CIS Blog

24/02/2014 - Facing and Resolving some of the Common Challenges in the Procurement Process

It is no great leap to say there are problems with the procurement process. Current economic and competitive pressures only serve to aggravate these problems resulting in a process fraught with obstacles and potential nightmares. A recent article in the Irish Times by Bruno Herbot expresses the frustrations felt by procurers and tenderers alike.

Compliance with statutory procedures can pose a real challenge to procurers. This is particularly true for publicly funded clients and particularly with EU procedures. The tenderer faces even greater challenges with cut throat competition, short tendering time and pressure on all important strategies.

Mistakes are inevitably made in such a high pressure environment. The results of these mistakes are always expensive. Either the tendering process must be re-run or the errors remain in the contract only to surface again later and cause expensive disputes.

No panacea will remedy or prevent all of these problems. However some common problems arise again and again in the procurement/tendering processes. By taking care to watch out for these issues and taking steps to avoid them the inherent difficulties of the process can be minimised for both tenderers and procurers alike.

Conflicts and Errors within Tendering Documents

For Public Procurement the Bill of Quantities is no longer the prime document since the introduction of the PWC contracts. It can thereby no longer be relied on to resolve the conflicts between the various design responsibilities.

The separate Work Requirement documents of architects, designers and engineers will inevitably contain significant differences which if not resolved before tender issue will provide opportunity for unscrupulous contractors to take advantage and offer the option of least cost to the unwary client/designer.

The prudent design team will carry out that all important check pre-tender. Whilst not ideal, a post tender review of the rates in the pricing document compared with the expected work requirement item should in many cases be enough to highlight areas of concern. This allows procurers to bring up these issues up before entering into contract and avoid a potential dispute/additional cost for the client at a later time.

Such differences can be quiet subtle, such as a reference made in a specification not appearing on a drawing. As was recently observed in one of our own pre-award meetings an under priced window package did not include an essential safety feature. The prospective contractor argued that it did not appear on the supplied drawings. Though his argument was not accepted, it was nevertheless decided to be prudent and re-tender rather than risk an expensive post contract dispute.

Abnormally Low Tenders

One of the main problems created by abnormally low tenders (ALTs) is the process of investigation required to confirm that they are in fact ALTs. Even when this process is carried out it is often inconclusive. This is entirely a result of recession in the construction industry

Ultimately ALTs undermine the entire tender process. They can also have potentially catastrophic consequences such as insolvency for the ALT contractor trying to fund his business through cash flow alone.

For the client the apparent benefit of a substantial discount is always negated through below quality work, through claims to recover the lost sums or the expense of retendering a half completed project for which he will carry the liability of latent defects.

To guard against ALTs the procurer must have reference to a recently prepared budget as well as establishing a figure below which a tender should be considered an ALT and prompt an investigation.

Under public work contracts ALTs are considered non-compliant tenders. However, establishing that a tender is abnormally low becomes particularly difficult where a number of apparent ALTs have been received. This requires a thorough and fair investigation that complies with the Information to Tenderers document.

Some UK courts hold the view that public authorities are bound to investigate the nature of a tender where an ALT is suspected. The investigation is then on the record should subsequent challenges occur. The EU is due to issue revised directives on ALTs in 2014.

Non Compliant Tender Documentation

A particular problem relates to tender offers that do not match the last issued tender documentation. Changes are often made to documents through the tender process as clarifications are made and designs revised.

The risk is that some tender changes may not be received or acknowledged by the tenderers. It then becomes unclear whether their tender is based on the original or revised documentation.

The golden rule is that all communication with tenderers should go through just one nominated party and written confirmation of all communications be sought from the tenderer. Silence will not constitute assent. Public procurers must also clearly identify any changes from the original on the issued documentation. If they are not, the tenderer may be within his rights to ignore the change particularly if it might increase their price.

The timing of these changes can be a serious issue for tenderers, as estimates may already have been obtained or key personnel may be away if changes are issued close to holiday periods. It is important that if clients seek changes after the tender documents are issued that they consider the time required for the tenderer to incorporate these changes and grant appropriate extensions of time.

Selecting a Tender List

A real risk for procurers in the current economic climate is the selection of potentially insolvent or poorly performing contractors.

Where selective tendering is used in public procurement processes some of the challenges can be addressed. Tenderers can be assessed through standard questionnaires and sworn certificates of compliance. However, these processes face the risk of challenge from disgruntled applicants should they choose to follow the complaints procedure.

Even with these checks in place the prospective contractor may no longer be compliant by the end of what can be a protracted process.

Recent reductions in bond cover under public contracts from 25% to between 10% and 12% also means the dubious practice of relying on the bondsman to carry out due diligence on prospective tenderers is no longer an option.

To minimise the risk involved design teams must be able to demonstrate their own due diligence in selecting a tender list. Prospective tenderers should however be made aware of the requirements involved.

Evaluating Tenders for Non Pricing Issues

When an open tender is used to evaluate more than just price, e.g. a design and build tender, there is inherent risk in setting out and explaining the evaluation process and marking systems to be used. This particularly applies to public clients.

If a marking system is to be established it must be based on direct and objective questions and not be seen to be discriminatory, e.g. limited only to contractors building schools. Unsuccessful bidders may ask the client to demonstrate that the assessment was carried out in accordance with the stated process.

Ensuring the assessment system is clear, direct and simple avoids the complex questions and marking systems that may cause problems as the process goes on.

Overall, the procurement process remains complex and challenging. Unfortunately this is not likely to change overnight. In the mean time, if procurers and tenderers are to make it through these difficult times unscathed it is important that they take the time and energy to properly evaluate and navigate this process as any shortcuts inevitably lead to greater cost down the line for all involved.

 

This is a guest blog post written by Gerry O’Sullivan from MMP.

Gerry has been a legal consultant with MMP Quantity Surveyors since 2005. He is also a Chartered Quantity Surveyor and worked with MMP from 1979 to 1989 and laterally from 2000. He has extensive experience in many aspects of the Construction Industry. He has served on many professional committees within the Construction Industry, and he is currently President of CEEC (Construction Economists within European Community). Gerry works on educational, medical, commercial, residential and refurbishment projects. He also works as a Conciliator, Mediator and Arbitrator on contract disputes within the Construction Industry.

Gerry O'Sullivan

20/01/2014 - "Meet the Buyer"

Connecting Local Suppliers to Opportunities in the Education Construction Sector

"Meet The Buyer" is a special FREE event being jointly run by the National Development Finance Agency (NDFA) and Enterprise Ireland.  Both organisations will jointly host this event on Friday 31st January at the Portlaoise Heritage Hotel, Portlaoise, Co. Laois.

The aim of the event is to provide information on supply chain opportunities in the schools PPP programme which is part of the €650m PPP stimulus package.

Event details & registration

Date: Friday 31st January 2014
Venue: Portlaoise Heritage Hotel, Town Centre, Portlaoise, Co. Laois
Time: 09:15 - 13:30

To register online for this FREE event - Click Here

or contact:

Claire Beattie +353 1 7272275

Cormac Friel  +353 1 7272137

Attendees at this important event will:

  • Learn about the schools PPP programme
  • Meet with the 3 shortlisted contractors/facilities management providers tendering for the projects
  • Find out how to become a sub-supplier to the projects
  • Receive information on employer support programmes
  • Access expert advice on credit rating, bond financing and credit insurance

Full details of the event programme, shortlisted candidates and supplier/contractor categories eligible to attend - Click Here

EI Logo

 

19/12/2013 - Education Construction Opportunities 2014

Special Report - Education Construction Sector

48 key and major projects set for commencement in 2014 - €861m

Visit our information page to order your copy of the Construction Opportunites 2014 special report.  Over 400 key and major projects listed.  Commentary from leading industry authorities.  Your chance to capitalise on the emerging opportunities in the Irish construction sector.

CIS Infographics Education 25 11 13 GM

12/12/2013 - Medical Construction Opportunities 2014

Special Report - Medical Construction Sector

58 key and major projects set for commencement in 2014 - €1.5bn

Visit our information page to order your copy of the Construction Opportunites 2014 special report.  Over 400 key and major projects listed.  Commentary from leading industry authorities.  Your chance to capitalise on the emerging opportunities in the Irish construction sector.

CIS Infographics Medical 25 11 13 GM

09/12/2013 - Industrial Construction Opportunities 2014

Special Report - Industrial Construction Sector

62 key and major projects set for commencement in 2014

Visit our information page to order your copy of the Construction Opportunites 2014 special report.  Over 400 key and major projects listed.  Commentary from leading industry authorities.  Your chance to capitalise on the emerging opportunites in the Irish construction sector.

CIS Infographics Industrial 25 11 13 GM

02/12/2013 - Commercial & Retail Opportunities 2014

Special Report - Commercial & Retail Sector

58 key and major projects set for commencement in 2014

Visit our information page to order your copy of the Construction Opportunites 2014 special report.  Over 400 key and major projects listed.  Commentary from leading industry authorities.  Your chance to capitalise on the emerging opportunites in the Irish construction sector.

CIS Infographics Commercial 25 11 13 GM

26/11/2013 - Construction Opportunities 2014

Special Report - Over 400 Key Projects Featured

This year we have produced a special report on the largest, active and ready-to-go projects for 2014.  An essential guide for companies who are preparing for the return to growth in the Irish construction sector.  Over 400 projects featured across 8 industry sectors with a combined construction value of almost €7billion.

A single volume hardcopy report available from the 6th December.  The perfect business planning tool which will enable you target the most lucrative construction opportunities in your sector. Order your copy today! - Click here.

Large Infographic

05/11/2013 - Weekly project highlights

5 key projects to watch this week

This week I am pleased to give you details on 5 key project projects across the Commercial, Industrial, Community, Civil and Leisure construction sectors.

Commercial Construction

Stringer Building Services Limited has been awarded the main contract for the €300k refurbishment of the AIB bank on Dame Street, Dublin 2. The project has not yet moved on site but is expected to commence by the end of November.  Works are expected to take in the region of 4 months to complete.

Industrial Construction

Recently the main contract has been awarded to Martin Cousins & Sons of Newcastle West, Co. Limerick for the construction of a €500k warehouse extension for Kerry Agribusiness in Kilorglin, Co. Kerry. Works are expected to commence during November and should be complete within a 6 month period.

Community Construction

Works are expected to start in December on the new 662 square metres £975k branch library in Lisnaskea, Co. Fermanagh.  Main contract has been awarded to Woodvale Construction of Omagh and mechanical and electrical contracts to Scott and Ewing Ltd and Taggart Electrical.

Civil Construction

Tenders have been returned from contractors and are currently being assessed for the construction of a new €30m prison at Rathmore road, Cork. Works are expected to commence in December 2103 following the appointment of the successful bidding contractor.  The project will take approx. 2 years to complete.  Further information can be obtained from the probation service or Todd Architects Belfast.

Leisure Construction

Work is currently underway on the extension and renovation of Portrush yacht club, Co. Antrim. Main contractors for this scheme are P & K McKaigue of Maghera, Co. Derry and mechanical and electrical works will be carried out by IDM Plumbing & Heating and Nevin Electrics.  Deadline for completion of works is May 2014.

Thanks for reading and keep following this blog for more project highlights!

24/10/2013 - Weekly project highlights

5 key projects to watch this week

This week I am happy to share details with you on key projects from the civil, residential, medical, commercial and industrial construction project sectors

Industrial Construction

IDA Ireland are expected to seek tenders within the next 3 - 4 weeks for the construction of a €1.8m Technology Building at the IDA Technology Park, Butlerstown, Waterford.  The 2,400 Sq M. building has been designed by Kavanagh & Tuite Architects of Clonskeagh.  Suppliers of metal cladding and curtain walling products will have an interest in this project also.

Commercial Construction

Collen Construction have recently commenced a €7.8m refurbishment of the office buildings of Amazon Data Services Ireland at Clonshaugh Business and Technology Park.  Works are expected to be on-going for approx. 12 months.  Suppliers of metal cladding and roller-shutter doors will be interested in this scheme.

Medical Construction

Coolsivna Construction Ltd have recently commenced works on a €745k nursing home extension at Ballaghaderreen, Co. Roscommon.  The 446 Sq M. building will include a new smoking and visitor's room, kitchen and dining room. Suppliers of roof slates/tiles and renders will have an interest in this project.

Civil Construction

Main contractor BAM Building Ltd, Co. Kildare has commenced work to provide secure accommodation for children detained by the courts at the €56m Oberstown Children's Detention Facilites in Lusk Co. Dublin.  Works are scheduled to take in the region of 24 months to complete.  Opportunities for curtain walling providers will be available on this scheme.

Residential Construction

Currently on site is the 21 unit Clanmill Housing Association £1.6m Apartment Development in Newtownabbey, Co. Antrim.  Construction work is being undertaken by Q Mac Construction and is expected to take in the region of 18 months to complete.

Thanks for reading and keep following this blog for more weekly project updates!

 

21/10/2013 - Soprema client case study

In this post I interviewed a key CIS client - Richard Crocker, Managing Director of Soprema Ireland.  Together we look at the nature of his business, the construction sectors that work best for him, the challenges he faces as well as some of his recent project successes.

Soprema

What is the exact nature of Soprema Ireland's business?

The nature of our business as a manufacturer is to supply high quality waterproofing products into the construction industry through a network of Soprema approved contractors who carry out the installation.

Describe the competition in your sector?

Our competition includes privately owned distribution companies who have exclusive rights with some manufacturers to market in Ireland and other manufacturers who are set up in a similar way to Soprema Ireland.    

What makes Soprema different/better?

Soprema prides itself in the fact that we want to offer a correct waterproofing solution which is suited to the requirement of a specific project.  Every project deserves the right to be given the opportunity for the correct solution rather than the attitude “what was specified on the last project will suffice”.  All projects are different so therefore should be designed individually.

Who is your target – architect? roofer?  main contractor?

As mentioned plus surveyors, engineers.

What construction sectors/project type's do you target most?

We have had quite a lot of success in the Industrial, commercial, pharmaceutical and domestic construction project sectors.  These areas are where we would be most targeted.

What do you see as the main obstacle to doing business in the construction sector today?

The main obstacle in doing business in Ireland which is a constant threat to the industry is credit.  Companies involved in this industry have always offered substantial credit terms which is still expected with little protection due to the necessary credit exposure offered.  If credit is not offered and calculated risks are not taken, business in this industry cannot be done at present.

Why did you choose CIS?

Soprema chose CIS as it is necessary for us to have the opportunity to contact the correct people who are involved in projects at an early stage in order to discuss the waterproofing requirements to be able to offer a correct solution.  CIS has given us the information required to begin to build relationships with architects, surveyors and main contractors for the future development and success of Soprema Ireland.

Have you any particular reference projects that you are most proud of in recent months?

In the education construction sector we have recently completed with Bam Building Limited the €13m Gorey Community College in Co. Wexford and the €10m Athlone Community College in Co. Westmeath. With John Sisk and Son Ltd we have also completed the €10.5m Sports/Multi-purpose hall at Waterford Institute of Technology. There are others across most construction sectors.

In one word how would you describe the outlook for construction in 2014?

Positive.

Contacts can be made at SOPREMA IRELAND, Unit 75A Cookstown Industrial Estate, Tallaght, Dublin 24

Richard Crocker is contactable on +353 1 4057796 | rcrocker@soprema.ie

Thanks for reading and watch out for more client case studies on this blog!

3610 construction projects with a total value of €12.7 billion have been added/updated to our comprehensive dataset in the last 100 days. Gain access to the details of all these projects and more - register for free 7 day trial now