Risk and price in the bidding process of contractors

Formal and analytical risk models prescribe how risk should be incorporated in construction bids. However, the actual process of how contractors and their clients negotiate and agree on price is complex, and not clearly articulated in the literature. Using participant observation, the entire tender process was shadowed in two leading UK construction firms. This was compared to propositions in analytical models and significant differences were found. 670 hours of work observed in both firms revealed three stages of the bidding process. Bidding activities were categorized and their extent estimated as deskwork (32%), calculations (19%), meetings (14%), documents (13%), off-days (11%), conversations (7%), correspondence (3%) and travel (1%). Risk allowances of 1-2% were priced in some bids and three tiers of risk apportionment in bids were identified. However, priced risks may sometimes be excluded from the final bidding price to enhance competitiveness. Thus, although risk apportionment affects a contractor’s pricing strategy, other complex, microeconomic factors also affect price. Instead of pricing in contingencies, risk was priced mostly through contractual rather than price mechanisms, to reflect commercial imperatives. The findings explain why some assumptions underpinning analytical models may not be sustainable in practice and why what actually happens in practice is important for those who seek to model the pricing of construction bids.

Subcontract and supply enquiries in the tender process of contractors

In the tender process, contractors often rely on subcontract and supply enquiries to calculate their bid prices. However, this integral part of the bidding process is not empirically articulated in the literature. Over 30 published materials on the tendering process of contractors that talk about enquiries were reviewed and found to be based mainly on experiential knowledge rather than systematic evidence. The empirical research here helps to describe the process of enquiries precisely, improve it in practice, and have some basis to support it in theory. Using a live participant observation case study approach, the whole tender process was shadowed in the offices of two of the top 20 UK civil engineering construction firms. This helped to investigate 15 research questions on how contractors enquire and obtain prices from subcontractors and suppliers. Forty-three subcontract enquiries and 18 supply enquiries were made across two different projects with average value of 7m. An average of 15 subcontract packages and seven supply packages was involved. Thus, two or three subcontractors or suppliers were invited to bid in each package. All enquiries were formulated by the estimator, with occasional involvement of three other personnel. Most subcontract prices were received in an average of 14 working days; and supply prices took five days. The findings show 10 main activities involved in processing enquiries and their durations, as well as wasteful practices associated with enquiries. Contractors should limit their enquiry invitations to a maximum of three per package, and optimize the waiting time for quotations in order to improve cost efficiency.

Commercial reviews in the tender process of contractors

Purpose – The purpose of this paper is to show the extent to which clients amend standard form contracts in practice, the locus of the amendments, and how contractors respond to the amendments when putting together a bid. Design/methodology/approach – Four live observational case studies were carried out in two of the top 20 UK construction firms. The whole process used to review the proposed terms and conditions of the contract was shadowed using participant observation, interview and documentary analysis. Findings – All four cases showed strong evidence of amendments relating mostly to payment and contractual aspects: 83 amendments in Case Study 1 (CS1), 80 in CS2, 15 in CS3 and 29 in CS4. This comprised clauses that were modified (37 per cent), substituted (23 per cent), deleted (7 per cent) and new additions (33 per cent). Risks inherent in the amendments were mostly addressed through contractual rather than price mechanisms, to reflect commercial imperatives. “Qualifications” and “clarifications” were included in the tender submissions for post-tender negotiations. Thus, the amendments did not necessarily influence price. There was no evidence of a “standard-form contract“ being used as such, although clients may draw on published “standard-form contracts” to derive the forms of contract actually used in practice. Practical implications – Contractors should pay attention to clauses relating to contractual and financial aspects when reviewing tender documents. Clients should draft equitable payment and contractual terms and conditions to reduce risk of dispute. Indeed, it is prudent for clients not to pass on inestimable risks. Originality/value – A better understanding of the extent and locus of amendments in standard form contracts, and how contractors respond, is provided.

Assessing the process of knowledge transfer – An empirical study

This paper investigates and evaluates the process of knowledge transfer in construction projects. Due to the highly competitive nature of business environments, knowledge transfer between organisations has become increasingly popular in recent years. However, although organisations can realise remarkable benefits by transferring knowledge from one unit to another, successful knowledge transfer can be difficult to achieve. The discussions presented in the paper are mainly based on findings of two case studies. The two cases were selected from Private Finance Initiative (PFI) projects in the UK. According to the case study findings, different stages of a knowledge transfer process can be overlapped, omitted, repeated as well as intermitted and then restarted. One of the significant findings of the case studies was the role of the "knowledge mediator". In selected case studies, there were external consultants and expert staff in the form of knowledge mediators. The importance of their roles was frequently highlighted by the interview participants. They were not only facilitating the close liaison between the knowledge source and the receiver, but also their role was strongly associated with practices of translation and interpretation. This combined role of mediator/translator, therefore, appears to be particularly significant for inter-organisational knowledge transfer in PFI projects.

Controlled trial of the short- and long-term effect of psychological treatment of post-partum depression 2. Impact on the mother-child relationship and child outcome

Background: Postnatal depression is associated with adverse child cognitive and socio-emotional outcome. It is not known whether psychological treatment affects the quality of the mother-child relationship and child outcome. Aims: To evaluate the effect of three psychological treatments on the mother-child relationship and child outcome. Method: Women with post-partum depression (n=193) were assigned randomly to routine primary care, non-directive counselling, cognitive-behavioural therapy or psychodynamic therapy The women and their children, were assessed at 43, [8 and 60 months post-partum. Results: Indications of a positive benefit were limited. All three treatments had a significant benefit on maternal reports of early difficulties in relationships with the infants, counselling gave better infant emotional and behaviour ratings at 18 months and more sensitive early mother-infant interactions. The treatments had no significant impact on maternal management of early infant behaviour problems, security of infant-mother attachment. Infant cognitive development or any child outcome at 5 years. Conclusions: Early intervention was of short-term benefit to the mother-child relationship and infant behaviour problems. More-prolonged intervention may be needed. Health visitors could deliver this.

Controlled trial of the short- and long-term effect of psychological treatment of post-partum depression - 1. Impact on maternal mood!

Background: Psychological interventions for postnatal depression can be beneficial in the short term but their longer-term impact is unknown, Aims To evaluate the long-term effect on maternal mood of three psychological treatments in relation to routine primary care. Method: Women with post-partum depression (n=193)were assigned randomly to one of four conditions: routine primary care, non-directive counselling, cognitive-behavioural therapy or psychodynamic therapy. They were assessed immediately after the treatment phase (at 4.5 months) and at 18 and 60 months post-partum. Results: Compared with the control, ail three treatments had a significant impact at 4.5 months on maternal mood (Edinburgh Postnatal Depression Scale, EPDS). Only psychodynamic therapy produced a rate of reduction in depression (Structured Clinical interview for DSM III-R) significantly superior to that of the control. The benefit of treatment was no longer apparent by 9 months postpartum, treatment did not reduce subsequent episodes of post-partum depression. Conclusions: Psychological intervention for post-partum depression improves maternal mood (EPDS) in the short term. However, this benefit is not superior to spontaneous remission in the long term.

Risk accountability in the tender process of contractors in Ghana and UK

The process of how contractors take account of risk when calculating their bids for construction work is investigated based on preliminary investigations and case studies in Ghana and UK. Ghana and UK were chosen, more or less arbitrarily, for the purpose of case studies, and to test the idea that there are systematic differences between the approaches in different places. Clear differences were found in the risk pricing approaches of contractors in the two countries. The difference appeared to emanate from the professional knowledge and competence of the bid team members, company policy, corporate accountability and the business environments in which the contractors operate. Both groups of contractors take account of risk in estimates. However, risk accountability was found to be higher on the agenda in the tender process of UK contractors, documented more systematically, and assessed and managed more rigorously with input from the whole bid team. Risk accountability takes place at three levels of the tender process and is dictated strongly by market forces and company circumstances.

Working together? Parent and local authority views on the process of obtaining appropriate educational provision for children with autism spectrum disorders

Background: There is general agreement across all interested parties that a process of working together is the best way to determine which school or educational setting is right for an individual child with autism spectrum disorder. In the UK, families and local authorities both desire a constructive working relationship and see this as the best means by which to reach an agreement to determine where a child should be educated. It has been shown in published works 1 1. Batten and colleagues (Make schools make sense. Autism and education: the reality for families today; London: The National Autistic Society, 2006). View all notes that a constructive working relationship is not always achieved. Purpose: This small-scale study aims to explore the views of both parents and local authorities, focussing on how both parties perceive and experience the process of determining educational provision for children with autism spectrum disorders (ASD) within an English context. Sample, design and method: Parental opinion was gathered through the use of a questionnaire with closed and open responses. The questionnaire was distributed to two national charities, two local charities and 16 specialist schools, which offered the questionnaire to parents of children with ASD, resulting in an opportunity sample of 738 returned surveys. The views of local authority personnel from five local authorities were gathered through the use of semi-structured interviews. Data analyses included quantitative analysis of the closed response questionnaire items, and theme-based qualitative analysis of the open responses and interviews with local authority personnel. Results: In the majority of cases, parents in the survey obtained their first choice placement for their child. Despite this positive outcome, survey data indicated that parents found the process bureaucratic, stressful and time consuming. Parents tended to perceive alternative placement suggestions as financially motivated rather than in the best interests of the child. Interviews with local authority personnel showed an awareness of these concerns and the complex considerations involved in determining what is best for an individual child. Conclusions: This small-scale study highlights the need for more effective communication between parents of children with ASDs and local authority personnel at all stages of the process