Construction procurement -- Guidance on strategy and tactics

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ISO/DIS 22058 - Construction procurement -- Guidance on strategy and tactics
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DRAFT INTERNATIONAL STANDARD
ISO/DIS 22058
ISO/TC 59/SC 18 Secretariat: SABS
Voting begins on: Voting terminates on:
2021-02-03 2021-04-28
Construction procurement — Guidance on strategy and
tactics
ICS: 91.010.20
THIS DOCUMENT IS A DRAFT CIRCULATED
FOR COMMENT AND APPROVAL. IT IS
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STANDARD UNTIL PUBLISHED AS SUCH.
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ISO/DIS 22058:2021(E)
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PROVIDE SUPPORTING DOCUMENTATION. ISO 2021
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ISO/DIS 22058:2021(E)
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© ISO 2021

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ii © ISO 2021 – All rights reserved
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ISO/DIS 22058:2021(E)
Contents Page

Foreword ........................................................................................................................................................................................................................................iv

Introduction ..................................................................................................................................................................................................................................v

1 Scope ................................................................................................................................................................................................................................. 1

2 Normative references ...................................................................................................................................................................................... 1

3 Terms and definitions ..................................................................................................................................................................................... 1

4 Options for engaging the market for new or refurbished construction works ...................................2

4.1 Concept .......................................................................................................................................................................................................... 2

4.2 Financing of the project ................................................................................................................................................................... 3

4.3 Design and interface management responsibilities ................................................................................................ 4

4.4 Interface management responsibilities ............................................................................................................................. 5

5 Developing a procurement strategy ................................................................................................................................................. 6

5.1 Introduction .............................................................................................................................................................................................. 6

5.2 Strategic considerations ................................................................................................................................................................. 7

5.3 Procurement objectives ................................................................................................................................................................... 7

5.4 Spend, organisational, market and stakeholder analysis ................................................................................... 8

5.4.1 General considerations ............................................................................................................................................... 8

5.4.2 Spend analysis .................................................................................................................................................................... 9

5.4.3 Organisational analysis .............................................................................................................................................. 9

5.4.4 Market analysis ................................................................................................................................................................. 9

5.4.5 Stakeholder analysis ..................................................................................................................................................10

5.5 Packaging strategy ............................................................................................................................................................................10

5.5.1 Concept .................................................................................................................................................................................10

5.5.2 Framework or non-framework agreements .........................................................................................10

5.5.3 Identifying work packages ...................................................................................................................................11

5.6 Contracting strategy ........................................................................................................................................................................12

5.6.1 Concept .................................................................................................................................................................................12

5.6.2 Standard forms of contract ..................................................................................................................................12

5.6.3 Selecting a suitable standard form of contract ...................................................................................12

5.7 Targeting strategy..............................................................................................................................................................................14

5.7.1 Concept .................................................................................................................................................................................14

5.7.2 Key performance indicators ................................................................................................................................15

5.8 Selection methods .............................................................................................................................................................................17

5.9 Documenting a procurement strategy .............................................................................................................................18

6 Tactics ...........................................................................................................................................................................................................................19

6.1 Concept .......................................................................................................................................................................................................19

6.2 Publicity .....................................................................................................................................................................................................19

6.3 Procurement planning and sequencing ..........................................................................................................................19

6.4 Setting up of procurement documents ............................................................................................................................20

6.4.1 General...................................................................................................................................................................................20

6.4.2 Tactical variables associated with the process of offer and acceptance .......................20

6.4.3 Identification of a suitable standard form of contract..................................................................22

6.4.4 Specific conditions of contract ..........................................................................................................................22

6.4.5 Approaches to achieve quality ..........................................................................................................................22

6.4.6 Cost-effective procurement .................................................................................................................................23

Annex A (informative) Delivery management concepts and practices ..........................................................................25

Bibliography .............................................................................................................................................................................................................................29

© ISO 2021 – All rights reserved iii
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ISO/DIS 22058:2021(E)
Foreword

ISO (the International Organization for Standardization) is a worldwide federation of national standards

bodies (ISO member bodies). The work of preparing International Standards is normally carried out

through ISO technical committees. Each member body interested in a subject for which a technical

committee has been established has the right to be represented on that committee. International

organizations, governmental and non-governmental, in liaison with ISO, also take part in the work.

ISO collaborates closely with the International Electrotechnical Commission (IEC) on all matters of

electrotechnical standardization.

The procedures used to develop this document and those intended for its further maintenance are

described in the ISO/IEC Directives, Part 1. In particular, the different approval criteria needed for the

different types of ISO documents should be noted. This document was drafted in accordance with the

editorial rules of the ISO/IEC Directives, Part 2 (see www .iso .org/ directives).

Attention is drawn to the possibility that some of the elements of this document may be the subject of

patent rights. ISO shall not be held responsible for identifying any or all such patent rights. Details of

any patent rights identified during the development of the document will be in the Introduction and/or

on the ISO list of patent declarations received (see www .iso .org/ patents).

Any trade name used in this document is information given for the convenience of users and does not

constitute an endorsement.

For an explanation of the voluntary nature of standards, the meaning of ISO specific terms and

expressions related to conformity assessment, as well as information about ISO's adherence to the

World Trade Organization (WTO) principles in the Technical Barriers to Trade (TBT), see www .iso .org/

iso/ foreword .html.

This document was prepared by Technical Committee ISO/TC [59] [Buildings and civil engineering

works], Subcommittee SC 18, [Construction procurement].

Any feedback or questions on this document should be directed to the user’s national standards body. A

complete listing of these bodies can be found at www .iso .org/ members .html.
iv © ISO 2021 – All rights reserved
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ISO/DIS 22058:2021(E)
Introduction

Procurement is defined in ISO 10845 as the process which creates, manages and fulfils contracts.

Procurement accordingly commences once a need for goods and services or any combination thereof

has been identified and it ends when the goods are received and the services and construction works are

completed and contracts are closed out. Delivery management is the critical leadership role played by a

knowledgeable client to plan, specify, procure and oversee the delivery of construction works projects

efficiently and effectively, resulting in value for money. Procurement yields the necessary resources

to deliver projects while delivery management provides the necessary leadership and oversight

management and forms part of the governance or quality oversight arrangements for construction-

related projects.

ISO 10845-1 describes generic procurement processes and establishes generic methods and procedures

for procurements enabling a procurement system to be established within an organisation. ISO 10845-4

contains standard conditions for the calling for expressions of interest enabling respondents to be

prequalified to be admitted to a data base or be invited to submit tender offers. ISO 10845-3 contains

standard conditions of tender enabling the process of offer and acceptance to be conducted. ISO 10845-2

establishes a uniform format for the compilation of calls for expressions of interest, tender and contract

documents, and the general principles for compiling procurement documents for supply, services and

construction contracts, at both main and subcontract levels.

ISO 10845-1 describes a number of techniques and mechanisms associated with targeted procurement

procedures, all of which are designed to promote the participation of targeted enterprises and targeted

labour in contracts. Key performance indicators (KPIs) relating to the engagement of enterprises, joint

venture partners, local resources and local labour in contracts are needed to implement many of these

procedures. Parts 5 to 8 of ISO 10845 establish KPIs to measure the outcomes of a contract in relation

to the engagement of target groups, and to establish a target level or performance for a contractor to

achieve or exceed in the performance of a contract.

The current 8 parts of ISO 10845 only address parts of the procurement and delivery management

system required for the delivery of construction works projects. They focus on the characteristics

of procurement processes, methods and procedures and the detail relating thereto, focussing on the

acquisition phase of procurement i.e. the areas which are commonly of greatest interest to regulators.

They introduce the concept of procurement strategy for a particular procurement and make provision

of a range of methods to solicit tender offers but fall short of providing definitive guidance on the

development of a procurement strategy and procurement tactics and ignore the funding options that

are available.

There are a number of options relating to how construction works are funded and design and interface

responsibilities are allocated. There are also options relating to the different types of contracts that

may be entered into during the life cycle of a project, how contractors are to be remunerated, how

secondary objectives are to be promoted through a contract and how the market is to be approached to

solicit tender offers. Such choices impact upon procurement and project outcomes.

ISO 22058 provides guidance on the development of procurement strategy and the procurement tactics

which are necessary to effectively implement a procurement strategy.

Annex A describes basic delivery management principles and practices which can inform decisions

made regarding the options for engaging the market for new or refurbished construction works.

© ISO 2021 – All rights reserved v
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DRAFT INTERNATIONAL STANDARD ISO/DIS 22058:2021(E)
Construction procurement — Guidance on strategy and
tactics
1 Scope
This document provides guidance on

a) options for engaging the market in satisfying a client’s need for new or refurbished construction

works,

b) the development of procurement strategies for one or more projects involving the acquisition of

goods, services or any combination thereof irrespective of complexity, size, duration or life cycle

stage, and

c) the formulation of procurement tactics which enable identified procurement strategies to be

effectively implemented.

This document may be applied by private sector, public sector or community organisations.

Delivery management (see Annex A) and subcontracting strategies are beyond the scope of this

standard.
2 Normative references

The following documents are referred to in the text in such a way that some or all of their content

constitutes requirements of this document. For dated references, only the edition cited applies. For

undated references, the latest edition of the referenced document (including any amendments) applies.

ISO 10845-1, Construction procurement — Part 1: Processes, procedures and methods

ISO 10845-2, Construction Procurement — Part 2: Formatting and compilation of procurement documents

ISO 10845-3, Construction Procurement — Part 3:Standard conditions of tender

ISO 10845-4, Construction Procurement — Part 4: Standard conditions for the calling for expressions of

interest

ISO 10845-5, Construction procurement — Part 5: Participation of targeted enterprises in contracts

ISO 10845-6, Construction procurement — Part 6: Participation of targeted partners in joint ventures in

contracts

ISO 10845-7, Construction procurement — Part 7: Participation of local enterprises and labour in contracts

ISO 10845-8, Construction procurement — Part 8: Participation of targeted labour in contracts

ISO 19208, Framework for specifying performance in buildings
3 Terms and definitions
For the purposes of this document, the following definitions apply.

ISO and IEC maintain terminological databases for use in standardization at the following addresses:

— ISO Online browsing platform: available at https:// www .iso .org/ obp
© ISO 2021 – All rights reserved 1
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ISO/DIS 22058:2021(E)
— IEC Electropedia: available at http:// www .electropedia .org/
3.1
client

person or organisation who initiates and finances a project and approves the brief

[SOURCE: ISO 6707-2:2017 definition 3.8.2]

Note 1 to entry: Note to entry: a brief is the document that states the requirements for a project

3.2
construction works
everything that is constructed or results from construction operations
[SOURCE: ISO 6707-1:2017 definition 3.1.1.1]
3.3
framework agreement

an agreement between a client and a contractor, the purpose of which is to establish the terms governing

orders to be awarded during a given period, in particular with regard to price and, where appropriate,

the quantity envisaged
[SOURCE: ISO 10845-1:2010 definition 3.19]
3.4
order

an instruction to provide goods, services or any combination thereof under a framework agreement

3.5
secondary procurement policy

procurement policy that promotes objectives additional to those associated with the immediate

objective of the procurement itself
[SOURCE: ISO 10845-1:2010 definition 3.38]
3.6
stakeholder

person, group or organization that has interests in, or can affect, be affected by, or perceive itself to be

affected by, any aspect of the project
[SOURCE: ISO 21500:2012, definition 2.14]
3.7
value for money
optimal use of resources to achieve intended project outcomes
[SOURCE: ISO 10845-1, definition 3.40]

Note 1 to entry: Note to entry: optimal use of resources results in the most desirable possible outcomes given

expressed or implied restrictions or constraints
4 Options for engaging the market for new or refurbished construction works
4.1 Concept

A client, where new or refurbished construction works is required, needs to answer basic questions

relating to (see Figure 1)
• the financing of the project on a “buy” or “make” basis (see 4.2), and
2 © ISO 2021 – All rights reserved
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ISO/DIS 22058:2021(E)

• if the decision is to “make”, whether or not design responsibilities and / or responsibilities for the

management of interfaces between direct contracts are to be retained or transferred.

This is an important decision as the choice of “buy” or “make” determines the number of contracts

that need to be procured and overseen as well as the capacity and capabilities of the client delivery

management team which needs to be put in place to oversee the delivery of the required construction

works (see Annex A). It also informs the procurement strategies that are adopted.

4.2 Financing of the project

The source of funding might not be an option as it can be a matter of policy or regulation for any

given client.

NOTE Clients appoint their own personnel or contract professional service providers to perform their

allocated design and interface management responsibilities in the delivery process.

Figure 1 — Common options for engaging the market for new or refurbished construction

works (“buy” or “make” decisions)

The financing of the project on a “buy” basis requires the market to pay for the acquisition incrementally

as the client pays only for completed work. Under this financing mechanism, the developer typically

carries the cost of providing the required construction works and commonly receives payment either

in the form of a lump sum, a monthly amount for the term of the contract or a percentage of the income

© ISO 2021 – All rights reserved 3
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ISO/DIS 22058:2021(E)

stream following the completion of the project. The options commonly available to the client where the

market funds the acquisition are indicated in Table 1.
Table 1 — Options where the client requires the market to fund the acquisition
Client requirements Options available to the client
Purchase completed construction works
Enter into a Public Private Partnership or a Public Finance Initiative
Client requires ownership
agreement
Enter into a lease to own agreement
Contract on a design, build and operate basis
Client does not require ownership
Enter into a lease for construction works

The client’s involvement in the delivery management of a project where the market funds the project is

limited (see Annex A). In procurements of this kind, a client may need to appoint a transaction advisor

as the other party to the contract will oversee or has already overseen the delivery of the project. A

client nevertheless needs to undertake a procurement process or negotiate a contract to acquire the

outcomes associated with the selected project delivery route. Furthermore, clients will need to source

some professional capacity to ensure ensuring that due diligence is undertaken at an appropriate level

to confirm that the requirements of the contract are delivered in accordance with the terms of the

contract.

The financing of the project on a “make” basis, on the other hand, requires the client to directly pay

all contractors for the goods and services associated with the delivery of the project incrementally as

the works proceeds. It also requires that the client play an active role in the delivery of the project as

indicated in Annex A and to make decisions regarding the allocation of design and interface management

responsibilities between the parties to a construction contract. A client needs to appoint professional

service providers to undertake design and interface management responsibilities which it has retained,

where it lacks in-house professional expertise to assume these responsibilities. Accordingly, decisions

made regarding responsibilities for design and interface management determines the nature and

number of professional service agreements that are entered into.

Strategies and tactics appropriate to the selected option to engage the market need to be adopted to

attain desired outcomes.
4.3 Design and interface management responsibilities

A client can retain design responsibility, in which case the contractor undertakes construction on the

basis of production information issued by the client (design by client strategy). Alternatively, the client

can assign design responsibility to the contractor in which case the contractor:

• designs the works based on requirements established by the client and constructs it (design and

construct strategy) or provides a solution to the client’s requirements and manufactures and

installs the required works or component thereof (design and supply strategy); or

• completes the production information based on a scheme design provided by the client and

constructs it (develop and construct strategy).

The client needs to have in the design and construct and develop and construct strategy a capability or

procure the necessary professional resources to develop the end of stage deliverables which form the

basis of the scope of work for a contractor who is assigned design responsibilities and thereafter for

reviewing the outputs of the contractor for general conformity with the scope of work and what has

been agreed at each stage following the appointment of a contractor. A client may in order to obtain

continuity in aspects of the design novate professional service providers to a contractor as a condition

of contract e.g. mechanical design. (Novation is the substitution of a new contract in place of an old one

or the substitution of one party for another party in a contract.)
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ISO/DIS 22058:2021(E)

Table 2 indicates the appropriate usage of the design by client, develop and construct and design and

construct strategies. The client is at risk for delays in production information in the design by client

strategy. The attractiveness of the develop and construct and design and construct strategy is that there

is single point accountability for design and construction which overcomes fragmentation in design

through integration. However, early contractor involvement (the practice of appointing a contractor

before the design is complete) linked to a design by client strategy, possibly though a framework

agreement, also enables construction knowledge, experience and inputs to be obtained earlier than

normal to reduce costs, before the price for detailed design and construction is agreed. There are

accordingly several options to achieve design integration and minimise waste through collaboration

between designers and constructors.
Table 2 — Appropriate use of strategies involving design responsibilities
Strategy Appropriate usage
Design by Where one or more of the following applies
client

• the client wishes to make significant technical inputs into the design process and design

details,
• the client requires flexibility in the development of the design,

• reasonable certainty in cost and time is required before a commitment to proceed to

construction is made,
• independent design advice is required, or

• the flow of outstanding production information after the formation of the contract can be

tightly managed
Develop and Where
construct

• the client requires integrated detailed design and construction, based on the client’s design

development report, and single point accountability,
• standard designs exist which need to be made site specific, or

• the works need to be priced and commence before the production information has been

completed
Design and Where the client requires
construct
• integrated design and construction and single point accountability,
• that most risks lie with the contractor in return for price certainty, or

• that the cost and completion date be agreed when a decision to proceed with the project is

made
4.4 Interface management responsibilities

A client can retain responsibility for managing interfaces between direct contracts in which case the

client is responsible for the planning and managing of all post contract activities for work packages

which have dependencies due to interfaces (construction management strategy). Alternatively, a client

can assign interface responsibilities to a contractor who will subcontract parts of the work (main

contractor strategy) or most if not all the works to others (management contractor strategy).

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ISO/DIS 22058:2021(E)
5 Developing a procurement strategy
5.1 Introduction

A procurement strategy can be developed for a single project, a programme of projects or a portfolio

of projects where the client funds the acquisition. It identifies the best way of achieving objectives

and value for money for a single contract or a group of contracts linked to a project, whilst taking into

account risks and constraints. Decisions regarding specific procurement strategies should only be

made after the option to engage the market has been identified.
Different options in a procurement strategy carry different level of risk f
...

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