STAGE TWO ENVELOPE BIDDING PROCEDURE ¨ ¨ ¨ ¨ Bidder shall submit his TECHNICAL BID and PRICE BID in separate inner envelopes and enclosed in a single outer envelope. ORIGINAL and each copy of the Bid shall be separately sealed and put in separate envelopes and marked as such No bid may be modified by a bidder after the deadline for submission of bids unless specified The Employer shall examine the Technical bids thus complete the technical evaluation. The Employer shall notify Bidders in writing who have been rejected Those Bidders willing to meet the Employer’s requirements, shall be called for further discussion. The bidder shall submit the revised Technical Bid with Supplementary price bid

Appendices to Bid n SPECIAL STIPULATIONS-Clause-Conditions of Contract (BA-1) n FOREIGN CURRENCY REQUIREMENTS (If required and only in case of International Bidding) (BB-1) n PRICE ADJUSTMENT UNDER CLAUSE 70 OF CONDITIONS OF CONTRACT (BC-1) n PRICE SCHEDULE (BD-1) ¨ The Bidder shall enter a prices in the Price Schedule against the pay items indicated for performing all design, procurement, manufacturing, establishment, material supply, and processing, construction, quality assurance, quality control, testing, commissioning and all other works to implement the total project, as described in these documents, as prescribed therein. ¨ The whole cost of designing, executing and completing the works is deemed to be covered in the pay items of the price schedule

Price Schedule Item No. 1 2 Description Total Amount (Pak Rupees) Milestone -1 [Component of Work] [Amount to be filled in by the Bidder] Milestone-2 [Component of Work] [Amount to be filled in by the Bidder] Day Work (Provisional Sum) 3 [Amount to be filled in by the Employer] TOTAL [Sum 1+2+3 to be completed by the Bidder] Schedule of Progress Payment Milestone No. 1 1. 2 1. 3 2 2. 1 2. 2 2. 3 Description Milestone-1 Activity-2 Activity-3 Milestone-2 Activity-1 Activity-2 Activity-3 Instalment in Percentage of corresponding activity w. r. t. Milestone [to be filled in by the Bidder] [to be filled in by the Bidder]

Day work Schedule n n n Work shall not be executed on a day work basis except by written order of the Engineer. Bidders shall enter basic rates for Daywork items in the Schedules, which rates shall apply to any quantity of Day work ordered by the Engineer. Nominal quantities have been indicated against each item of Daywork Labour ¨ Daywork Material ¨ Daywork Constructional Plant ¨

DAYWORK Summary (Daywork) Amount (Rs. ) (I)Total for Daywork: Labour: ______ (II)Total for Daywork : Materials: ______ (III)Total for Daywork: Constructional Plant: ______ Total for Daywork: __________ (Carried forward to Summary Page of Bill of Quantities)

PROPOSED CONSTRUCTION SCHEDULE Description Time for Completion a) Whole Works _________ days b) Part-A _________ days c) Part-B _________ days d) __________________ days e) __________________ days

METHOD OF PERFORMING THE WORK n A narrative outlining the method of performing, design and execution of the Work n Organization Chart indicating head office and field office personnel involved in design , management and supervision, engineering, equipment maintenance and purchasing n Mobilization in Pakistan, the type of facilities including personnel accommodation, office accommodation, provision for maintenance and for storage, communications, security and other services to be used. n The method of designing and executing the Works, the procedures for installation of equipment and machinery and transportation of equipment and materials to the site n Quality Control/Quality assurance measures to be adopted including procedures to be followed for carrying out all tests required under

LIST OF MAJOR EQUIPMENT – RELATED ITEMS Owned Purchased or Leased 1 a. Owned b. To be Purchased c. To arranged Lease be on Description of Unit (Make, Model, Year) Capacity HP Rating Condition 2 3 4 Present Location or Source 5 Date of Delivery at Site Period of Work on Project 6 7

n n n CONSTRUCTION CAMP AND HOUSING FACILITIES LIST OF SUBCONTRACTORS ESTIMATED PROGRESS PAYMENTS ORGANIZATION CHART FOR THE DESIGN/SUPERVISORY STAFF AND LABOUR Quarter/ Year/ Period Amounts (1, 000 Rs. ) 2 1 Ist Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter 5 th Quarter 6 th Quarter 7 th Quarter 8 th Quarter 9 th Quarter Bid Price

CONCEPTUAL DESIGN n The bidder shall provide herein preliminary design including Drawings, design criteria and relevant technical detail to enable the Employer to judge the competence of the bidder for qualifying the bidder in his Technical Bid (including other appendices also for this purpose) and to determine his responsiveness]