The document discusses the process of selecting subcontractors. It states that the main objectives are to obtain competitive prices through work package optimization and selecting suitable subcontractors. The selection process generally involves issuing tender invitations, receiving quotes, evaluating bids based on both price and qualifications, and selecting subcontractors based on factors like experience, current workload, and execution of previous work. The document also notes that the selection is not solely based on price and that maintaining the construction schedule is important.

1. CONS5Q25 Assignment 3 Praveen Premkumar as at 17th
September 2009
Student ID: 1213020
4.0 Subcontractor Selection
The main objective of obtaining competitive prices is an advantage through work
package optimisation. (Prigg, SB2.07a Subcontractors Introduction & Overview,
2009). This process is to be carried out by one entity for example, a company. A
subcontractor supplies material, equipment, labour and management (Prigg, SB2.07b
Obtaining & Selecting Subcontractors, 2009).
Therefore, the selection of suitable subcontractor plays a significant role for
acquiring prices and estimation for deciding in the construction industry, which is to
be performed by the main contractor. It is a standard practice to issue tender
invitation letters to the bidding parties including information pertaining to that
particular subcontractor’s scope of work. Generally, this would include for
commencement of work, completion date, and Conditions of Contract used and a
draft construction programme drawn up, set of tender drawings and specifications
will be given to each trade of subcontractor. As a rule there are at least three
subcontractors to bid the tender.
It is standard procedure after receipt of quotation from all participating
subcontractors a bid evaluation to be carried out. The tender tags are qualifications to
an offer and take an important part for the selection of the subcontractor. It is critical
to analyse the tags and make financial adjustments accordingly (if required). If the
lowest tenderer, stipulates tags, which were included by the other subcontractors, a
reasonable price selected from the other contractor to be added to the lowest bidder.
It is important that the subcontractor elaborates on all items deemed to be part of the
subcontract. The bid evaluation should be conducted for each subcontractor work
package. The history of previous involvements and the current workload in hand of
the subcontractor would form a vital component to decide whether the lowest bidder
has the capabilities to match the construction programme. Therefore, the
subcontractor selection is not entirely determined by the price. There are
subcontractors who tend to execute subcontract works to the main contractor
frequently take a bit of favouration in the selection by negotiation of the subcontract
trade. A subcontractor performing a particular trade for the main contractor for a
longer period successfully may enter into a subcontract by preparation of schedule of
quantities with the standard market rates, to award the subcontract.
In view of the above, some clients nominate subcontractors for specific trade
elements based on their expertise on the trade. It would be advisable when
appointing nominated subcontractor, it is necessary to make allowance for builders
work associated incidental works which will be carried out by the main contractor.
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2. CONS5Q25 Assignment 3 Praveen Premkumar as at 17th
September 2009
Student ID: 1213020
The main contractor should make certain that the selected subcontractor performs his
duties in accordance with the construction programme, in order to liase with other
activities parallel in progress. For the duration of the construction work in progress,
some subcontractors may go into liquation. This could reflect a delay on the
scheduled programme and have a knock on effect on the progress of work.
Consequently, the main contractor should be well prepared to substitute another
contractor in place to carryout the work from the termination of the existing
subcontractor. This may not only affect the main contractor’s construction progress
but also the financial outcome of the end product.
At some point in the selection process of the subcontractor, before reaching an
agreement, a preferred subcontractor meeting will take place. In the meeting,
meeting minutes both parties can critically analyse the scope of the work to make
sure all relevant items are covered in the subcontract. This will eliminate any
ambiguous or contingent section of work.
The packaging options the main contractor should consider may include for
combination of won work and subcontract work packages. This is the most
commonly used option 30% own work and 70% subcontracted work but it highly
depends on the project nature and the mood of the contractor. Otherwise, the
alternative method is the project management approach, which is to subcontract
everything (whole project). To do it all within the contracting organisation but the
whole is often better managed by breaking it up into parts (Prigg, SB2.07a
Subcontractors Introduction & Overview, 2009).
It should be noted that when receiving prices from suppliers that are unknown to the
company you are working in, you are faced slightly at a disadvantage if the supplier
you are not too familiar or unfamiliar with sends you a price quote. It is also
suggested to be cautious because cheap prices are sometimes wrong, and there is an
issue of uncertainty when dealing with ‘unknown’ factor which may arise, for
example say $X dollars today, will be worth tomorrow $X + 10% (C. Prigg, personal
communication, 1 September 2009). In economical terms, it is best accepting prices
put forward to you before tender closes.
These duties are important in two ways to control for quality and costs. You may
choose to place a time limit on the subcontractors who may wish to respond to your
bids. By accepting the lowest bid can cost you, the main contractor more than what
you think you will save (Prigg, SB2.07b Obtaining & Selecting Subcontractors,
2009).
Woodson (1995) indicates if you take an approach of simply hiring the lowest
bidder, the odds are high that you will be disappointed with the quality of
Est1 Assignment Pt.3 2-2009.xls C: UNITEC Institute of Technology 13/10/2009
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3. CONS5Q25 Assignment 3 Praveen Premkumar as at 17th
September 2009
Student ID: 1213020
workmanship. What appears to be the lowest price can creep up with extras. Your
thoughts that a subcontractor offered the best deal will change quickly if the quality
of the workmanship is below average. When you are dealing with subcontractors you
will have to look below the surface, ands you must spend some time researching the
fact available to you. It is not as simple as requesting the three bids and accepting the
lowest one (p. 36).
It is reported that there are some underlying assumptions to be made. For instance,
doing the work yourself is more profitable but more risky of making errors.
However, on the other hand delegating work packages to subcontractor are less risky
but more profitable i.e. say you as the main contractor aren’t held liable if a mistake
happens, it is the subcontractor’s liability (C. Prigg, personal communication,
September 1, 2009).
In conclusion to the above, upon commencing of the post tender stage assuming it is
successful, the contractor is to accept the subcontractor prices as soon as possible and
“get into track” move in to the construction phase of the project.
But it also depends on the project and the contractor. As a general sense, however,
the critical path is only an outline proposed at tendering stage. If the cost will goes up
client will somehow accommodate liquidated damages (Prigg, SB2.07c
Subcontractor Administration & Documentation, 2009).
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