General Procurement: Pre-Bid Estimate and Bid Documentation

Procurement

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Okay, in this module, we're going to discuss the procurement stage of a construction
project, and the typical involvement of a cost manager or a cost estimator.
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Firstly, what does the word procurement mean?
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Procurement is the action of obtaining or acquiring something. Purchasing plays a role in
the procurement process, but is not the same and should not get confused. Procurement is
concerned with acquiring, procuring, all of the goods, services, and work that is vital to the
construction process and overall project. Procurement is essentially the overarching
or umbrella term within which purchasing can be found. If you are the cost manager, you
always play an important role in the procurement process. You will need to guide the
project team in all of the five procurement points to decide.
0:55
Often, the cost person will lead the procurement process in it's entirety. We're now going to
delve a bit deeper into procurement and I'm going to discuss the four main parts that I see
important in the construction process. Important to ensure budget, schedule and overall
project success.
1:13
We're going to discuss the pre bid estimate, bid documentation, bid return and leveling, and
the contract awards. The pre bid estimate really comes in just before the procurement
stage begins. We would normally construct the pre bid estimate a few weeks or even
months before the project goes out to bid. It is often used to help determine the funding
value for the project, funds to pay for the construction project. To update the estimate to the
latest stage of design, typically it would now be at DD or post DD.
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Gain a clear understanding of what construction values the bid returns will be.
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And take us to the procurement stage following the designs spectrum we discussed earlier.
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Usually, the previous estimate should be a further update to an existing estimate. But it can
be reformatted, ready to be used as a pricing document, which will come later in the next
part.
2:17
During putting together the pre bid estimate, to gain actual pricing on certain scope items, it
is at this stage that you as a cost manager, you'll make contact with suppliers,
subcontractors, to gain latest market pricing.
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By this, we mean pick up the phone and emailing, supplies and subcontractors in getting it
from the horse's mouth.
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The very latest pricing and rates that you use within the estimate is really, really important
at its current and its market rates.
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RS means another pricing tool which can be very useful, but prices can change by the day,
by the week, by the month, and even by the year. All of which the pricing tool you normally
use can not keep up with this.
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So, lessons learned, procurement is the action of acquisition. The pre bid estimate sets the
baseline.
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It's important you establish relationships with suppliers and organizing the budget ready for
the leveling stage.
3:33
Now we're going to discuss the bid documentation stage.
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As with much of cost management, it is vital to plan well. Be organized and ensure clarity
and understanding is in place for users of your documents. Be at the early stage concept
estimate right through to the final cost report, close out the project.
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In this segment, we're going to discuss the actual bid documentation stage.
4:05
In order to go out to bid and gain a strong number of returns, it's important that time is put
into the bid documentation pack to make sure the bidders firstly have all the correct
information they need to bid and to ensure they fully understand the project and the client
requirements.
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So, the typical bid documentation checklist includes, an RFP, request for proposal, a pricing
document, a drawing register, your design pack.
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In that design pack, you have typically the architectural pack, the engineering pack, the
structural pack, possibly a civil pack, and a geotechnical pack.
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Other packages within your contract documentation will be further project details and
contract requirements. So,let's just talk a bit more about the packs within your procurement
package. So the RFP, the request for proposal, is the formal document which outlines the
project to the bidder as well as the overall documents within the pack. It's your master
document that has everything in there including submission deadlines.
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Some RFPs also enclose either a construction schedule or a timeline.
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The RFP will outline important dates that the bidder will need to adhere to in order to be
accepted as a serious bidder on the project.
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The pricing document.
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This is basically your estimate with quantities and pricing removed. It can be formatted in
several ways, but typically it mirrors your pre bid estimate to help with the bid leveling
process.
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The purpose of this document is for the bidder to record their pricing to carry out the work.

6:11
The pricing document must read well and with all the bid documents in the pack.
6:18
The drawing register, this is a highly important drawing list that confirms every drawing that
should be included within the design pack. It's just as important as your design
pack. Without this drawing register, the user cannot refer to the full list and take off all the
design documents to make sure they have the full pack.
6:41
Then, this leads to the design pack. It's the full set of drawings by architectural and
engineering sets. The engineering set often is referred to the MEP set, a mechanical,
electrical and plumbing.
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It can also extend out to the structural, civil and geotechnical designs. And I will say this all
applies to the particular project you're working on. You may only have architectural
mechanical, electrical and plumbing, or you might have every single one there, architectural
right through to geotechnical.
7:17
So, you also have further project details and contract requirements. Typically, within the bid
pack there will be further document which outline the project and submission requirements
such as, site visits, contracts that are likely to be used and insurances.
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Lastly, it is normally advised to go out to at least three to five bidders. Three is sufficient in
order to receive the most accurate market pricing and to be able to perform a fair leveling
process to help make the right bid award

decision.
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So, lessons learned.
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Proper organization is paramount. Ensure the drawing pack and register are accurate, and
read well together.
8:07
Analyze all the special details and contract requirements.

Bid Stage, Bid Returns and Levelling

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Interactive Transcript
English
0:00
Let's now delve into the actual bid returns and levelling stage.
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At this stage of the procurement process, it is time to receive all of the bids back. The bid
review and levelling process can take several weeks or even months to perform, depending
on the size of the project you're working on.
0:23
To make the most accurate decision, enough time must be given to this process, which on
average can be likely two to four weeks or longer.
0:39
The levelling time is literal to its name. It' levelling process in order to get to the bid
pricing to balance with the pre-bid estimate.
0:49
Despite putting efforts into controlling the pricing document, you'll often get a mix if returns,
some with numbers and items excluded. This is where your pre bid document is used to fill
the gaps.
1:09
Now here on the screen, you can see an example of a levelling sheet. Now this is a very
basic example and for this we've selected new carpet that's going into this project.
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Now, we've summarized our pre bid estimate here, on this column here, as you can see.
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We're saying it's going to cost $100,000. That's what we put in our pre bid estimate. That's
what we've advised the client, or even your boss.
1:40
Within that cost, we've got it broken down. We've got removal of existing flooring, we're
saying that's included in the $100,000 and we've just summarized it here your pre bid
estimate will go into a bit more detail and you'll have that cost and we'll come unto that in a
minute.
1:53
You got your substrate included, we're saying it's 25,000 square foot of new carpet and it
includes the skirting boards as well. Now your square foot rate there comes out to around
$4 a square foot.
2:07
Now we've gone out to three other contractors here, ABC Contracting, XYZ Contracting
and TGIF Contracting.
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This is now the returned bids.

2:26
You're benchmarking against a $100,000 pre bid estimate. ABC Contracting came in at
$110,000, XYZ came in at 95,000 and TGIF came in at 90,000. What I'm trying to show you
here is it's really important that you do the levelling process. Now, you may just get figures
coming through, and it will be a one liner. So, you may only see that top line. If you first
glance at this, common sense makes you think, we need to go with the cheapest one
here. If that's the price, they got all the bid documents, they got all the drawings, if they can
do it for $90,000, they've won want it. This is the whole point of the levelling exercise. If you
then go into further detail, you go through the breakdown, which they use your pricing
document, you can see some of these contractors have excluded items and some have
included items. On top of that, they've done a measure themselves, and you can see on
the far right, TGIF, their quantity takeoff is completely out, it's doubled your pre bid estimate
at 50,000 square foot. Again looking at the bottom line, you can't really tell either by looking
at the square foot rate. Again, it looks like TGIF are the cheapest and are the best. Another
thing to note here is your pre bid estimate you want to sit bang in the middle of your
returns.
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You don't want to be too high, you don't want to be too low. You want to give your boss, or
your client,
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an average value that you think your bid estimate will sit in-between and then you know it
will be within 4 to 5% around that $100,000. You go through this leveling exercise and what
I'm going to show you here is the final result.
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Now, by going through this properly, you've got
4:27
excluded items in ABC Contracting, that's for removal of the existing flooring.
4:33
You look to the far right, TGIF, they excluded removing the flooring. Now using our pre bid
estimate, we costed that at $10,000. So we now put that back into TGIF's value. The same
with the square foot rate. We know that it's not 50,000 square foot. They've over measured
it, they've made a mistake there, it's actually 25,000 square foot.
4:58
The same goes with the skirting boards and they've excluded that and that's at a cost of
20,000 square foot. Now if you look across these, all of the sudden now, TGIF

Contracting, who are the cheapest, are now one of the highest, along with ABC
Contracting.
5:20
We're doing this very high level, but you can see here now from doing the levelling process,
it's proved that XYZ Contracting are the best contractor to use. They're $95,000, it includes
removal of existing flooring, it includes the skirting boards, and the quantity take off at
25,000 square foot is accurate.
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The next stage is, you'll be awarding that contract to XYZ Contracting.
5:47
This is a very simple example of a levelling sheet, and we've just pulled out one component
of the estimate, and that's for the new carpet.
5:57
You'll actually do a full detailed levelling sheet going into every single component, every
single element of the scope of works and the detail in your pre bid estimate.
6:12
The levelling process can be an ongoing exercise during that two to four
week period. During this time, you'll conduct a number of phone calls, emails, etc., to the
individual bidders in order to gain clarity on the bids.
6:27
It should be noted that it's important to maintain your professionalism when speaking to
bidder. You should not give one bidder more information than the other or have one party to
win the bid. It's got to be a fair process.
6:40
It's typical to conduct face to face interviews with the proposed bidders. Sometimes you
invite all of the bidders or at this stage, you may narrow it down, you're bidding this to two
or three bidders.
6:52
The interview stage is extremely useful to ask several questions and to go through the
project thoroughly to ensure the bidder has covered everything in their bids.
7:02
It also shows the bidder exactly what you're after and you go through the project detail in
great detail. Also, it allows the bidder to ask further questions to gain clarity themselves.
7:20
Please note, as the cost manager, you may you maybe on either side of the interview
process. You may be the cost advisor interviewing the bidders, or also you may be part of

the bidder team. You can play an important role on either team, and if you do go into cost
management, you'll find yourself on both sides.
7:38
In general, we are talking from the client or consultant side of cost management but this
can be applied to either, a general contractor as well. You will then come to finalizing the
bid levelling part. By this stage, you would have gained enough knowledge, an
understanding in the pricing, levelling returns, and you'll next come to the recommendation
stage.
8:00
What have we learned here? You need to allocate adequate time based on the project
scope for the levelling process. You need to maintain professionalism throughout the
process and then follow the process and analyze data methodically.
8:19
This then leads to the contract award stage. This is the end of the process of the bid stage
of procurement. You have come to a clear decision on which bidder to recommend to your
team and you'll also be ready to award the contract.
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The very last stage for awarding the contract will involve
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outlining the contract with the potential bid award,
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negotiating the contract, reviewing the company's financial status to be sure they're
capable of working on the project, and have good business ethics. Now this is very
important.
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Again, your boss, or your client, will not want a contract or a company on board that has a
poor financial status. If all the sudden, they go bust halfway through the project, and they're
about to deliver their deliverable at their stage of the project, it's going to mess up the entire
project. So it's really important, that part.
9:22
Also, you're going to be agreeing the contract value. You've got further room to negotiate
the price down or to add more scope items into it.
9:33
It's highly important that the contracts were reviewed thoroughly. It's similar to all contracts
in any given life experience, once signed, both parties are legally bound.
9:45

Normally, the company you're working for will have a legal team who will deal with this, but
you'll help complete the cost management process and you will still play an important role
at this stage.
9:57
Lessons learned within contract award, negotiate to minimize risk is crucial. Financial due
diligence can spell success for the project.
10:09
The final contract sum becomes the new construction control budget. So, it's really
important you get it right and that then sets up your budget for the full construction
period. Just to wrap up the procurement stage of construction and everything we've just
discussed, let's just go over it again. I see there being four main parts, all very important to
the procurement process. You have your pre bid estimate, you have your bid
documentation, you have your bid return and levelling stage and then your final contract
award stage.
10:45
Within your pre bid estimate, use that as your baseline estimate.
10:51
You make sure it's updated to the latest design and you're going to use that at your bid
return and levelling stage.
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Your next stage is your bid documentation.
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You need to make sure you spend enough time, a lot of careful organization is put into this
bid release to selective bidders. You do your homework and you select the bidders you
want to go to.
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Your bid return in levelling stage,
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this is when you perform the analysis of all the bids back. You need to spend enough time
on this process, and you're comparing apples with apples against your pre bid estimate.
11:32
This then, goes through to your final contract award stage. This is when you do your final
negotiations with the subcontractors. You check all legal contract, financial insurance
statuses.
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It then leads to the contract awards, that is literally issuing a purchase order to the
nominated subcontractor. So that wraps up the procurement process,
11:59
thank you very much for listening, we appreciate your time.

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Review Related Lesson

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1.
Procurement includes all of the following except

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2.
Which of the following are construction procurement stages?

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3.
The Pre-bid Estimate is typically developed after procurement begins.

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4.
A goal of the pre-bid estimate is to set a cost baseline for your project.

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5.
The Bid Documentation checklist includes all of the following except

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6.
The Contract Award Stage is the final stage of procurement.

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7.
All of the following actions would be part of the contract award stage except