Procurement Strategy 採購策略Procurement Strategy 採購策略 KCTang Sat, 20/12/2014 - 22:17
Why Contract Out? Why Call for Tenders?
- Find someone to do it for you
- More capable
- Statutorily qualified
- Less costly
- Accountability in case of joint venture
When to Decide?
- As early as when the first project programme is developed
Which Types of Contractual Arrangement?
- Traditional or special?
Choices of Contract Types based on
- Design and build
- Design, build and operate
- Management contracting
- Construction manager
- Based on firm bills of quantities, with reference to drawings and specification
- Based on provisional bills of quantities, with reference to drawings and specification
- Based on drawings and specification, without bills of quantities
- Based on pre-priced schedule of rates, competing on adjustment percentage
- Lump sum total, with unit rates
- Rates only, without total
Degree of Risks
- Fixed price
- Price with fluctuation
- Cost plus fee (lump sum fee, fixed percentage fee, scaled percentage fee, sharing)
- Ceiling price / Guaranteed maximum price
- Demarcation between Costs and Fee
- All funded by the employer
- Private finance initiative – public-private partnerships
How to Package Contracts?
- Optimum balance between the time required to complete every design and the time required to construct
- Optimum balance between single line responsibility and more control over choosing sub-contractors and suppliers
- Specialist works by specialist contractors/sub-contractors
- Responsibility for delivery time and wastage to be watched out if nominated supply contracts are used
Usual Contract Packaging
- Demolition Contract
- Piling Contract
- Main Contract
- Supply Contract
- Other Direct Contracts
Which Form of Contract?
- Private or public?
- Domestic or international?
- Standard form or specially drafted?
- Old or new versions?
- With how much amendments?
- How harsh?
- Soil conditions
- Underground obstructions
- Phased possession of site and completion
- Time for completion
- Liquidated damages
- Grounds for extension of time
- Grounds for monetary claims
- Insurances and bonds
- Defects liability period / defects rectification period
- Payment terms
Guaranteed Maximum Price 封頂價Guaranteed Maximum Price 封頂價 KCTang Sat, 20/12/2014 - 22:35
- What does “guaranteed maximum price” mean?
- It means the maximum price payable to the Contract after completion of the Works and defects rectification.
- Who is to bear when the final price is more than the guaranteed maximum price?
- The Contractor.
- From the Contractor’s point of view, Individual cost overruns must be allowed to be balanced by individual cost savings.
- Who is to gain when the final price is more than the guaranteed maximum price?
- The Employer. The Contractor may have a share.
- Why a guaranteed maximum price is required?
- The Employer wants certainty in budgetary control.
- When would a guaranteed maximum price arrangement be feasible?
- The design is not fixed yet such that the Contractor can design to within the guaranteed maximum price
- The design is complete but the Contractor can provide better alternatives.
- What kinds of employers would prefer a guaranteed maximum price contract?
- Non-professional developers and owners.
- Those who want certainty in budgetary control.
- Those who want to seek excellence in design and construction management.
- What types of contractors are qualified for a guaranteed maximum price contract?
- Those who have design expertise.
- Those who have site management team understanding the risks of guaranteed maximum price contract.
- Why are guaranteed maximum price contracts used more in the United States?
- The Contractor is on-board upon the inception of early design stage.
- The Contractor is responsible for the design or the development of design.
- The Architect only provides schematic design or design intent.
- When can the guaranteed maximum price be varied?
- What should constitute a Variation?
- “A material change in the nature, type, quality or quantity of any goods, materials or workmanship specified in the GMP Works Contract. A change to any work including advance preparation and procurement works which has been commenced or completed at the time the variation is issued. A change to any specified sequence, timing (including acceleration measures) or method of construction. Every case excludes Design Development” ???
- What is design development?
- Development of the brief or design intent into working details for construction.
- “Any development or progress of the design of the Works from the state of the design set out in the Contract towards finalization in a form suitable for construction and includes the clarification, elaboration, supplementing and/or augmenting of any method statement, drawing, specification or any other document or thing pertaining to such design.” ???
- What is design development instruction?
- “Any Instruction issued by the Management Contractor to the GMP Works Contractor in relation to Design Development including the provision of drawings, details, or information necessary for the GMP Works Contractor to carry out and complete the Works which instruction shall not initiate an adjustment to the GMWP and shall not constitute a Variation.” ???
- “The Design Development process shall not include the introduction of Variations as defined, such Variations shall only be ordered by GMWP Instructions.” ???
- How should the Contractor tender and price for guaranteed maximum price contracts?
- Make sure that there is room for cost saving from the tendered design.
- How can the Contractor survive after tender award?
- Make sure that there is room for cost saving from the tendered design.
- Why is design development important to the Contractor?
- Put the design under the Contractor’s control to ensure that the final design, materials, workmanship and method would not exceed the guaranteed maximum price.
- Should the Contractor want for the design details to be provided by the Architect?
- No, the chances are the Architect will want to perfect and upgrade the design such that the costs will become higher.
- How should the difference between a prime cost sum and its initial awarded sum or its final expenditure be treated?
- How should the guaranteed maximum price be adjusted for direct loss and/or expense, liquidated damages, acceleration, costs of defects rectification, and the Contractor’s alternative design proposals, provisional quantities, p.c. rates?
Demarcation between Costs and FeeDemarcation between Costs and Fee KCTang Fri, 12/01/2018 - 13:55
22nd August, 2005
For cost plus contracts, arguments can easily arise as to whether an expenditure should be treated as part of the reimbursable costs or part of the fees. Essentially those items which can be carried out by the head office of the Contractor rather than on site may be regarded as part of the office overheads and therefore as part of the fee rather than costs. Contractors would try to argue in reverse. Items which need careful descriptions in the cost plus contracts to avoid arguments include:
Types and extent of design responsibilities.
Types and number of head office supervisory, technical and clerical staff to be employed and deemed to be part of the fee.
Types and number of supervisory, technical and clerical staff to be specifically provided for the Contract and chargeable as costs.
Expenses in connection with sub-letting which can be done by the tendering and purchasing department of the Contractor at the head office or alternatively by a dedicated team, such as sourcing tenderers, preparing tender documents, inviting tenders, analysing tenders, preparing contracts.
Types and extent of attendance of head office administrative nature rather than physical work upon sub-contractors and suppliers.
Effects of fluctuations in the costs of labour, materials or plant, exchange rates of currencies, or Government taxes, fees and charges.
Interests on money, finance charges, patent right and royalty.
Entertainment expenses for customers and visitors, customary mid-year and year end gift expenses, expenses in connection with ceremonies at commencement of works, completion of works or part thereof, celebration and obituary offering expenses.
Types and extent of taxes, fees or charges.
Costs in connection with the obtaining of permits, approvals, consents from Government, local authorities and statutory undertakers.
Import duties, custom clearance, administrative handling charges.
Types and extent of usual preliminaries to be deemed to be part of the fee.
Extent of Contractor's site office expenses including costs of stationery, paper, accounts, printing, fuels, office equipment.
Site transportation vehicles including fuel charges, insurances and license fees.
Extent of Contractor's communication expenses such as postal charges, telex, telegram, long distance calls, etc.
Contra-charges imposed by the Builder for loading and unloading of materials, use of lifts and hoists, removal of rubbish, use of water and electricity, damage by one trade upon the other
Acceleration and overtime to catch up programmes.
Preparation of periodic reports and programmes.
Taking of progress photographs.
Provision of portable safety measures, first-aid kits.
Accidental damage to utilities, roads and footpaths.
Types and extent of protection, cleaning, rubbish removal and maintenance work during construction.
Setting out team and responsibility.
Types and extent of insurances. Deductibles under insurance policies.
Types and extent of common plant, tools, etc.
Extent of scaffolding, working platform at high levels, temporary supports, etc.
Extent of hoardings, screens, protective covering to be provided.
Establishment, operation and removal of storage sheds, workshops, offices, latrines.
Use of telephone, water and electricity. Provision of temporary plumbing, electrical installation, etc.