TENDERING IN CONSTRUCTION

LEC 03
Project Lifecycle – Main Contract Tender

Evaluation

Inception
Design

Master planning
Design Development
Implementation
Feasibility
Contract Documents
Tender & Contract
Schematic Design Operation

Construction
Facilities Management
Handover &
Commissioning
Asset Management
Defects Liability
Period
Roles & Responsibilities

Project Role Key Participants Key Responsibilities

Client Client Project Manager Award Contract
Project Manager Project Manager Prepare documents
Assistant PM Manage process on client behalf
Evaluate and recommend contract award
Negotiate contract
Lead Consultant Senior Architect Manage and coordinate documentation
Prepare addendum responses
Cost Consultant Quantity Surveyor Prepare pre-tender estimate
Evaluate submissions
Consultant Senior Engineer Prepare documentation
Provide addendum responses
Main Contractor Senior Estimator Create packages from documents
Commercial Manager Manage distribution of packages to subcontractors
Building Manager Evaluate project risks (commercial and construction)
Cost Planner Submit Estimates
Subcontractor Estimator Prepare and submit price based on documents
Suppliers Estimator Submit supply costs of goods & materials as per documents
The Process

Pre-Tender

Expression of
Interest (EOI) Tender

Tender Documents
Call Tender Evaluation

Tender
Tender Opening Award & Contract

Tender Addendums
Tender Evaluation Preferred Tender

Close Tender
Tender Interviews

Tender
Recommendation
 WHAT IS A TENDER?
Tender is :
 An offer to contractor to do the work for a
certain amount of money.
 Incorporate time and other conditions
required .
 To carry out the contract requirements
 The tender which is submitted by the
contractor is generally based on a bill of
quantities & specifications of the statement of
work.
 TENDER SYSTEM
 The process of finalization of contracts is achieved
through the tender process.

Advantages of the Tender process

 Most effective method of locking competitive rates.

 New technologies and options are received through open
tendering process.
 Risk transferring.
TYPES OF TENDER

1. Open tender

2. Close tender/ Selective tender

3. Negotiated tender
Open tender

 Bidding process that is open to all

qualified bidders.
 Tender usually published in the
newspaper and internet
 chosen on the basis of price and quality.
 This is most effective way of obtaining
many competitive rates.
Open tender -
advantages
 Anycontractor can tender their
work

 No favoritism occurred

 Maximum competition

 Nocommitment to tender, all

tender received will be genuine.
Open tender - disadvantages

 Client must bear expensive cost of tendering.

 Thewrong contractor may be chosen because

they are from unknown background.

 Time consuming process.

 Close /Limited / selective
tender
◦ Tender open to bidders in the category stated in the notice
only.
◦ Example: Only Prequalified Contractors.
◦ A number of contractor of known reputations are selected by
the design team to submit a price of the project.
◦ The contractor who submit the lowest tender is generally
awarded the contract.
◦ The number chosen to bid under this tender is little
◦ They are chosen for their expertise and experiences
 Negotiated tender
 Under this method, only one contractor is approached.

 Normally because the skills of the contractor are such

that the architect and other members of the design
team needed from the contractor’s specialist
knowledge use for design stage.

 Following the completion of the design, the contractor

will price the bill of quantities and then enter into a
negotiation with the quantity surveyor.
 Short Tender Notice

When work is to be completed very quickly or

no contractor prefers to accept the work (THE
TENDER IS FLOATED) then a notice with short
duration is again published by the client.
Such a tender notice is called “SHORT TENDER
NOTICE”.
The terms and conditions remain the same as that for
ordinary tender notice.
THE TENDER PROCESS
Project Definition and
Scoping

Selection Process For

Tenderers

Tender Documentation

Criteria for Selection

THE TENDER PROCESS

CALL FOR TENDERER

TENDER MEETING

AMENDMENTS TO TENDER DOCUMENT

SUBMISSION AND CLOSING OF TENDER

TENDER PROCESS
TENDER ANALYSIS

TENDER CLARIFICATION

TENDER SELECTION & AWARD

TENDER ANALYSIS

work
experience
Adequacy
of the
completion
tender
conditions
period
TENDER
ANALYSIS

Ongoing Price
projects offered
Ability of the
company
(finance,
personnel
etc.)
INVITING TENDER NOTICE

 The Tender Notice is a brief

description of the job being
tendered.
 to be published in
Newspapers and on the
Internet.
 The Internet is a very cost
effective way of publishing
the tenders.
Format of an ideal tender
notice
1. Name of the Project.
9. Date and time up to
2. Name & Address of the which tender documents
Company offering the can be obtained.
tender. 10. The cost of tender
3. Name of work, materials documents.
or services. 11. Due date of submission
4. Place of work location. 12. Eligibility Criteria
5. Approximate estimated
cost of work.
6. Earnest Money.
7. Period of completion.
8. Date on which the
Tender Document sale
commences.
QUOTATION

For small jobs, the owner/engineer

gives an offer to the contractor for
quoting rates for works and supplies
required.
No EMD is required with a quotation.
EARNEST MONEY DEPOSIT
It is the amount of money to be deposited
along with the tender document to the
department by the contractors quoting a
tender. This money is a guarantee against
the refusal of any contractor to take up the
work after the acceptance of his tender. In
case of refusal, this amount is forfeited.
EMD of contractors whose tenders are not
accepted will be refunded.
1% - 2% of the estimated cost of work is the
Earnest Money Deposit.
LIQUIDATED DAMAGES

It is an amount of compensation payable by a contractor to

the owner due to delayed construction.
This amount of compensation is not related with real
damage. This does not relieve the contractor from his
obligations and liabilities under the contract.
In case if a part of the project or premise is used by the
owner before its completion, the amount to be paid is
reduced in proportion to the value of the part that has been
utilised, after issuing the certificate of occupancy.
UNLIQUIDATED DAMAGES

It is an amount of compensation payable

when a contract is broken. The party
who suffers such a breach is entitled to
receive this amount from the party who
has broken the contract.
CONTRACT DOCUMENTS

When the tender of a contractor is accepted, an

agreement between the contractor and the owner takes
place and the documents defining the rights and
obligations of he owner and the contractor are attached to
the agreement bond and this is called a contract
document.
Each page of the contract document bears the
signature of the contractor and the accepting authority
and any correction in it is initialed.
The contract document must contain

1. Title page – name of work, name of owner, name

of contractor, contract agreement no., contents,
etc.
2. Index page – contents of the agreement with
reference pages
3. Tender notice – brief description of work,
estimated cost of work, date and time of receiving
tender, amount of EMD and security deposit, time
of completion, etc.
contd….
4. Tender form – the bill of quantities, contractor’s rate, total cost of work,
time of completion, amount of security deposit, etc.

5. Schedule of issue of materials – list of materials to be issued by the

owner/department to the contractor with the rates and place of issue.

6. Drawings – complete set of drawings including plan, elevation, sections,

detailed drawings, etc. all fully dimensioned.

7. Specifications – (a) General Specifications which specify the class and

type of work, quality of materials, etc. (b) Detailed specifications – detailed
description of each item of work including material and method to be used
along with the quality of workmanship required.

contd….
8. Conditions of contract
 Rates of each item of work inclusive of materials, labour, transport,
plant/equipment and other arrangements required for completion of
work
 Amount and form of earnest money and security deposit
 Mode of payment to contractor including running payment, final
payment and refund of security money, etc.
 Time of completion of work
 Extension of time for completion of work
 Engagement of sub contractor and other agencies at contractor’s
cost and risk

contd….
 Penalty for poor quality and unsatisfactory
work progress
 Termination of contract
 Arbitration for settlement of disputes
 Special conditions – depending upon the
nature of work taxes and royalties included in
the rates, labour camp, labour amenities,
compensation to labour in case of accidents,
etc.
 Deed of pledge
SECURITY DEPOSIT

Security deposit is the amount the contractor has to deposit

with the owner before awarding a work, after his tender is
accepted.
This amounts to generally 5% to 10% of estimated cost of the
project and is inclusive of the EMD already deposited by the
contractor along with the tender.
This will be refunded to the after the completion of the
project. No interest is paid on SD.
SECURITY DEPOSIT
 The contractor has to fulfill all the terms and
conditions laid down in the contract and maintain
quality and speed satisfactorily. If he fails to do so,
a part or whole of the SD is forfeited by the
department.
 If there is any fault in the construction and the
contractor refuses to demolish and reconstruct then
the department will carry out that work using the
SD.
SECURITY DEPOSIT

If the cost of the project is a huge amount, t the

contractor is made to deposit only 50% of the
amount in the initial stage and then the rest of
the SD is deducted in installments from the
running bills of the contractor.

SD is not collected in the case of a contract for

supply of materials, as the supplied materials
become the security.
DEFECTIVE LIABILITY PERIOD

 Defective liability period will start after hand over

the finished work to the client.
 This time varies work to work.
 Any defect if occur at any stage of Defective liability
period, then contractor has to maintain that work
without any extra payment, otherwise client will do
himself from security deposit or from amount of
retention( usually 5% on every bill)
TERMINATION OF
CONTRACTS
A contract may be terminated due to
following reason:
(i) By mutual agreement between both
parties.
The reason may be any but both parties
must be willing to terminate the
contract.
ii) Performance: The working of
contractor may not be satisfactory and
work with variation is not acceptable to
other party(client).
TERMINATION OF CONTRACTS
 Lapse of time: Undue delay cause termination of contract.
 Breach of contract: is a violation of any of the agreed-upon
terms and conditions of a binding contract.
 The contract can be terminated and the damages can be
claimed by suffering parties
 When contractor Failing to perform any term of a contract,
written or oral, without a legitimate legal excuse.
 This may include not completing a job, not paying in full
or on time, failure to deliver all the goods, substituting
inferior or significantly different goods, not providing a
bond when required, being late without excuse, or any act
which shows the party will not complete the work.
 Don’t Take Rest After Your First

Victory, Because If You Fail In

Second, More Lips Are Waiting To

Say That Your First Victory Was Just

Luck…..

-DR. ABDUL KALAM-