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BPM 213 – Procurement ManagementExams Attempt 2016-Jan 2020Question 1a) A public housing authority is calling for tenders for building works for an integrated housing development. The scope of works involves the erection of 330 units of residential housing with social community facilities, bus inter...

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BPM 213 – Procurement Management Exams Attempt 2016-2020 Jan 2020 Question 1 a) A public housing authority is calling for tenders for building works for an integrated housing development. The scope of works involves the erection of 330 units of residential housing with social community facilities, bus interchange, food centre, multi-storey carpark, a heritage walks and contingency works at a new housing estate. Finance is approved for the construction cost of the 31-month contract which is estimated to be $230 million. Work may commence as soon as the contract is arranged. Good cost control is required. Client: Public Housing Authority Scope of works: 330 units of residential housing + social community facilities Duration: 31-month contract Cost: $230 million

FACTORS TO CONSIDER BEOFRE DECIDING i.

Describe TWO (2) factors to be considered by the housing authority deciding on a suitable contractual arrangement for the project. (6 marks) (Study Guide Page 26) The 2 factors to be considered are; (any 2) 

Transparency The Government maintains an open and transparent procurement system and its procurement requirements, procedures and evaluation criteria for quotations and tenders are published openly on the Government Electronic Business (GeBIZ) portal.

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Value for money The Singapore Government procures from sources that can best meet its requirements and which offer the best value. Value for money is derived from the optimal balance of benefits and costs based on the total cost of ownership.

Therefore, value for money does not necessarily mean the lowest price or that a tender or quotation must be awarded to the lowest bidder.

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Open and fairness The Government encourages suppliers to give their best offers in an open and competitive environment. Suppliers are given equitable opportunities and access to compete on a level playing field. All suppliers will be treated fairly and given the same information to prepare their bids.

TRADITIONAL LUMP SUM

ii.

Recommend and justify an appropriate choice of contractual arrangement for the client, and describe its procedures. (6 marks) (Study Guide Page 84) The suitable contract arrangement for this case is a Traditional Lump Sum (Drawings and Specifications) contract. This is because as a government agency, traditional lump sum shows the factors that they consider which are transparency and value for money in the procurement system, whereby it involves a predetermined, single ‘lump sum’ price for all the works being agreed to complete the project. In Lump Sum contract, the works areas are well-defined when tenders are sought that means the contractor is able to accurately price the works and prepare their own quantities asked to be carried out in tender document. Thus, being accountable for the use of public funds, the lump sum contract agreement is beneficial towards the client as it reduce client’s risk and contractor would bear the risk of any measurement and pricing errors. It is also used to reduce design and contract administration cost. The project is in need of the rection of 330 units of residential housing with social community facilities, bus interchange, food centre, multi-storey carpark, a heritage walks and contingency works at a new housing estate for 31 months at a value of $230 million. Hence, in preparing tender documents with traditional lump sum in a big scale project, it would need to provide a well-defined and completed construction drawings to help control cost and control quality. Procedure: The procedure for the contractor to attain this contract is through tender documents that is quote on a lump sum basis. Before the calling of tender, tenderers have to supply with virtually completed drawings and specifications.

There is no bill of quantities given as tenderers are required to prepare their own quantities from the drawings and specifications. This is to establish the estimated cost of tender by estimating labour cost, material cost, maintenance cost etc. So firstly, the Architect will be in charge of the project and represent the client’s design process. Thus, he is responsible in ensuring the client’s design approval and getting the project done on time and budget. Afterwards, the client would appoint different consultancy in separate contracts such as structural engineer, M&E engineer and Quantity Survey (QS) to work with the Architect to further produced detailed designs and issue tender documents. Only after confirmation of drawings and specification will there be open tender documents for competitive bids. The successful contractor who got the contract will have direct contract with the client to carry out the work under the supervision of the Architect.

iii.

Explain the merits and demerits of your recommended contractual arrangement. (7 marks) (Study Guide Page 84) The merits of Traditional Lump Sum contracts are; Time required for preparation of tender documents is reduced as the client’s professional advisors do not need to work out the quantities. Both contractual parties have a clear picture of their respective commitments at the time of signing the contract, e.g. the contract sum is agreed before construction starts. The Demerits are; No detailed breakdown is provided on the tender sum, with the exception of the contract sum analysis showing only work sections priced as a lump sum item. Valuing variations could be problematic during the construction stage unless a comprehensive open or fixed schedule of rates is included in the contract. The contractor will be responsible for and reimbursed under the contract for most of the pricing risk especially for errors made in measuring his quantities from drawings. To compensate for possible errors or omissions, tenderers tend to overprice the contract rates or work items. As each tenderer is required to measure the quantities separately, this duplication is extremely wasteful and can make comparison among tenders difficult.

ROLE OF PPP IN DBFO

b) The Design-Build-Finance-Operate (DBFO) model of the Public Private Partnership (PPP) had been successfully adopted for the development of social infrastructure projects in Singapore. Describe the roles played by the private sector PPP provider under model to achieve value for money for public services. (6 marks) (Study Guide Page 101) The role of PP provider is will help to;  Secure its own financing from equity investors or debt providers (e.g. banks and financial institutions).  Design the facilities, equipment and work processes that provide services to the public or the Government.  Build the facilities needed to meet the public sector’s requirements.  Operate and maintain all the facilities and equipment required to deliver the required services.  Identify opportunities for the Government to share the use of such facilities with other users to reduce the total cost to the public sector.  Operate on commercial facilities that can generate third-party revenue to reduce total project cost

Open Tendering System Question 2 a) Recommend and justify a suitable tendering system for this project, and describe its procedures. (7 marks) (Study Guide Pg. 123) The recommended suitable tendering method for case 2 is ‘Open Tendering’. This is because the client is in the public sector, thus, it is important to follow the underlying values of the Government Procurement Framework policy which includes fairness, transparency and value-for-money. This meant opportunity for everyone as this method allow any interested contractor to submit their bid for tender. The client provides a straightforward outline detail of the project scope and scale of work which are; 330 units of residential housing with social community facilities, bus interchange, food centre, multi-storey carpark, a heritage walks and contingency works at a new housing estate for 31 months at a contract-value of $230 million. Hence, the call for open tender gives transparency for contractor to submit tender documents of stated project outline with design and specification as well as overall cost. This would

provide a well-defined and completed construction drawings that include factors such as quality of good and service, timeline in delivery etc for client’s evaluate criteria. Procedure: The tendering procedure for is firstly, in public sector, the client would post under Govt-GeBIZ and put up an invitation to tender with outline details, scope of work, programme etc. Then, interested contractor will response to submit tender documentsbased dateline through Govt-ITT and bid their price for the project. At the specified closing date, tenderers must apply a priced tender document to the client or consultants. This would be considered an offer from the contractor. However, the client and his consultant will evaluate the tenderers for shortlist interviews before selecting to award the contract and make accept the offer.

b) Explain the advantages and disadvantages of your recommended method for this job. (6 marks) (Study Guide Pg. 124) Advantages:

1.No favouritism is shown among the tenderers. 2. Competitive tenders can be expected. 3. Price fixing by contractors can be prevented. 4. Equal opportunity is given to all eligible contractors to tender for the job. 5. The client does not bear the tendering costs. 6. The system offers public sector clients with accountability for the use of public funds for most infrastructure projects. 7. It provides a true reflection of current market prices. 8. Tenders or quotations submitted can be used as a basis of comparing factors like alternative proposals by tenderers on the contract period, design and management. Disadvantages . While the lowest tender is often selected for the job, the contract may be awarded to one who makes the most mistakes. 2. There is no limit on the number of tenderers, leading to longer evaluation time. 3. Unless an analysis is made on the contractor’s reputation and track records, there is no guarantee on performance. 4. Since only one contractor will be awarded the contract, several other unsuccessful tenderers will incur abortive costs due to a huge waste of time in preparing the tender estimates. 5. If no eligibility criteria have been used, unknown companies with dubious reputation may be introduced to the project. 6. The client’s professional advisers may not be able to vet the tenderers’ eligibility before tender submission if no information on the tenderers’ eligibility is provided. 7. With this method, restriction is

on full communication between design team and tenderers on the design details and site operations.

Criteria for Selecting Contractor c) Describe TWO (2) factors which the housing authority should consider before selecting a suitable contractor to carry out this project. (4 marks) (Study Guide Pg. 121) The two factors to consider before selecting a suitable contractor are; (any 2) 

Price Level of the Tender Price is considered in many cases as the prime consideration for selecting a Contractor, especially the need by public sector clients for accountability in the use of public fund. Hence, there is a need for public sector clients to adhere closely to (and to be easily seen as so) the guiding principles of the Government Procurement Framework, i.e. maintain an open and transparent procurement system, to allow an open and competitive environment and to procure from sources that meet the requirements of the best value for money. If the price appears to be above market value, then the highly priced sections or items that are favourable to the contractor, need to be identified. It would be unfair for the client to pay more than what the job is worth for such overpriced sections/items. Likewise, there is a need to identify the trades/items that are under-priced or if the tender price is too low because it would be unwise to hold contractor to the tender sum at which he would then be working at a lower profit and possibly at the expense of compromised quality and workmanship.

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Method of Pricing Many contractors often adopt a strategy of pricing known as front loading of tenders. The strategy involves over-pricing the sections or items of work that will mainly be completed in the early stages of the project (for example, the substructure work) while under-pricing those that are expected to be completed in the later stages. The higher or inflated prices quoted in the early stages of work are then balanced with lower rates in the finishing sections. This enables the contractor to secure higher progress payments in the earlier valuations to improve his cash flow position. The pricing method works against the client’s interests, especially when the contractor goes into liquidation before the contract was completed

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Extent of errors and inconsistencies in pricing

Two forms of errors or inconsistencies can be found in a tenderer’s pricing: arithmetical errors and patent errors. Arithmetical errors can be detected in the following ways:  Errors in the extension of an item, e.g. through multiplication of a quantity of an item by the unit rate.  Errors in addition of an item, e.g. in the totalling of a page, transfer of page totals to collections or summaries, etc. Patent errors can be detected in the following ways:  Using the wrong basic cube rate for a superficial item or using superficial rate for a linear item.  An item has not been priced at all of which one would normally expect it to be priced due to an oversight.  Identical items from different sections of the schedule of rates or bills are priced differently without any good reason

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Other selection factor: Contractor’s relevant and past experiences with this type and scale of work and the types of contracts encountered, and his performance record.  The Contractor’s current workload and future plans.  The Contractor’s financial strength and credit rating.  The Contractor’s reputation and his relationships with the client. The Contractor’s management systems and expertise including quality assurance, safety, planning, scheduling, estimating and cost controlling techniques.  Design – depending on whether the contractors are required to design the whole or part of the works

The fundamental factors to be considered in the selection of a suitable contractor during the tender exercise include analysing the price, method of pricing, the contractor’s previous relevant experience with this type and scale of work, performance record, current workload, financial strength, reputation, relationships with the client, and his management and design expertise.

PQM – RECOMMENDED WEIGHTAGE – TWO ENVELOPE SYSTEM d) The client will be adopting the current guidelines of the Price-Quality Method (PQM) to evaluate the tenders. Examine the recommended weighting, the shortlisting (EOI) and the two-envelope system of PQM. (8 marks) (Study Guide Pg. 134) The weightage of Price-Quality-Productivity score depends on the project requirements. In this project, the complexity of the project is quite heavy and the design input required from the tenderers goes to a few facilities such that it requires 330 units of residential housing with social community facilities, bus interchange, food centre, multi-storey carpark, a heritage walk and contingency works at a new housing estate. Since the project is awarded to the tenderer with the highest combined price, the recommended weightage of Price-QualityProductivity would be on the higher percentage as shown below; Weightage for building tenders = Price + Productivity + Quality = 60% + 10% + 30% =100% Weightage for civil engineering tenders = Price + Productivity + Quality = 70% + 10% + 20% =100% The price component is determined by a scoring methodology, “Price Score Computing” (Pscore) whereby the formula is;

The maximum price score will be awarded to the lowest tender price. The price scores of the other tender prices will be inversely proportional to the lowest tender price. The productivity components are determined by components such as; Constructability Score, Technology Adoption, Workforce Development and Other productivity attributes such as the tenderers' appropriate track records or particular competencies that will increase their project suitability. To compute productivity score, the formula are as follows;

Productivity-score (PD-score) = Scores from [CS Index + TA(C) Index + WD(C) Index] + Other productivity attributes (if any) The quality components are determined by components such as; the tenderers' appropriate track records or particular competencies that will increase their project suitability. The past appraisal performance that includes timeliness, quality, safety performance (site safety) must at least provide 15% overall quality work in past projects. Work methods and services allocated to the project must be included in all Project Specific Proposals. It is good to show any awards or other distinctions. The scoring method for the specify quality attribute shall be set by GPEs. The maximum quality score will be awarded to the tenderer with the highest total raw quality points. The Quality score formula is as follows Quality-score (Q-score) = [Tenderer’s total Quality Points / Highest total Quality Points] x Quality Weightage The shortlisting The shortlisting, also known as Expression of Interest (EOI) stage is where it is carried out before the actual tender to limit the number of tenderers to an optimal number of 5 candidates. For this project, since its contract value is at $230 million, it is performed by 2stage QFM selection. In this selection, agencies require to request for and evaluate Quality proposals at the EOI stage such as firm’s track record, relevant expertise and experience of the proposed project team etc. Agencies are to ensure that the scoring criteria are stated upfront clearly in the EOI document and shall not re-evaluate the same Quality attributes at the subsequent tender stage. The Two-Envelope System of PQM

The guideline for two-envelope system is that the Quality and Productivity envelope is submitted separately from the Price envelope by tenderers. Before opening the Price, envelope and calculating the cumulative score, government agencies must open and compute the Quality and Productivity score first. This is to maintain objectivity and eliminate the possible of influencing fee on the evaluation of Quality. It also ensures that the QFM procedures are operated in an open and transparent manner. The contract will be awarded to the tenderer with the highest cumulative ranking.

Question 3 The Singapore Cancer Society is inviting interested vendors to submit tenders through a Request for Proposal (RFP) for managing an event with the theme, Race Against Cancer 2020. The annual flagship charity event is aimed at rallying the community together in the fight against cancer, as well as to raise funds for the related programmes and services. The main activities include a 5-km fun run, a 10-km and a 15-km competitive run as well as a 10km team challenge.

RFP PROCUREMENT USE + KEY CONCEPTS/ REQUIREMENTS a) Explain the use of the RFP as a procurement document for a creative proposal for the events and its key requirements. (8 marks) (Study Guide page 128) The use of RDP as a procurement document is that it serves as an early stage in procurement process where invitation issued to suppliers, often through tendering process, to submit a proposal on a specific goods or services. The process aims to provide the structure and format for the contractor or supplier to make the procurement decision and to clearly identify the risks and benefits at an early stage. Thus, there are a few components that RFP aimed at such as; Obtaining correct information to enable sound business/purchasing decisions, decide on a proper procurement strategy, Leverage company's purchasing power to obtain a favourable deal and Provide broader & creative range of procurement options for consideration. RFP is applicable in situations wher...