Report to:Bexhill to Hastings Link Road Project Board
Date:9th May 2009
By:Robin Hayler (Team Manager, Procurement)
Title of Report:TENDER ASSESSMENT REPORT – Award of Early Contractor Involvement (ECI) Contract
RECOMMENDATIONS
The project board are recommended to approve the acceptance of the tender submitted by Hochtief – Vinci Joint Venture relating to the ECI contract for the design and construction of the Bexhill to Hastings Link Road (BHLR) being the most economically advantageous tender.
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1.0PURPOSE OF REPORT
1.1To seek approval to let a contract to engage a contractor under ‘Early Contractor Involvement’ to carry out the detailed design of the scheme and to construct the scheme when funding and all statutory and internal approvals are in place.
1.2This report details the tenders received and explains the procedures which have been followed in the assessment of those tenders and requests a decision on the acceptance of the recommended tender.
2.0BACKGROUND
2.1In order to meet the target timescales identified in the Major Scheme Business Case (MSBC), and to secure funding for the scheme, progress against the milestones within the MSBC must continue to be demonstrated. Early award of the ECI contract is essential in order to maintain the project programme which envisages construction in 2010-2012.
2.2The Cabinet approved Early Contractor Involvement as the preferred procurement route on 25 September 2008. Engaging a contractor under the Early Contractor Involvement (ECI) process will bring construction expertise into the design process leading to more effective and economic proposals, and greater security of price and delivery timescales.
2.3Tenders for an ECI contract have been sought and assessed under European Union procurement rules and in accordance with the Council’s Contract Standing Orders, and the recommended tenderer has demonstrated the most economically advantageous tender when assessed against price and quality. A summary of the price and quality assessment is attached at Annex A.
3.0FINANCIAL IMPLICATIONS
3.1The current capital programme makes an allowance for £1m to cover the ECI Phase 1 design costs in the period 09/10 budget. Allowance for future years will have to be made depending on the outcome of the public inquiry and approval by the Department for Transport of the MSBC.
3.2The estimated outturn cost of the scheme is £99.8m, of which £80.4m has been bid for from the Department for Transport. The remaining £19.4m will need to be funded from County Council resources.
3.3There will be break points within the contract so that in the event of DfT refusal of the Major Business Case, or the scheme being abandoned by the Council, there would be no financial liability to the Council in respect of the construction contract and only costs to date expended in Phase 1 design would be payable.
3.4Financial appraisals of all the tenderers have been carried out by ESCC CRD Strategic Finance Group. CRD Finance were asked to advise on the financial status of the companies and their suitability for undertaking a scheme of this size and complexity. A copy of the satisfactory financial appraisal for the recommended tenderer isattached atAnnex B.
4.0TENDER PROCEDURE
4.1As the scheme construction costs exceed European Union (EU) thresholds, interested tenderers have been sought by advertisement under EU Procurement Rules. Seven companies responded and a shortlist of five companies was selected through assessment of the pre-qualification submissions received.
4.2The five tenderers selected were;
May Gurney Ltd.
Joint Venture Partnership formed of Hochtief (UK) Construction Ltd. and Norwest Holst Ltd.
Joint Venture Partnership formed of Costain and BAM Nuttall Ltd.
Carillion Civil Engineering Ltd.
Interserve Project Services Ltd.
4.3During the tender period Norwest Holst Ltd. Changed their trading name to Vinci Construction UK Ltd.
4.4Tenders were received from these companies by 27th March 2009. A five-person quality panel has assessed the tenders based on a model developed from previous experience. The model assesses the tenderers’ submissions and awards marks based on 70% Quality and 30% Price.
4.6Tenderers were required to:
(a)submit responses to nine ‘quality’ questions seeking their opinions on key aspects of the project;
(b)attend an interview, where the quality panel asked questions based on their responses to the quality questions; and
(c)submit a separate financial proposal, including staff charge rates for those employed in the stage 1 design period, together with Fee Percentages that will be applied to the actual construction costs incurred when the scheme is constructed.
5.0TENDER EVALUATION
5.1In order to allow the quality of the bids to be assessed without being influenced by the associated cost a two envelope tendering system was adopted with the priced and quality submissions being submitted in separate envelopes.
5.2Tenders were assessed on the basis of quality and price in the ratio 70% / 30%.
5.3Each tender submission was assessed by two separate panels: a Quality Panel and a Financial Panel. The membership of these panels is detailed in Annex F.
5.1Quality Assessment
5.1.1The Quality Panel assessed quality scores and awarded marks, based on the tender score criteria in Annex C, Table C1, against the quality aspects in Annex D.
5.1.2Members of the Quality Panel firstly reviewed and scored each quality submissions independently. Following this the Quality Panel came together to compare and discuss their scores. Minor adjustments were made to individual scores following these discussions. The tenderers final quality score was then taken as the average of the individual panel members.
5.1.3A quality threshold of 50 marks out of a possible 100 was set below which tenders would not be considered further. All five tenders received achieved the minimum quality score.
5.1.4Quality scores for each of the quality criteria detailed in Annex D where then multiplied by the appropriate weightings relevant to the importance of each quality aspect. The quality assessment sheets from each member of the assessment panel are shown in Annex E.
5.1.5After weighting and averaging the scores, the highest scored tender was allocated 100 marks. The other tenders were allocated marks on the basis of a one mark reduction for each percentage point lower than the highest scoring tender.
5.2Quality Interviews
5.2.1Followingassessment by the quality panel each tenderer was interviewed by the panel. Performance at these interviews contributed to the quality marks.
5.2.2The final quality score for each tender is summarised in Annex A.
5.3Financial Assessment
5.3.1The Financial Panel also assessed the financial element of the tender independently of the Quality Submissions.
5.3.2The financial scoring was split into two areas for assessment: -
(a) Hourly Rate by staff grade for Phase 1 (Detailed Design)
In order to compare and assess the rates submitted by the tenderers the hourly rates by staff grade in Phase 1 wereinserted into apredetermined model containing an estimate of the number of hours required for the key members of staff and other supporting staff, to produce an estimate of the design costs payable in Phase 1.
The Phase 1 design costs, using the model, were compared by allocating 100 marks to the average of the lowest three figures submitted. The marks allocated for other tender design costs were then allocated on the basis of a reduction of one mark for each percentage point increase or decrease from the average figure.
The Phase 1 design costs from above make up 20% of the overall financial assessment.
(b)The tendered direct fee percentage and the subcontracted fee percentage for Phase 2 (Construction).*
The proportions of the subcontracted work and other work were multiplied by a nominal construction cost for the Scheme, which excludes the contractor’s fee. This gives the nominal costs for the subcontracted work and other work elements and the appropriate fee percentages were then applied to those costs and an aggregate fee amount derived. This was then added to the nominal construction costs to calculate a notional price for the construction phase of the works purely for tender assessment purposes.
Marks were calculated by allocating the lowest notional price 100 marks and then allocating marks to the other tendered notional prices on the basis of a reduction of 1 mark for each percentage increase.
The fee percentages make up 80% of the overall financial assessment.
*(The direct fee percentage and the subcontracted fee percentage are the percentages that are applied to the actual cost of additional works (Compensation Events) and are applied to non-subcontracted or subcontracted work respectively.)
5.3.3The tendered fee percentages ranged in value from 3.5 to 8% with three tenderers submitting rates around 4%. The fee percentage is proposed to cover the contractor’s off-site overheads and profit and reseach has shown that a value of 6-8% would be expected for contractors of the size tendering here. At 4% it is suggested that it would be difficult for the contractors to make a profit and that there would be pressure to keep a target high enough to ensure some gain share resulting in potential conflict between the Contractor and the Council.
5.3.4The final financial score for each tender is summarised in Annex A.
6.0BACKGROUND PAPERS
6.1The following papers should be considered in association with this report;
Cabinet Report 25th September 2008;
Tender Evaluation Process dated 26th March 2009;
Pre-qualification of Companies to Undertake the Contract for the Bexhill to Hastings Link Road Design and Construction dated 20th November 2008; and,
ECI Construction Contract - Proposal for Contract Share Percentages to be applied to the Target Cost Contract dated19th December 2008.
7.0 SUMMARY
7.1The assessment mechanism is detailed in Appendix A and summarised below and shows how the pre-determined award criteria, the weightings applied to them, the quality / price ratio and the price scoring mechanism were used to allow the quality and price elements of the tenders to be evaluated.
(a) / (b) / (c) / (d) / (e)Tenderer / Name / Quality Mark / Financial Mark / Overall Mark 70%(a) +30%(b) / Overall Mark within 5% / Ranking
A / Hochtief - Vinci / 100.00 / 94.53 / 98.36 / 98.36 / 1
B / Carillion / 94.11 / 95.00 / 94.38 / 94.38
C / Costain - BAM Nuttall / 92.23 / 97.44 / 93.80 / 93.80 / 2
D / Interserve / 83.16 / 94.85 / 86.67 / N/A
E / May Gurney / 88.32 / 98.41 / 91.35 / N/A
Tenderer A has the highest overall mark and may be considered for award.
Taking note of all tenderers within 5% of the highest overall mark gives a range to consider down to 98.36 x 0.95 = 93.44
Tenderers B & C lie within that range. Of these two, Tenderer C has the best financial score and may also be considered for award.
7.2The Hochtief – Vinci Joint Venture have achieved the highest overall scorewith a fee percentages of 8% and are therefore recommended for award.
7.3The tender award criteria issued to tenderers stated that the Council has the option to consider the lowest price scoring bid which achieves a score within 5% of the highest score. Using this rule the bid from Costain – Bam Nuttall Joint Venture could also be considered. As the Costain – Bam Nuttall Joint Venture scored third in terms of quality and that the tender from Hochtief – Vinci Joint Venture is fully compliant it is recommended that this option is not exercised.
8.0ENDORSEMENT
This report has been read and endorsed by;
Robin Hayler (Team Manager, Procurement)
SignatureDate
Carl Valentine (Project Manager – BHLR)
SignatureDate
ANNEXA – Summary of tender assessment
ANNEX B –Financial Appraisal for Hochtief and Vinci Construction UK Ltd
Financial Appraisal Summary / Annual ReviewChief Officers require a financial appraisal from the Director of Corporate Resources of tenderers whose contract value is
above the Standing Orders contract threshold value. The appraisal below and recommendation is provided for this
purpose. It is confidential to EastSussexCounty Council and is provided specifically for the contract
requirement stated. It should not be used for any other purpose. The financial opinion on potential
contractors used in Committee (and other formal) reports should always be the recommendation and full unamended
wording given below in this financial appraisal. Finance Managers should be provided with a copy of this appraisal when
approving relevant formal reports. If there is recognisable delay in using this appraisal, or if new information
becomes available, the recommendation should be rechecked by the Director of Corporate Resources.
Company: / Vinci Construction UK Ltd
Registration Number : / 2295904
Latest year: ending / If Not / Commentary
31st December / 2007 / Acceptable
enter X
Credit Rating / 77 / Low Risk
County Court Judgements / 0
Unsatisfied CCJs
Turnover / £489,848,000 / £408,829,000 in 2006 and £389,155,000 in 2005
Gross Profit / £40,014,000 / £42,338,000 in 2006 and £32,286,000 in 2005
Pre-Tax Profit / £16,769,000 / £19,278,000 in 2006 and £14,762,000 in 2005
Net Worth / £27,783,000 / £32,381,000 in 2006 and £28,571,000 in 2005
Current Ratio / 1.05 / 1.12 in 2006 and 1.11 in 2005
Acid Test / 1.04 / 1.11 in 2006 and 1.11 in 2005
Gearing Ratio / 9.2% / 14.8% in 2006 and 15.2% in 2005
Max Contract Value / £122,462,000 / ( 25% of
Turnover)
Technically Insolvent (Y/N) / No
Appraisers Comments (for use if queried by supplier). - Acceptable - This is a large company with assets in excess of £227m. Turnover has increased year on year during the period appraised but gross and net profit have both dropped slightly leading to a small reduction in net worth. The liquidity ratios appear acceptable with a strong gearing ratio. This company appears acceptable for consideration for contracts for work
RECOMMENDATION (and wording to be used)
The Director of Corporate Resources has appraised the financial position of this organisation
and, for the purposes appraised, has found it to be:
Acceptable
Completed By: / Paul Rogers / Date: / 20.04.09
Financial Appraisal Summary / Annual Review
Chief Officers require a financial appraisal from the Director of Corporate Resources of tenderers whose contract value is
above the Standing Orders contract threshold value. The appraisal below and recommendation is provided for this
purpose. It is confidential to EastSussexCounty Council and is provided specifically for the contract
requirement stated. It should not be used for any other purpose. The financial opinion on potential
contractors used in Committee (and other formal) reports should always be the recommendation and full unamended
wording given below in this financial appraisal. Finance Managers should be provided with a copy of this appraisal when
approving relevant formal reports. If there is recognisable delay in using this appraisal, or if new information
becomes available, the recommendation should be rechecked by the Director of Corporate Resources.
Company: / Hochtief (UK) Construction Ltd
Registration Number : / 2489026
Latest year: ending / If Not / Commentary
31st December / 2007 / Acceptable
enter X
Credit Rating / Not known
County Court Judgements / Not known
CCJs
Turnover / £43,215,000 / £47,016,000 in 2006 and £43,128,000 in 2005
Gross Profit / £5,730,000 / £5,995,000 in 2006 and £3,864,000 in 2005
Pre-Tax Profit / £1,626,000 / £2,464,000 in 2006 and -£365,000 in 2005
Net Worth / £5,806,000 / £2,120,000 in 2006 and £210,000 in 2005
Current Ratio / 1.6 / 1.3 in 2006 and 1.3 in 2005
Acid Test / 1.6 / 1.3 in 2006 and 1.3 in 2005
Gearing Ratio / 3.1% / 10.3% in 2006 and 78.0% in 2005
Max Contract Value / £10,803,750 / ( 25% of
Turnover)
Technically Insolvent (Y/N) / No
Appraisers Comments (for use if queried by supplier). - Acceptable - There was a slight downturn in turnover and profits during 2007 but an increase in net worth. The liquidity and gearing ratios appear strong and improving. This company appears acceptable for consideration for contracts for work up to £10.8m p.a.
RECOMMENDATION (and wording to be used)
The Director of Corporate Resources has appraised the financial position of this organisation
and, for the purposes appraised, has found it to be:
Acceptable up to £10.8m p.a.
Completed By: / Paul Rogers CRD Finance / Date: / 2nd October 2008
ANNEXC – Quality Score Criteria
Standard / Service Delivery Level / MarkVery high standard / Proposals likely to exceed all delivery targets / 10
Good standard / Proposals likely to meet all delivery targets and exceed some delivery targets / 8 – 9
Acceptable standard / Workable proposals likely to achieve all or most delivery targets / 5 – 7
Poor standard / Significant reservations on service delivery targets but not sufficient to warrant exclusion of the bid / 1 – 4
Not acceptable / Bid excluded from further consideration / 0
ANNEXD – Quality Questions
A1Methodology and Programme
Please provide a statement setting out the tenderer’s strategy for delivery of the works to meet the Employer’s objectives, from contract award through to the end of the aftercare period for the landscaping and ecological works.
As a minimum the statement should describe in detail the following:
- The approach and strategy to the deliver the Scheme and what you believe to be the key stages and priorities;
- A critical appraisal of the Employer’s overall programme and the construction programme contained within Section 3 of Environmental Statement Chapter 3B: Construction Strategy;
- When and how the team will be assembled, giving details of the proposed location for the Phase 1 team and the reasons behind it;
- Procedures for understanding, capturing and incorporating into the design, comments on maintenance and economy;
- The critical stages in the construction of the works including their impacts and mitigation and
- Proposals for commissioning, handover and aftercare ensuring that the requirements of all parties are met.
Where appropriate, please provide examples of recent experience and evidence from previous schemes.
A2Cost and Risk
Please provide a detailed statement setting out the tenderer’s general approach to cost and risk management throughout the Scheme life cycle including the following:
- Comments on the Employer’s budget, detailing where inaccuracies may lie or where any savings could be made;
- An explanation of how the total of the Prices at the various stages of the Scheme will be computed and an indication of any inaccuracies that may be present and why. How will the tenderer ensure that these inaccuracies are minimised?
- An explanation of how the Defined cost will be compiled and submitted;
- Procedures that will be adopted to monitor, manage and forecast risk throughout the Scheme;
- The interpretation of the term ‘open book’ accounting and it’s implementation. Please provide evidence of how have you achieved this successfully on other schemes?
- How the tenderer will manage costs down ensure that final total of the Prices is within the Employer’s budget;
- How the tenderer will ensure that the Prices are competitive and are commensurate with current market prices;
- The tenderer’s policy on the use of ‘in-house Subcontractors’ and ‘Associated Companies’. Commentary on the advantages and disadvantages in terms of economy and
- Procedures and Processes for translating materials, equipment and labour quantities received from site into accurate cost information, including checking procedures to ensure that these figures are accurate.
A3Quality Management