Contractor Selection in Project Management

Contractor Selection in Project Management
By The Office of Government Commerce – OGC, UK

Purpose of the Contract Selection

To encourage the most effective and cost effective means of engaging consultants and contractors to carry out necessary services and works.

Fitness for Purpose Checklist

• quality of supplies, materials and results;
• the value of the finished product to the business;
• life-cycle costs not just initial costs; and,
• appointing, retaining and improving the best team to manage and deliver a project.

Suggested Content

The aim of the “Contractor Selection” is to achieve best “value for money”, whilst ensuring that the objectives of any commission are properly met.

There are two aspects to the type of contract which may be adopted for a particular works contract or project strategy:

1. the basis on which the price is to be sought; using:
   • bills of quantities,
   • schedules of rates, or
   • simple lump sum contracts;
2. the type of contract including:
   • traditional lump sum contracts,
   • design and build contracts,
   • prime cost contracts,
   • management contracts,
   • construction management contracts,
   • design and manage contracts,
   • extension contracts and variations,
   • term contracts.

Source Information

• Programme Plan/Procurement Strategy

Notes

The principal aim of the procurement process is to select a contractor who offers the best value for money. This will nearly always involve a process of competitive tendering. Value for money for a particular commission means optimising the balance between best performance or quality of service and lowest price. The aim is always to secure and maintain the quality of service received.

The final decision as to which contractor offers the best value for money will be determined by:

• the size and scope of the commission;
• the complexity of the commission;
• quality considerations of tenderers, such as qualifications, experience and track record etc.;
• the prices offered by tenderers.
• A very useful approach to tender evaluation for this kind of requirement is to use a quality/price mechanism which is based on a numerical scoring and weighting system. The advantages of this are that:
• it formalises what can be a very subjective evaluation process;
• it requires forethought as to what are the most important criteria for selection;
• it can be transparent;
• it can be audited.

It is important for Departments to focus not on each commission in itself but upon the benefit of the completed project or commission to the overall business objectives of the Department.

Project or commission objectives will be set and strategies formulated to ensure that the value added to the business activities of the Department is maximised.

This means taking a broader view and a longer term view of the importance of the property and construction procurement process.

Competitive tendering is the only way of establishing a price range for the commission to be procured, and generally the only unbiased way to find the cheapest price.

However, price is only one of the project criteria by which the success of a commission is measured. It is far more important that the commission meets the objectives set by the Department.

A cut-price offer can mean a cut-price service. If a Department pays too little, then it may be that what is delivered fails to provide the Department with what it set out to obtain.

Accordingly Government policy on procurement by Departments is that a supplier is selected on the basis of an offer which represents the best value for money. This means using a procurement system which gives weight to quality as well as price. Quality judgments are therefore an essential part of good procurement practice.

With major works projects in particular, price must be considered in the context of the life cycle cost of the project.

The Office of Government Commerce – © Crown Copyright 2009