A study on evaluation element of technical proposal tendering for apartment remodeling business

1.1. Background and purpose of the study

The government has presented new policies and programs for remodelling of apartments as a means to address the changes in the demands for houses due to the booming in the remodelling industry, ageing of the society, and dropping of birth rates. The standard for selecting the contractors under the new system dictates that the contractors shall be selected via an open competitive tender, limited competitive tender, or a designated competitive tender. The new standard also require that a basic remodelling plan is established before establishing a remodelling cooperative in megalopolis, metropolises, and large cities with 500,000 or higher populations. This new standard also requires that such plans are prepared with a view to improve the housing environment in cities and the quality of life for the citizens living in it. For this, the plans are required to specify a clear set of goals and basic directions.

In a technical proposal tendering, the project owner issues the basic or execution drawings, along with the tender documents, which the bidders review to prepare their technical proposals containing construction plans, plans to reduce the project cost, and how they will mange the project schedule. The project owner, then, evaluates these proposals and selects the successful bidder. In this regard, it is believed that a technical proposal tendering would be a good choice to select contractors for remodelling projects in the future, as the contractors review the basic designs of the project and come up with a better technology and options.

However, the evaluation items specified in the ‘Standard for Technical Proposal Tendering’ announced by the Ministry of Land and Transportation in February 2014, and the ‘Manual for Evaluation and Assessment’ are mainly focused on new construction projects, making it less relevant for the nature of the remodelling projects.

Therefore, the purpose of this study is to identify the evaluation items for a technical proposal tendering process for a remodeling project.

1.2. Study Method and Scope

The scope of this study is limited to remodeling projects for increasing the housing units or horizontal/vertical expansions in accordance with the revised Housing Act in July 2012. For this study, review of the assessment items was peformed based on the evaluation items in ‘Standard for Technical Proposal Tendering’ and ‘Review and Evaluation Manual’ announced by the Ministry of Land and Transportation announced in February, 2014.

As the first step of this study, we identified the concept, status, and characteristics of technical proposal tendering and remodelling. Then, we identified the key issues involved in remodeling businesses from the existing studies and reviewed the existing cases of public announcements and contracting to identify the issues of importance. Next, we analyzed the project elements of remodelling we identified in the previous steps and compared them with the evaluation items of technical proposal tenders of the past to identify items commonly exist and other issues of importance. Lastly, we interviewed 16 construction managers, 21 contractors, and 15 designing engineers who have experience with remodeling projects to review the items analyzed herein for their relevance and set the scope of their applications. With this, we identified the appropriate evaluation items for technical proposal tenders for remodelling projects.

2.1. Backgrounds and concepts of remodelling

A remodelling refers to an overhaul¹⁾ to slow the aging or increase the functional capability of a building or partial expansion of it. (Item 10, Article 2 of Construction Act, Item 15, Article 2 of Housing Act)

Residential renovation of aged apartments in Korea has been done through reconstruction or redevelopment of them since the late 1990s. However, the large amount of construction wastes resulting from it, and the tendency of otherwise sound residential complexes into slums became social problems. Also, the changes of the constructions environments surrounding reconstruction and awareness on the needs for saving resources resulted in the introduction of remodelling in the early 2000s.

In 2012, the government introduced new policies which allowed increasing the number of housing units up to 10%, selling the remodelled apartments to non-cooperative member buyers, along with up to 10% of differential application of the allowed expansion ratio for exclusive areas of 85m², building separate pavilions, and leasing of the apartment if the project include introduction of ‘multi-homes.’ In 2014, the government again introduced now policies allowing vertical expansion of the apartments, adding three more stories for apartments with 15 stories or higher and two stories for apartments of 14 stories or lower. Also, the increase ratio of the existing housing unit was again alleviated to 15% from previous 10%, in an effort to invigorate the remodelling market.

2.2. Processes for a remodeling project

In this section, we will review the key steps of a remodeling projects as well as the processes to select the contractor, which are shown in <Table 1>²⁾ below.

Table 1.

Main contents of remodeling procedure

The procedure of remodeling starts with establishing the basic plan. The establishment of the basic plan is required for the sake of improving the residential environment and preventing over population of the city environment. This requirement is applicable to megalopolises, metropolises, and large cities with 500,000 or more populations. The selection of the constructor is to come after the establishment of the basic plan and forming of the remodelling association.

Since these steps come before the execution designing of the project, it is evident that a technical proposal tender process for a basic design is a reasonable method of contracting. Also, the project owner many use the plans and basic designs created during the basic planning phase to achieve an improved development proposal through a technical proposal tender when selecting a constructor.

2.3. Concepts and background of a technical proposal tender

A technical proposal tender³⁾ is not like the previous tendering processes where the project owner presents already-determined construction plans and scopes of design and expects the potential contractors to present their construction references. Here, the bidders review the design documents and tender documents and submit their own plans for construction, plans to reduce the project costs, and how they will manage the construction schedule, which are evaluated by the project owner to decide the successful bidder.

The main purpose of this technical proposal tendering process is to improve the current problems of the existing tendering process, with a view to achieve qualitative improvement of the buildings through technical competitions between bidders. The expected benefits of a technical proposal tender include improvement of construction efficiency, availability of VE method, and advantages in life cycle costs, constructions costs, and construction time.

The Ministry of Land and Transportation announced the Standard for Technical Proposal Tender and the Review and Evaluation Manual, with a view to ensure fairness and reliability of the evaluation criteria and rationalize the level of outputs that used be demanded excessively in previous tender documents⁴⁾.

2.4. Types of technical proposal tenders

The technical proposal tender processes are divided into the basic design technical proposal tender processes and the execution design technical proposal tender process⁵⁾ depending on the extent of available design documents from the project owner, the mode of contracting by the project owner, and the time of contracting.

In a basic design technical proposal tender process, the project owner issues a public announcement inviting design proposals to complete the basic deign. Upon completion of the design bidding, the project owner than announces a technical proposal tender, in which the bidders may participate by submitting a technical proposal based on the basic design documents along with a bid price, with possible improvement of the basic design if necessary. Once a successful bidder is selected, it is now given with the authority to proceed with the execution design and carry out the project. Therefore, this procedure can be regraded as an integrated process to select a qualified engineering firm to perform the design work and a construction company.

In an execution technical proposal tender procedure, the execution design for the project is already finished before the announcement of the tender, to which the participating bidders submit their technical proposals. The proposals are evaluated by the project owner, and the successful bidder is then authorized to perform the construction work. While it is still possible for the successful bidder to perform execution design works for some elements, such are rather shop drawings for actual construction works and the selected bidder is not given with the level of authority to make its own designs. Hence, this process can be deemed as a process of competitive bidding to select the construction company to preform the construction jobs.

3.1. Case Study

LH Corp., Korea, has published its study titled “A Study on Improvement of the Contracting System by Developing a New Contracting Model for LH Corp.” In this study, the factors that where thought to affect the contracting ( were, respectively, the characteristics of the project owner which was LH Corp., IN this case,) the characteristics of remodelling projects, and the demands from the tenants, which were examined in this study. After that, an analysis was performed to find out which of an alternative tender, construction project management, tendering the design portion and the construction portion separately, and tendering the design portion and the constructions portion in a same tender was the most appropriate.

The result of the study mentioned above showed that construction project management method was the most appropriate option. However, with our sensitivity analysis with different weights given to the demands of the tenants, the characteristics of the project, and the characteristics of the project owner, the resulting values were difference. Since the paper mentioned above was published before the introduction of the technical proposal tendering method and there was not any difference in terms of the sensitivity, we decided to refer to the elements which affect the tendering only.

Table 2 below shows the elements which were shown to affect the tendering process in the study published by LH Corp. which was mentioned above.

Table 2.

factor affecting order

In addition, Yongkyoung Cho (2011) defined the decisive factors in a remodelling project for a multi-unit housing facility in his study titled “A Study on Decisions of the Importance Level Among Remodelling Project Elements in an Aged Multi-Unit Housing Facility” as in Fig. 1 below.

Fig 1.

stratification of remodeling dinger

Once the definitions were given, the importance level of each tier was analyzed through interviews with experts and the fuzzy AHP analysis method. The result of the survey showed that the importance level was the highest in the order of the economic feasibility > Improvement of the exclusive spaces > Improvement of the shared spaces > residential performances and safety.

3.2. Cases of Public Announcements

On June 18, 2014, LH Corp. announced a competition with a them of ‘Creative Space Building for Invigoration of Remodelling.’ The purpose of this competition was to promote development of a new breed of houses with creative spatial structures and new elements technologies and obtain design ideas and technologies for convergence of the housing related industries. In this study, we analyzed the planning instructions for the competition in order to identify the necessary elements of a remodelling project.

Table 3.

planning guidance

The instructions/guideline shown above signifies that the planning elements for the tenants and the demands from them are proactively included, as one can see in the rational residential complex planning, the rationality in planning the unit residence layout, and the establishment of plans that reflect the preferences of the tenants.

Also, elements such as constructions plans with lower costs, high efficiency, eco-friendly planning, and other planning elements that reflected the changing trends in the housing market were included.

3.3. Contracting Cases

The purpose of this exemplary project was to facilitate formation of housing remodelling associations by preparing the project plans such as the basic design for remodelling for OO Apartment Complex No. 4 in Jeongja-dong, Bundang-gu, which was selected as the pilot complex for remodelling in accordance with the ‘Ordinance on Supporting Remodelling of Multi-unit houses in Seongnam-si.’ The detailed guidelines for the performance of the project were as follows;

Table 4.

detailed achievement of a task

The guideline requires the contractor to perform an survey of the current status of the apartment and the demands from the current tenants. After that, the potential bidder should provide a basic design for the relevant complex, as well as the direction for the project. By utilizing the outcomes from these processes, the remodelling association may present a set of expectations so that a technical proposal tender process may result in a higher level of technical and designing capability.

3.4. Summary

In terms of the planning process, a remodelling project is dependant of the consents, which is unlike a new construction project. Therefore, the basic survey (required repair works. long-term repair works reserves, and the house prices (or the lease costs,) the site photos, and the survey with the tenants are carried out, as well as a demand survey for a remodelling (including the preferred type of remodelling and items which require urgent repair works) so that a basic design can be prepared.

Since old houses were built in accordance with the anti-earthquake designing criteria of the past, reinforcement of the anti-earthquake performance and an effective connection between the existing structure and the newly added structure should be considered.

In terms of the energy, it is required that the bidder suggests quantified energy improvement plans which are evidence-based for items which are actually to be included in the planning aspects, such as ensuring heat insulation performance of the existing walls, installation of chassis on doors, windows, and corridors, improvement of heating and air-conditioning systems, application of energy-saving technologies in the main building, addition of green areas in the main building, and addition of roof-top gardens, etc.

In the economic aspect, reduction of the project cost, construction time, lease income (for each household), divided remodelling costs, minimization of the evacuation period, and saving the maintenance cost should be considered in order to reduce the financial burdens on the tenants.

Table 5 below shows a summary of the project elements;

Table 5.

Remodeling business task

4.1. Comparative analysis of the project elements and the evaluation elements in a technical proposal tender

Fig. 2 below shows the project elements specified in Section 3 of this paper and the evaluation items in the standard technical tender documents;

fig 2.

Remodeling task & technical proposal tendering evaluation factor comparison analysis

fig 3.

Remodeling task + technical proposal tendering evaluation factor

Fig. 3 reveals that the eco-friendliness/energy, and the design/structure elements are overlapping between the two sides.

As for the elements of a remodeling project, the basic survey and the demand survey for remodelling were performed during the basic planning phase, while the tenant presentation is held when the association is established. Therefore, it is not related to the selection of the contractor. However, one might notice that, as the ‘estimation of the economic feasibility and the shared cost’ may depend on the construction technology which again depend on the selection of the contractor, it should be included as one of the evaluation items for the technical proposal tender.

As one might take a look onto the evaluation items for the technical proposal tender, the construction works, construction management, machiner/fire-fighting/electricity/communication, and the civil works and landscape items are subject to evaluation in both a new construction project and a remodelling project, therefore, these items can be regarded as common items. As a result, it is evident that, as shown in Fig. 3 below, the evaluation items for a technical proposal tender should include the ‘estimation of the economic feasibility and shared costs.’

4.2. Identification of evaluation items through interviews with experts

As a result of the comparison between the project elements and the evaluation elements of a technical proposal tender, the necessary elements for remodeling in the evaluation process of such a tender were identified. In order to establish relevance, hierarchy, and scope of application for these elements, an interview with experts was conducted. Also, their comments on additional items for considered were requested for.

In the interview with the experts, to collect a wide range of opinions from them, 16 construction managers, 21 constructions experts, and 15 designing engineers were selected as the panel to conduct an interview with the evaluation items for a technical proposal tender. The issues that were selected to be considered were as follows;

Firstly, the relevance of the items that were identified were reviewed.

Secondly, the identified items were reviewed for their application as an evaluation item for the standard.

Thirdly, the experts were requested to identify items subject to further considerations.

As a result of the interviews with them the studies on the evaluation items for a remodelling project that are suggested in this study resulted in conclusions that they were mostly relevant. The answers from the experts on their application were also positive.

Table 6 below shows a summary of the evaluation items for a technical proposal tender that were finally identified as a result of the interview with the experts.

Table 6.

Suitable technical proposal evaluation items for Remodeling

The ‘estimation of economic feasibility and shared costs’ identified as a result of the comparison between the project elements and the evaluation elements for a technical proposal tender was changed into ‘changes of the rights and plans for move-out.’ This is to include the specific items only to be found in a remodelling project, instead of simply trying to reduce the project cost.

The relevance of the plan for the changes of rights and the relevance of the plan for relocation were added to the evaluation items included in the ‘changes of the rights and plans for move-out.’ The relevance of the plans for changes of the rights is included within the process of remodelling and includes the changes of the rights for the buildings, shared costs, project costs, sales plan, and other ordinance issues. The relevance of the plans for relocation, which was not originally included in the preceding studies, pursue the convenience of the tenants by means of the timing of relocation, management of the construction sectors, the time of bringing in the materials, and management of the laborers and the remaining tenants.

Other issues identified from the project elements, which are the planning based on the opinions of the tenants, the reinforcement of the structures, and the eco-friendly elements were overlapping with many of the existing evaluation items. Therefore, they were not included as a part of the specialty fields or the evaluation elements. Instead, there were redeployed as the key consideration items for evaluation items. Also, additional key consideration items were added to the relevance of the changes of the rights and the relevance of the relocation plans, which were evaluation items that were added as a result of the interviews.

The detailed contents of each item were as shown in Table 7 below.

Table 7.

Suitable evaluation guide & Principal reviewed for Remodeling

The evaluation guideline for ‘eco-friendliness/ energy saving, and performance plan relevance’ and the key review items saw addition of ‘relevance of the plans to minimize the amount of construction wastes by minimizing the demolition of the existing structure, etc.,’ which was identified during the research of the existing cases and ‘the plan for recycling of construction waste,’ which was identified during the interview with the experts.

As for the evaluation guideline and key review items for ‘construction plan and structural relevance), the basic survey, which was identified during the case study, the layout of the complex through the demand survey, the relevance of the use of spaces, the relevance of the plans to secure the infrastructure (parking lots, parks, etc.,) expansion of the floor height, inter-floor noises or other design specialization plans, the relevance of the sunlight environment for the lower floor areas, the relevance of the plans for effective connections between the existing and new structures, reinforcement of the structure and the relevance of repair works were deployed. The interview with the experts resulted in inclusion of inter-floor noises related issues which are becoming a social issue these days.

As for the evaluation guideline and the key review items for ‘the relevance of the plans for changes of the rights regarding the land and the buildings,’ the relevance of the plans for changing rights related to the land and the building, which were identified during the case studies, the relevance of the calculation of the lease incomes when the number of units is increased, the relevance of the calculation of the shared costs, the relevance of the calculation of the project cost, and the relevance of the plans for sales of the properties were deployed as the key items for consideration.

The ‘relevance of the management of relocation’ was identified as a result of the interview with the experts. Key consideration items for this included the relevance of the calculation of the relocated period, the relevance of the management of the partitions, and the management of the laborers and the remaining tenants.