Chapter 12 of CSI Project Delivery Practice Guide (PDPG) continues with the key terms and concepts of Procurement, which are on the Construction Documents Technologists (CDT) Exam. Procurement is the transition stage from the design stage to construction stage of a project.  It is a collective term referring to bidding, negotiating, and/or purchasing. Review list of pricing activities noted on PDPG - Chapter 12, p. 345.

Also, a price is presented in one of following:

• A bid that will be compared with other bids submitted by other prospective bidders in a competitive bidding process.
• An offer in the form of a proposal in a negotiating process.
  (PDPG - Chapter 12, p. 345)

Pricing Methods
Know the following types:

• Stipulated Sum (also known as Lump Sum) including Cost of Work, and Contractor's Overhead and Profit
• Cost of the Work Plus a Fee, sometimes with a Guaranteed Maximum Price (GMP)
  GMP is a not to exceed amount for completion of work. This pricing method is best for negotiated contracts.

Also note -
Bid packages or subcontract packages for subcontractors may be negotiated or combined with procurement requirements assembled by the contractor for bidding subcontractors. Accordingly, many portions of a project may be competitively bid at the subcontractor/supplier level even when the prime contract for the project is to be negotiated. 

• Time and Material with an Estimated of Probably Cost
• Unit Price
  (Review PDPG - Chapter 12, pages 346-347.)
   

Purchasing

Purchasing is the direct acquisition of materials and equipment, and in some cases special services, by the owner (referred to as the buyer) for installation in the project or use in the constructed facility. Materials and equipment acquired under a purchasing contract may include supplies, furniture, furnishings, or equipment necessary for the facility to function during the facility management stage.
(PDPG - Chapter 12, p. 347) 
 

Pricing Considerations
Note pricing as a evaluation process for determining cost and profit. This often has a comprehensive cost analysis of the project and its requirements. Pricing resources are derived from:

• the contractor's (or cost estimator's) experience on completed projects
• published cost guides (usually by trade or professional organizations)
• participation in construction-related associations structured to promote contractor business interests
   

Pricing Categories  
Know the following four categories and what each one includes. Review PDPG - Chapter 12, pages 348-350 for detailed list.
  

• Construction Costs
• Contingency
• Contractor's Overhead
• Profit

Competitive Pricing
Besides the speed and accuracy with which the contractor compiles prices, competitive pricing depends mainly to three factors:

• Seeking the lowest prices available from subcontractors and suppliers
• Accurately estimating contingency factors without over- or under-estimating
• Determining reasonable sums for overhead and profit

Also review the reasons why prices may vary, as noted on PDPG - Chapter 12, p. 351.  Additionally, note the following factors about competitive pricing:

• Value Analysis of Proposed Substitutions
  Contractors should employ sound principles with these procedures in order to be determined as acceptable.
• Pricing under Design-Bid-Build Project Delivery
  Review Figure 12.1 on D-B-B project delivery.
• Pricing under Design-Negotiate-Build Project Delivery
  Review Figure 12.2 on D-N-B project delivery.
  
• Pricing under Construction Management Project Delivery
  Note difference between construction manager as advisor or agent (CMa) to the owner and one acting in capacity of the contractor (CMc).
• Pricing under Design-Build Project Delivery
  Pricing takes place in the design phase of the project, unlike D-B-B or D-N-B. Review Figure 12.3 on D-B project delivery.
  
• Pricing under Owner-Build Project Delivery
  Contractors negotiate or bid directly with the owner. Review Figure 12.4 on O-B project delivery.
  
• Pricing under Integrated Project Delivery
  Material and product suppliers are involved early in the project process. Thus cost of work evolves with the project design.
  Key advantages:
  • Owner, design, contractor, and supplier teams can interact before construction documents are completed to make decisions about the design's cost implications.
  • Decisions made and orders placed for materials, products, and equipment with long lead time
  • The buyout phase can be managed better due to team interactions and extend time for decision-making.

Project Information
Key to exchange complete and timely information for most effective pricing Review PDPG - Chapter 12, pages 356-358.

• Distribution of information
• Control of Information

Bidding
Understand competitive bidding process. Know difference between publicly funded projects and privately funded projects in the the bidding process. (Review PDPG - Chapter 12, pages 356-368.)

• General Considerations
  • Competitive Bidding Participants
  • Qualifications of Prospective Contractors
  • Competitive Bidding Activities
  • Procurement Documents
  • Establishing a Competitive Bidding Period
  • Prebid Meeting
  • Substitution Requests
  • Addenda
  • Subcontractor and Supplier Bids
  • Preparing Competitive BIds
  • Submitting Bids
  • Bid Depository
  • Evaluating Bids
• Public Competitive Bidding Process
  • Competitive Bidding Participants
  • General Characteristics of Public Projects
  • Contractor Qualifications for Public Projects
  • Multiple-Prime Contracts in Public Projects
  • Procurement Documents
    Generally open to a greater number of participants than private bidding
  • Bid Solicitation
  • Receipt, Tabulation, and Review of Bids
  • Award of Public Contracts
  • Additional Considerations
    • Wage Requirements
      Federally funded projects and Davis-Bacon Act (Dept of Labor)
    • Percentage of the Bidder's Own Labor Forces Provided
      Relation between minimum percentage of work and degree of credibility
    • Minority Business Enterprise (MBE)/Disadvantaged Business Enterprise (DBE)
    • Environmental Requirements
    • Liquidated Damages
    • Incentives
• Private Competitive Bidding Process
  Know participant differences based on type of project delivery.
  • Competitive Bidding Participants
  • Design-Build Participants
  • Construction Management Participants
  • Owner-Build Participants
  • Procurement Documents
    Key differences from public projects:
    • Bid solicitation is usually by invitation, although the owner may post a public advertisement.
    • Instructions to bidders are usually brief.
    • Bid form and supplements are usually more brief and less standardized.

Negotiating Process
Know defintion of negotiating as a process of dialog, offer, compromise, and resolution.

• Participants
  This may include the owner, A/E, and prospective contractor(s)
• Procurement Documents
  Know the various documents included.
  • Request for Proposal (RFP)
  • Drawings and Specifications
  • Offer Forms and Supplements
• Negotiating Procedures
  • RFP by One Participant to Another to Engage in Negotiation Process
  • Discovery
  • Pricing Procedures
  • Offer
  • Counteroffer
  • Resolution
  • Award of Contract
  • Execution
• Value Analysis of Construction Prices

Purchasing of Goods

• General Considerations
  • National Accounts
  • Cooperative Purchasing
• Participants
• Documents
• Processes
  Know steps in securing a purchasing agreement. (Review PDPG - Chapter 12, pages 379-381 and Figure 12.6.)
• Purchasing - Cost Impacts and Concerns
  • Delivery and Distribution
  • Lead Time
  • Special Shipping and Handling
  • Import and Export
  • Terms of Payment
  • Role of Product Representative

Subcontracting
Know types of important information which can help other participants.

• Subcontractor Prices
• Subcontractor Issues and Concerns
  • Bid shopping
  • Payment and retainage provisions
  • Labor availability and competency
  • Legislative initiatives affecting labor
• Bid Shopping
• Subcontractor Bidding Environment
  Improving this improves the project quality assurance and increases the chance for project success.

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