Package Procurement the Right Way

Procuring the work packages can make or break a construction project. Following the steps set out in this article will help reduce the risks associated with work package procurement, give you more control and ultimately improve your business performance.

Like all successful projects, planning and the time and effort invested upfront are paramount to the project’s subsequent delivery and commercial success. There are a few key steps to follow that will improve performance. Each of the steps below could be expanded further, and the VOLOCO team can do that.

Tendering/procurement of work packages can occur at different times in a project and vary depending on the complexity of the project and the form of contract chosen by the client.

In this article, we have elected to use the term work package contractor, but this can be read as sub-contractor or trade contractor.

Work package identification and procurement strategy

• Review the documents (drawings/specifications/other project requirements)
• Identify the work packages that need to be procured
• May include brief notes outlining high-level scope information
• Identify how each package is to be procured (competition/negotiation)
• Identify which packages will have design responsibilities passed to the work package contractor
• You may begin to identify the work package contractors you would like to price the works and may engage in some very early discussions to ascertain their capacity and desire

Procurement schedule

• Use construction programme information
• Identify start on-site date for each package then work backwards to identify
  • Period required for lead-in/mobilization
  • Period required to prepare and issue order
  • Period required to review and compare package prices
  • Period required by the package contractors to price and return the tender
  • Period required to prepare and issue the work package enquiry
  • Period required to produce the scope of work for the package
• The above should be recorded clearly in a format that can be updated/monitored/managed
• Use this document to identify priorities and sequence for procurement (it may not be the same as the construction sequence)

Work package scoping

• Review the tender documents including
  • Preambles and preliminaries
  • Drawings
  • Specifications
  • Programme
  • Any other relevant documents
• Mark-up drawings (colour coding work packages with highlighters or directly onto PDF’s) to ensure each element is covered within a package
• Add notes to the drawings as you think about the work packages
• Pay particular attention to all interface details
• Consider the sequence of each element
• Do not forget temporary works that may be necessary to facilitate permanent works (you’ll need to cover this somewhere including design and checking)
• If the project is Design & Build, the drawings you are looking at may not include all the details required – you will need to use your experience and knowledge to identify anything missing and ensure you include them somewhere
• Think about the attendances necessary for the performance of the work package contractors and be clear about what you want them to provide. Record this in a simple tick list form to be issued with the enquiry
• Depending on the size of your business, the work package and the resources you have available, holding scoping workshops that involve individuals from your organisation who have responsibilities for operations, design and cost is a real benefit

Preparing work package enquiries

• Identified list of contractors for each work package
• You may have an approved supply chain to select from where contractors have been “pre-qualified” on criteria that may include
  • Experience
  • Financial stability
  • Health, Safety, Quality & Environmental standards
• Ensure you have spoken to the work package contractors before deciding on the final list and sending the enquiry. This discussion should capture…
  • Capacity to price within your timeframe
  • Capacity to deliver the work within your timeframe
  • Desire to be part of the project
  • Note: This will make them feel engaged in the process already and more likely to submit a return than a cold written enquiry.
• Include a cover letter/email outlining the highlights for easy reference. This should typically cover
  • Who you are sending the enquiry (full company name and contact details)
  • Project name, location and brief description
  • Your client’s name
  • What work package you are asking them to price and if to be designed by them
  • If the price is to be lump sum / remeausurable
  • List main attachments / enclosures
  • High-level programme information
  • The main form of contract including any damages
  • Form of sub-contract to be used for the work package
  • Payment terms
  • Note any bond or warranty requirements
  • Contact details for them for queries and to submit pricing to
  • Deadline by which the price needs to be submitted (date and time)
• Develop a document register to schedule out the documents that form part of the enquiry (some projects have a large number of documents, and there is no harm in including them all, but make sure you draw the work package contractor’s attention to the package-specific information (simply highlighting them in the register would do this)
• Include drawing mark-ups developed in scoping if their inclusion makes pricing clearer and ensures the full scope if priced
• Develop a pricing/activity schedule that sets out the descriptions that you want to be priced against (this will sometimes be a Bill of Quantities, a simple list of activities or just an invitation to submit an all-in, fixed price, lump sum for smaller work packages
• Populate an attendance matrix that reflects the work done in the package scoping exercise (this can include items such as access, lifting, materials distribution, power, water, site welfare facilities, site office accommodation etc)
• Note any particular areas for co-ordination and/or interface with other work packages
• Issue the enquiry in a way that means you retain a copy of what has been sent. Electronically is the most expedient method and there are specific procurement packages that allow this, but equally can be done through cloud storage and sharing platforms

Mid-tender review meetings

• Maintaining dialogue with the work package contractors is essential
• Mid-tender review meetings serve as an ideal forum allowing people to meet face-to-face an discuss the project in detail
• A loose agenda for such a meeting might include…
  • Capacity / desire
    • Including current workload, turnover, number of operatives
  • Relevant experience
    • Confirm if the package contractor is likely to be able to deliver based on previous experience
  • Productivity / programme
    • Use this to test your own thoughts on the programme and refine it as necessary (including the requisite lead-in period)
  • Specification/quality (including finishing and detailing) –
    • Discuss the specific quality standards for the project and any particularly challenging details etc
  • Risks & Opportunities
    • This will help you with your own Risks & Opportunities but is also a way of gauging how well the package contractor understands the project
  • Value Engineering / options
    • Similar to above, but can be used to gain a competitive edge in tendering (fine line between offering Value Engineering in a tender and giving up your unique knowledge, effort and insight that may subsequently be shared with your competitors – this does happen and it never feels fair when it does)
  • Method / Health & Safety
    • It is critical to understand that your supply chain can deliver the project in a way that aligns with the overall plan and most importantly, do it safely
• Any discussion is good and encourages questions from the work package contractors
• This step will provide you with increased time and cost certainty from the outset (it’s also a great learning environment to “upskill” your knowledge of particular work packages)

Comparison and analysis of work package pricing

• This step is important and will enable you to make true “apples for apples” comparisons, drive out anomalies and ensure you identify the best value package contractor
• Set up a template that allows you to make accurate comparisons
• Identify any excluded items and in the interim “plug” them using a rate/price from another package contractor’s pricing
• Ensure that they have allowed their preliminary costs (if applicable) for the correct programme period
• Identify any items that consistently across all returns have not been priced – you may need to provide additional information
• Look for any unexpectedly large price differences on items between returns – you might need to ensure the same thing is being priced and/or provide further information
• Schedule out the notes/clarifications that are usually submitted with work package pricing returns then ensure you…
  • Review and decide if each clarification is acceptable
  • Take any further action necessary to verify/accept/eliminate and
  • Feed any pricing update into the comparison document
• Once this step has been undertaken along with the more qualitative assessment made during the mid-tender review meeting, it will put you in a strong position to select the best value price/work package contractor

Work package pre-order meeting

• Final opportunity to review the project details with the preferred work package contractor including…
  • Pricing
  • Scope and attendances
  • Method
  • Programme
  • Quality
• Note: This meeting is not a contractual commitment and you may need to be prepared to hold with more than one contractor per package if the process uncovers any further issues that cannot be resolved or do not present best value
• With large projects/packages, holding a Post Tender meeting with each of the package contractors pricing may help

Work package orders

• The order process ought to be straightforward having followed the process above and should include…
  • The documents that formed part of the enquiry
  • The agreed headline programme
  • Breakdown of the agreed price
  • Clarify if lump sum or remeasurable
  • Records of any agreements made during the tender process
  • Ensure the order is issued with sufficient time for the preferred work package contractor to review/sign/return to avoid any discrepancies or uncertainty surrounding the contents of the order

Conclusion / call to action

Remember…

• Make it obvious what you are asking people to price
• Make sure it is relevant (don’t ask a painter to price plumbing work)
• Regular touch-points of clear meaningful communication are important
• Transfer risk but don’t hide it – no gain in the long run
• The cheapest 1^st cost is not necessarily best value in the end (and rarely is)

There are 2 key ingredients for successful procurement…

• System/process to follow
• Knowledge/experience

VOLOCO can help your business take control of procurement to significantly reduce risk, increase margin and improve cashflow. We have the system/process, knowledge, and experience to do this.