CIV 511

Construction Methods and Project Management

Procurement Management

Dr. J. Berlin P. Juanzon CE, MBA, MSCM

 SAFETY AND CONSTRUCTION
RISK INDUSTRY
MANAGEMENT

FINANCIAL
SCOPE
MANAGEMENT
MANAGEMENT

CONSTRUCTION
TIME PROJECT
MANAGEMENT MANAGEMENT PROCUREMENT
MANAGEMENT

COST
MANAGEMENT HUMAN
RESOURCES
QUALITY MANAGEMENT
MANAGEMENT
 Procurement Process
• Definition
It is the process required to supply
equipment , material , service and other
resources needed to carry out a project
that satisfy customer

3
Developing Procurement Strategy
• Traditional or Design-Bid-Build
– This is probably the most commonly used
method of procurement and it is suitable
for:
• all clients, including inexperienced clients
• complex projects and projects where
functionality is a prime objective
• time predictability
• cost certainty.
 Developing Procurement Strategy
• Traditional or Design-Bid-Build
– The client appoints a team of consultants to prepare a design,
plus tender documents.
– The client appoints the building contractor to construct the
works to the design, by the contract completion date and for the
agreed price.
– Usually much of the work is sub-contracted to specialist firms
but the contractor remains liable.
– The consultants administer the contract on behalf of the client
and advise on aspects associated with design, progress and stage
payments which must be paid by the client.
• Not suitable for fast track projects
Developing Procurement Strategy
Design and Build
– This method of procurement involves the
contractor being responsible for design as
well as construction, it can be suitable for:
• all clients, including inexperienced
clients and those requiring distance from
the project.
• cost certainty
• faster track
Developing Procurement Strategy
Design and Build
– The main contractor takes responsibility for
both design and construction and will use
either in-house designers or employ
consultants to carry out the design.
– Most of the construction work will be
carried out by specialist or sub-contractors.
- Not suitable for:
• an uncertain or developing client brief
• complex buildings
 Developing Procurement Strategy
• Management Contracting
– The client appoints designers and a contractor
(management contractor) separately and pays the
contractor a fee for managing the construction
works.
– This is suitable for:
– fast track projects
– complex buildings
– a developing brief
• However, it is less suitable for:
– inexperienced clients
– cost certainty before starting construction
– clients wanting to pass risk to the contractor
 Construction Contracts
• Contracts are generally awarded by owners
separately for design and construction
• Types of Contracts
– Stipulated sum/unit price
– Cost Plus
– Management
 Construction Contracts
• 1.0 STIPULATED SUM / UNIT PRICE
• Stipulated sum and stipulated unit price
are grouped together because of the
similarity of their cost control requirements
as described separately from the
contractor’s and owner’s view point.
 Construction Contracts
• 1.0 STIPULATED SUM / UNIT PRICE
• A Contractor in a stipulated sum agrees
to construct project for a fixed amount no
matter what difficulty or expenses he
encounters. The remuneration may be made
in a series of partial payments after
acceptance of the contractor’s work
 Construction Contracts
• Unit price
• A “unit-price contract” is one on which
payment for the work is to be based on the
computed quantities of work performed on
specific work items and materials furnished
and used by the contractor on the project,
each such quantities being multiplied by the
contractor’s bid price of the unit.
 Construction Contracts
• 2.0 COST-PLUS
“Cost Plus” is another type of contract. The
prime contractor is generally involved prior to
completion of the contract documents, when the
scope of work is not clearly defined. The contractor
is reimbursed for his actual expenditures and is paid
a fee for supervision. The fee paid to him may be
based on a percentage of the cost of the work or a
fixed amount predetermined as compensation for his
services.
 Construction Contracts
• 3.0 PROJECT MANAGEMENT CONTRACT
•
• The third type of contract is the Project Management
Contract. It provides a method for project development
where the owner hires the Project Manager who in turn
employs the services of architects, engineers, and other
consultants. In this method, the initiation of policy,,
programming, budgeting, design, and construction are
controlled by a team of professionals under the direction
of a project manager.
Bidding Process

16
 Qualification of Bidders
• Pre-qualification documents:
– Information about the firm
• Owners
• Organization chart
• Company background
• General office location
– Business licenses
• Business permits
• SEC/DTI registration documents
• BIR registration
• Contractors license
• SSS/Pagibig registration
 Qualification of Bidders
• Pre-qualification documents:
– Technical capabilities
• Years of experience
• List of projects completed
• List of technical personnel
• List of equipment
• Experience in related projects
– Financial capabilities
• Financial Statements
– Balance sheet and Income statements
• List of accredited suppliers with credit lines
• Bank references with credit lines
 Bidding Information
• The bid documents are sent out with the
drawings and specifications to the qualified
bidders.
• This section of the documents contains:
– Invitation to Bid
– Instruction to Bidders
– Bid Forms
 Bidding Information
Invitation to Bid
The invitation to bid is a request for
pricing. The owner usually prepares it with
the assistance of the designer or
construction manager.
It contains:
1. The type of project.
2. The size of project
 Bidding Information
Invitation to Bid
3. Location of the project
4. Bid due date
5. Start and completion dates
6. Bonds
7. Document location
8. Legal requirements
 Bidding Information
Instruction to the Bidders
The instruction to bidders are usually
bound in the specification. Although they
may repeat some of the information in the
invitation to bid or on the bid form, the
instruction are mostly concerned with the
following:
 Bidding Information
Instruction to the Bidders
1. Bid due date
2. Instruction about filling our the form
3. Places to indicated fees for additional work
4. Unit Prices
5. Location to deliver the bid
6. Method of awarding contracts
7. Expected dates of award and start of project
 Bidding Information
Bid Form
The bid form is the document on which
the bidder submits the price. The form is
usually prepared by the designer, with
blanks left to be filled out by the bidder.
This makes the bids more easily
comparable.
 Bidding Information
Bid Form
Items may include some or all of the
following:
1. Name of contractor
2. Price both in numbers and in words
3. Price breakdown for major trades, which can
guide progress payments
4. Amount of bonds
5. Fees for additional work
 Bidding Information
Bid Form
6. Unit prices if quantities are unclear
7. Key subcontractors
8. Legal status: (Single proprieor. Corporation or
partnership)
9. Signature of authorized representative of the
firm, title and date
 Contractual Information
• The contract issued with the construction
documents goes to the firm that will
perform the work. This includes:
– Agreement
– General Conditions
– Special Conditions
– Sample of Bonds
– Insurance requirements
 Contractual Information
• Agreement
– Identification of the parties
– Description of the project and the work
– Date of start
– Date of substantial completion
– Liquidated damages
– The contract sum
– Progress payments
– Interest rate
– Retainage
 Contractual Information
• General Conditions
– The purpose of the general conditions is to
establish he legal responsibilities, obligations,
authority, and rights of all parties involved in
the project.
 Contractual Information
• Special Conditions
– The special conditions are sometimes called
supplementary conditions or special provisions
of the contract.
– They are intended to supplement the general
conditions and are project-specific.
– Special conditions include additional owner
requirements such as provisions for prevailing
wages and additional insurance requirements
 Contractual Information
• Bonds
– If the contractor fails to perform in accordance
with the contract, a bond will protect the owner.
– There are four types of bonds commonly
required in construction:
• Bid bonds
• Performance bonds
• Payment bond
• Guarantee bond
 Contractual Information
• Bid Bonds
These are furnished with the bids and basically
guarantee that the contractor will enter into a contract
with the owner for the price of the bid.
• Performance bonds
• These guarantee that the contractor will perform the
contract with the terms of the agreement. If the
contractor goes bankrupt or otherwise cannot
complete the work, the bonding company becomes
liable for it.
 Contractual Information
• Payment Bonds
Also called labor and material bonds, these assure the
contractor will pay all bills, thus leaving the owner
unharmed by claims and liens.
• Guarantee bonds
• These guarantee that the contractor will guarantee
the quality of work completed within a period of one
year prior to release of retention money to the
contractor.
 Contractual Information
• Insurances
– To be purchased by the contractor as required
by the contract to protect the contractor against
risks during the construction period.
– Types of insurances:
• Workers’ compensation
• Comprehensive liability
• Contractor’s All Risk (CAR)
 Contractual Information
• Workers’ compensation
– This insurance covers disability and medical
treatments for injuries resulting from accidents
that occur during the construction employment
• Comprehensive liability
– This provides protection from third-party
claims. It covers injury to non-workers at the
site, damage caused by construction vehicles,
damage caused by sub-contractors.
 Contractual Information
• Contractors’ All Risks (CAR)
– This is essentially property insurance for the
building while it is under the control of the
contractor. It covers losses resulting from fire,
smoke, water, explosions, vandalism, and theft.
 Technical Information
• The technical information is resented in two
formats: drawings and specifications.
• These two different formats (one graphic
and one narrative) do not exist
independently but as a unit.
Technical Information
 Technical Information
• Technical Specifications
– The technical specifications are written
descriptions of the quality of the project.
– They detail the materials, equipment, and
workmanship to be incorporated into the project
– Types of Specifications:
• Design specifications
• Performance specifications
• Proprietary specifications
• Open specifications
 Technical Information
• Design Specifications
– These are also known as descriptive
specifications.
– They are detailed descriptions of materials,
workmanship, installation, and erection
procedures.
– The contractor’s obligation is to follow the
instructions as laid out in the specifications
 Technical Information
• Performance Specifications
– These lay out the expected results of the work and
leave the methods to the contractor.
– Performance may be expressed in terms of:
• Operational capacity
• Functional qualities
• Appearance
• Finish
• Color, texture, structural tolerance
Master Format Specifications
 CE BOARD NOVEMBER 2000
A project has been bid out by the DPWH. The
approved agency estimate (AAE) is 500M
pesos. The results of responsive bidders are as
follows:
Bidder A- P550,234,41.98
Bidder B- P620,345,763.12
Bidder C- P454,218,557.98
Bidder D- P389,122,897.44
Bidder E- P284,758,426.54
 CE BOARD NOVEMBER 2000
The implementing rules and regulations of PD1594
states that no award of contract shall be made to a
bidder whose bid price is higher than the allowable
government estimate (AGE) or AAE, whichever is
higher, or lower than 70% of AGE. The allowable AGE
is defined as one half the sum of the AAE and the
average of all responsive bids. For the purposes of
determining the average responsive bids, bids higher
than 120% of the AAE or lower than 60% of the AAE
shall not be considered. No negotiation will be allowed
to bring down the bid to the level of the AAE/AGE.
 CE BOARD NOVEMBER 2000
1. Who are the qualified responsive bidders?
2. What is the average of all responsive bidders?
3. What is the value of the approved agency estimate
in peso?
4. What is the maximum bid price for the project?
5. What is the minimum bid price for the project?
6. To which bidder can the project be awarded?