Pre-qualification – preferred supplier assessment

The first point of assessment for all potential subcontractors will be pre-qualifications. Whilst it is useful to have a multitude of subcontractors on your supply chain, it is difficult to maintain and build relationships. Therefore, it is common practice to have between 3 and 5 preferred suppliers to deliver particular elements of the works i.e. 5x surfacing contractors, 3x M&E contractors etc.

To attain a position on the preferred supplier list, all the potential suppliers must provide certain credentials and qualifications that will prove their aptitudes to deliver the element of works with a certain level of quality, health & safety and environmental credibility. Financial stability and company background, previous projects, historical records, CV’s of senior staff will assist in this process. Affiliation to external governing bodies such as ISO, Chase, CSCS, CTIB, ICE, RICS, Construction Line etc will also prove the companies competencies. These governing bodies will have already requested certain amount of evidence and case study to approve the supplier. There organisations are independent and therefore their approval / affiliation will be non-bias and deemed reliable within the industry.

Further to the above, companies will be shortlisted onto the preferred supplier list with a provision of parent company guarantees (if the supplier is not prevalent, it’s connection to a more popular company will be desired) and collateral warranties / guarantee bonds / escrow agreements (generally associated with individual projects as opposed to procurement process). These tools are put in place to compensate the client should the supplier fail to deliver i.e. if this supplier fails on road surfacing, then the parent company will be liable to correct the issues or should the supplier take the fee and fail to deliver a product, then the monies in the escrow agreements / bonds will be released to the client. These are all forms of security and risk mitigation commonly used in the absence of trust, experience and knowledge.

Another vital part of the pre-qualification process is having the necessary insurances. This will include professional indemnity, public liability, employers liability etc. These insurances are to cover any unforeseen damages to the client. The level of insurance is dependent on the contract / project however they will be normally more than a million pounds. It is useful to check if the insurance company is recognised and leading within the industry after all, the insurance company will be the ones to pay out if there are any issues and claims.

Suppliers of the same discipline will be banded into 1 discipline and commonly 5 suppliers are selected for each discipline of works. This is optimum to achieve competitive tendering and building subcontractor / contractor relationships.

Please note that all the above pre-qualifications must be monitored annually by the procurement team.

Selection of subcontractor for individual schemes

When a project is being planned, elements of works are split into packages. These packages are suited to specific suppliers eg, carriageway surfacing will go out to tender to companies like Tarmac, Breedon and Hansons etc. Individual packages are comprise of set of drawings, specifications, bill of quantities / activity schedule, and quite possibly a programme. This package of works will usually go to suppliers on the preferred supplier list with a deadline to return the quotation. All the quotations will be comparable as they will be based off the same information (tender package). Due to the pre-qualification process (mentioned above) the subcontractors that will provide a quotation will be certified and trusted to deliver the scheme / works. Therefore the assessment will be based on capacity, price, logistical favourability.

Capacity to carry out the works should be considered when awarding a contract for the works. Overloading the subcontractor / contractor will force them to either sublet the works, hire agency staff / labour, or accelerate the works. These factors may impact the quality of the deliverables. When the subcontractor / contractor sublets or hires agency staff / labour, then it is impossible to ensure the same level of quality is maintained from this particular supplier following the pre-qualification process. When the subcontractor exceeds capacity, they may tend to rush the works which will ultimately impact the quality.

Most quotations submitted by suppliers to the client will be based on price. Due to the fact all suppliers on the preferred supplier list and the quality can be ensured, price is the obvious deciding factor. Notwithstanding the above, value for money and competitive tendering process will always have price at the centre of its philosophy. However, this is not without exception, being the cheapest does not automatically mean they are awarded the contract. Workloads and quality difference on high profile schemes may surpass budgetary restrictions.

Logistical favourability is considered on high volume projects. For example, extensive groundworks would require large amounts of stone being to site and large volume of disposal off site, from a sustainable and environmental perspective being logistically close will be preferred. Also, allowing the local economy to grow, is a very admirable and highly sought approach.

In some cases, you will go with one supplier due to the specialism of the activity / works. In this situation, price, quality, environmental aspects cannot be considered due to the limited supply chain.

Detail assessment of the tender response

Within this process, the tender responses are scrutinised on a detailed basis. Some subcontractors / contractors will offer value engineering, which will need to considered when awarding the contract. Whilst some tender responses may seem more expensive on face value, the quality may be superior to other tender responses due to product durability or additional properties such as rebar reinforced concrete versus fibre reinforced concrete. This detail will be within each quotation and should be assessed on its own merit. It is good practice to encourage value engineering as contractors commonly specialise in their activities and can offer new and innovative methods and products which may be unknown to the client or design team during the design stage.

Subcontractors / contractors will commonly provide their programmes and they will differ from other subcontractors / contractors. This may be due to different resource structures or selective methodology. Either way, this will reduce the client’s programme and minimise preliminary costs.

It is also common in the industry to negotiate the tender. This is when the client has a specific budget and needs the subcontractor / contractor to deliver within the budget. This may also be a tool to build relationships where one supplier is used multiple times but the tenders are negotiated each time. Within the European fair trade policy, this method of tendering is the least favourable. So whilst it is deployed, it must be in certain specific circumstances. It is common on many framework agreements where the contractors will deploy the above methods to demonstrate best value cases.