DAMBI DOLLO UNIVERSITY

COLLEGE ENGINEERING AND

TECHNOLOGY

Contract Specification and Quantity Surveying

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Core Objectives of the Course;
To provide students with basic knowledge;
 On Procurement, Contract and its management
 On Specification, writing Specification and Quantity surveying
(carry out measurement of construction work)
 On taking-off, Preparation and writing of bill of quantities(BOQ)
 On Construction project cost estimation and Valuation
After completion of this course students will be
 Equipped with Preparing tender documents
 Prepare take-off sheets from Design and Drawing
 Prepare Bill of Quantity
 Estimate construction project cost
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Lecture Four

Procurement and Contract

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Introduction

Construction Industry is an industry in which

planning, execution and evaluation of all types of civil
works are involved.
It can be categorized into three major sectors, namely;
 Transport and Communication (Road, Railway,
Airway, and Telecommunication related physical
works);
 Water and Energy Works; and
 Buildings and Other Physical Infrastructures.
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Introduction…
The main players in the construction industry are:
 Client: The initiator and owner of the project.
 Consultant: One who convert the wish of the owner into realizable form and makes the
study, design and possibly the supervision.
 Contractor: One who performs the work.
 Insurance Companies: Provide bid bonds, performance and payment bonds, and they also
service the liability and property insurance needs of contractors.
 Banks: Provide the working capital contractors need to build the project. Banks also provide
bonds for bid and performance.
 Suppliers: They provide Construction materials. The quality of a construction project is very
dependent on the quality of materials.
 Permitting Agencies: represent the interests of public safety. They administer publicly
funded construction projects, and they ensure private construction projects comply with
zoning laws and building codes.
 Public: The public is impacted by every construction activity. Impacts are both good and bad.
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Introduction…

Resources for the Construction Industry includes;

 Human Resources /Labor or Workmen
 Financial Resources / Fund
 Information Resources
 Physical Resources such as Materials, Equipment and Other
Assets (Cover 55-70% of the total construction cost)
 Services (Acquisition of land, provisions of water supply,
electric power, communication systems) and Management.

From the above resources, physical and service resources require

intensive procurement procedures and thus are worth mentioning.
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Stages in Construction

The following are the common formal stages for a construction project:
1. Inception and feasibility
 At this stage the owner puts his visions and wishes and with this as the
starting point, the various groups (professionals) try to conceptualize the
project and prepare a conceptual design.
2. Planning and Design stage
 Planning is a function of devising the cause for future with a vision,
formulated for the future state of the organization or project.
 At this stage the consultant plans and designs the project based on the
owner’s requirement and the possible constraints.
3. Tendering stage
 At this stage contractors are invited to offer their best technical and financial
offers as per the conditions and specifications depicted in the contract
documents. Usually a 5% of bid bond is required so as not let him disappear.7
Stages in Construction…
4. Bid Evaluation / Evaluation of Tenders.
The bids are evaluated based on:
 Compliance with the contractual terms and conditions
 Correction of bid prices and
 Detailed analysis.
5. Award of Contract
After the negotiations have been successful, the contract will be awarded to the
successful contractor. The formal Steps might include:
 Write a letter of acceptance
 Write the letter to proceed with the works
 Performance bond: 10% a guarantee that he will do the job as per agreed
There are different methods & types of construction contracts. The owner
generally makes the selection. 8
Stages in Construction…
6. Construction Stage
 A stage where actual execution of the works takes place as per the design and
scheduled.
7 Commissioning and Acceptance
 Commissioning is a process whereby the contractor makes sure that all installed
mechanical or electrical parts are operational.
Acceptance has two stages:
a. Provisional acceptance:
 Client accepts the completed works on provisional basis for a period one year.
During this period all payments except the retention money are paid.
b. Final acceptance:
 At this stage the owner completely accepts the works executed and the retention
money is released to the contractor. But if the client found out some construction
default during this period, he can oblige the contractor to work out that default or the
client himself worked it out from the retention money.
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Introduction to Procurement
Construction Industry involves procurement and contract management systems
in order to ensure fair competition and distributions of obligations and rights
among stakeholders.
Fair Competition helps:
 The Project Owners’ -acquire the five rights
 The Project Financiers’ & Regulators’ - value market principles and
effective utilization of finance, and
 The Project Providers’ - get impartial & neutral Opportunity for business.
Procurement is;
 A process used to select the lowest competitive and qualified bidder for
procuring services or works or goods from potential competitors based on
reasonable relevant criteria.
 A method used to employ or buy services or works or goods for the value (in
the form of money) which includes reasonable profit.
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Introduction to Procurement…

An effective and efficient procurement method ensures the following

rights called “The Five Rights" (Quality, Quantity, Cost , Counterpart
and Time)
1. The Right Quality: It is based on two major factors.
a. Technical expectation;
Insuredby the provisions of specifications and checking their
conformance reliability of the intended job
b. Economic consideration (Price & Availability);
Itcan be taken into account by the competition initiated using
procurement processes. This implies that a tender document
should, as much as possible, clearly specify the quality
requirements and allow participation of qualified and
experienced firms for tendering.
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Introduction to Procurement…

2. The Right Quantity:

 Quantity should be computed carefully and included in the BOQ correctly. If
the quantity is found mistakenly more/less, it will have consequential effect
on project; budget, cash flow, contract administration, stocking (more
storing places and risk of spoilage)…etc
 Two major factors that can play important role in providing the right
quantity are Take-off-Sheet Measurements and Resources Allocations.
3. The Right Cost:
 Right cost usually relates to the quality expected to accomplish the task. It is
difficult to get the right cost, however to approach it, is a possibility.
 Tendering together with negotiation and market intelligence techniques is
the only way that ensures the right cost and accomplishing the task
successfully.
 Competition is the bases for determine the Right Cost or Price.
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Introduction to Procurement…
4. The Right Counter Parts
 This is to guarantee that the parties agreeing to accomplish the
task shall be fit to the job.
 Consultant shall exercise an independent professional acts by his
skill and judgment; between the client and the third party.
Therefore, with the help of tendering, it is possible to select the
right counterparts.
5. The Right Time
 The right time for the provision of resources and
accomplishment of obligations of each party shall be set and
agreed.
 To prevent delay in time, scheduling with regard to right timing
is essential. 13
Types of Procurement
 Procurement types can be classified based on the things to be procured and the
way how they are procured.
 There are six bases for classifying procurement methods

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Types of Procurement…

1. Based on things to be procured;

 Procurement of Goods
Physical resources that used as components of construction works, such as
Materials and Equipment
 Procurement of Services
In the construction Industry procurement of services are often termed as
consultancy services procurement. These include services like
 pre-feasibility and feasibility studies,
 design and contract administration of projects,
 Construction management consultancy services,
 Procurement of Works
In the Construction Industry procurement of works mean the procurement
of contractors to carry out the actual physical infrastructures; like Building,
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Types of Procurement…
2. Based on Bidders’ Coverage:
 Competitive Tendering:
It acquire the goods or works or services at the most economic cost to the project owner. This
type of tendering is commonly used for the selection of better and capable winning bidder among
the various eligible firms.
a. Open competitive bidding; allows all eligible bidders to participate
b. Limited competitive bidding; In this case limited numbers of eligible firms are invited to
participate for the bid (based on the firms past performance and past experience)
The major difference is the addition of qualifying criteria on limited competitive bidding.
 Negotiated Tendering:
Direct appointment of an eligible firm can be exercised by Project Owners. The nomination of
this direct invitation is usually based on good performance, acquaintance with the Project Owner,
for supplementary agreements, etc.
This kind of tendering is exceptionally exercised when the project under consideration is very
urgent or needs special skill whereby the required skill is rarely available.
The main disadvantage is usually its cost be, higher than the competitive bidding. 16
Types of Procurement…
3. Geographical Coverage:
 International, Regional, National and Local Tendering
Such types of procurements are generally caused by three major factors.
 Local Capacity,
 Financial Sources and
 Globalization.

Donor financed projects are often practicing International or Regional

Tendering.
The World trend for Globalization and the principles of Free Trade and
Trade Liberalization also encourages international tendering. In practice,
Preference Margins in the range of 7% are applied to local, national or
regional tenderers, which imply tender offers higher than 7 % will be
given preference to encourage local participation.
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Types of Procurement…
4. Based on Procurement Awareness;
 General Procurement Notice
It is made during projects planning phase and it is only interests
of the bidders are aroused because sufficient tender documents
are not available.
Two types of General procurement awareness based on their
purpose why and when they are notified.
1. To create awareness and let bidders’ prior information about
upcoming projects. Announced as soon as the design
implementation service is started. (for works and goods)
2. To determine interested bidders who could be invited in the
form of Limited Competitive Tendering. Announced after
financial sources are determined. (for services) 18
 Types of Procurement…
 Specific Procurement Notice;
Is an Invitation for Tender or a Request for Proposal when the project is ready for
implementation.
Based Procurement Steps;
This includes Single Vs Two Staged and Pre - Vs Post –Qualification Tendering.
1. Pre-qualification
Is a tendering type where Technical Evaluation is carried out before Financial
Document.
The following criteria are often used in determining this ability of the bidder;
 Experience and past performance,
 Health, Safety and Environment Records if any,
 Capability in respect of personnel and equipment
 Organizational arrangement and facilities
 Financial Status and etc
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 Types of Procurement…
Pre-qualification is an internationally accepted
practice in procurement management.

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 Types of Procurement…
2. Post – qualification
 Is a tendering type where Financial Evaluation is carried
out first and rank bidders on the basis of their offer for
tender price.
 Technical Evaluation is performed step by step starting from
the lowest financially evaluated bidder until technically or
cumulatively qualified bidder is determined.
 The advantage of this approach is not to loose the lowest
financial bidder and to save time during technical
evaluations.

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 Procurement and Contract Management
Procurement and Contract Management involves
three major processes:

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 Procurement and Contract Delivery Systems
It is the way Project Owners with Project Regulators and Financiers
determine the assignment of responsibilities to Stakeholders along the
Construction Process.

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 Procurement and Contract Delivery Systems…
1. Force Account
 When the Project Owners engage themselves to undertake the
project.
 It is promoted if the Project Owners believe that there is a
comparative advantage in Cost, Time and Quality issues.
 If there is a lack of capacity from the private sector to undertake
very large and technologically new projects, public companies
do undertake such projects using Force account delivery
systems.
 These days this type of delivery system is often used when
projects are small and places are remote, spatially scattered and
not attractive to call attention of Bidders.
 It enhance the approach of promoting privatization and its
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 Procurement and Contract Delivery Systems…
2. Design Bid Build (DBB)
 The most practiced type of delivery system in the Construction Industry of Ethiopia.
 After project owners did prepare the Basic Planning that identifies construction
project programs, they call upon the participation of Design and /or Supervision
Consultants either by tender or by negotiated contracts. This consultant will carry
out the design together with the necessary tender documents.
Limitations of DBB
 Severe adversarial relationships between stakeholders
 Fragmented contract for the project owner
 Project owner is responsible for risks associated with the design and contract
administration
 Non - Impartiality of the Design and Contract Administration services
 The inability of design and contract administration consultants to cope up with new
construction technologies and constructability issues of their designs
 The incompatibility of consultancy fee to the desired activities
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 Procurement and Contract Delivery Systems…
3. Design Build (DB) /Turnkey
 A single body/Contractor perform both Design and Build the project.
 The project owner is not responsible for any liability other than force
majeure and agreed upon claim adjustments.
 Mostly it uses Lump-Sum contract type
Advantages of ( DB)
 Reducing fragmentation and adversarial relations
 Minimizing Project owners’ risk transferable due to Designers’ faults
 A single contractor take the responsibility for both design and
construction
 The client budget is defined early enough in the development process.
 Coordination between design and construction processes will be
enhanced.
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 Procurement and Contract Delivery Systems…
3. Design Build (DB) /Turnkey
Disdvantages of ( DB)
Implying loss of control from the owner.
Tender cost is higher than in the case for DBB
delivery system.
The increase in risk transferred onto the
contractor will be counterbalanced by the increase
in contract prices(cost of risks).

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 Procurement and Contract Delivery Systems…
4. Finance /Build Operate Transfer (BOT)
A form of procurement and contract delivery system
that promotes Public Private Partnership (PPP) in
which a private company is contracted
 To finance, design, construct, operate for a given
concession period (usually 10 years) and
transfer.
The Typical BOT contract is the process whereby a
government grants a concession to a project
development company to develop and operate what
would normally be a public sector project. 28
 Procurement and Contract Delivery Systems…
4. Finance /Build Operate Transfer (BOT);
Advantageous because of three major factors:
It minimizes owners’ scarcity of financial resources;
Itdevoid of considerable risks from the project
owners and lesson regulatory activities; and
The facility is well operated and transferred with free
of charge or minimum compensations to project
owners.
 In DB and BOT the Project Owner was not well
represented for its benefit and the problem of
fragmentation between Planning and Implementation
Occurs. 29
 Procurement and Contract Delivery Systems…
5. Construction / Facility Management Consultancy;
 It coordinate all activities from concept inception through acceptance of
the facility.
 Facility management consultancy adds operation of facility during
operation to Construction Management Consultancy.
Construction Management Consultants represents Project Owners to carry
out the following services:
 Feasibility studies of Construction related services
 Plan and Monitor the Triple Constraints of Project Performances
 Lead and Organize regulatory systems of the Construction Industry
 Valuation,
Quantity Surveying and Procurement and Contract
Management Services
The main difference of this delivery system is that, it is involved in the
whole construction processes. 30
 Procurement and Contract Delivery Systems…
6.Partnering, Alliances, Outsourcing (Running and Specialized
Delivery System);
 Focuses on management of relationships to ensure quicker, cheaper
and quality services.
 Very minimized or no dispute.
Single staged procurement systems, involving in less competitive and
comparative advantage for services and works and existing stakeholders
relationships. As a result,
 Running delivery system using Partnering and Alliances,
 Specialized delivery system using Outsourcing,
 Fast tracking, parallel and coordinated implementations using
Concurrent Engineering.
Require overcoming cultural and behavioral barriers among interest
groups and control motivated performance based management. 31
 Procurement Management
Procurement Management process can be
idealized into three major processes.
1. Preparation,
2. Tendering and
3. Evaluation (including Award Recommendation)
Processes.

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 Procurement Management
1.Procurement Preparation phase;
Includes the formation of a Procurement Team; the preparation of Tender
Documents and their approval for procurement implementations.
 Procurement Team;
 Minimum of five members shall be established
 Tender Documents are prepared to:
 Instructbidders on the procedures for the preparation and
submissions of bids,
 Inform prospective bidders about the nature of things to be procured,
 Inform bidders about the criteria for evaluation and selection of the
successful bidder
 Lay down the contract conditions, delivery system, procurement
methods and contract types of the project.
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 Procurement Management
Tender documents include:
 Form of Invitation to Tender or Request for Proposals
 Instruction to Tenderers/Bidders
 Prequalification Documents if necessary
 Forms of Tender
 Forms of Contract Agreement
 General and Particular Conditions of Contract
 Bill of Quantities and Drawings
 Technical Specifications & Methods of Measurement
and
 Other Forms, Formats and Schedules
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 Procurement Management
Tendering Phase includes;
Invitation, Clarification, Submission and Opening of tenders.
 Normally open tenders are floated for a period between 30 to 45 days.
Limited and Negotiated tenders can be invited between 7 to 15 days.
The invitation to tender shall clearly state:
 The owner and his desirous service or works
 Sources of fund and Eligibility requirements,
 Date, time, place and condition to Obtain, submit and open tender
documents,
 How long the tender will be floated,
 How should the tender offer be packed and
 Stages and accordingly qualification terms
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 Procurement Management
Clarification;
 Can either be requested by interested bidder or
carried out using a pre tender clarification meeting.
 Issues clarified will be sent to all bidders
participating for the intended services or works.
Submission;
 The bidders shall submit their offer on or before the
submission date and time including the issues
clarified.
 Late bidders are automatically rejected.
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 Procurement Management
Tender Opening:
 Bids shall be opened in public on the date, at the time and
place mentioned in the invitation to tender.
 Ethiopian practice in tender opening for public construction
projects is that, two representatives from MWUD and PPA
in addition to the Project Owner, Consultant (if available),
and Contractors (Who wish to attend) representatives shall
attend during the tender opening ceremony.

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 Procurement Management
The following will be carried out during tender opening:-
 Tender Attendee members shall take their place and be
registered,
 Tender box opened and checked for faulty things,
 Check the tender is the right one,
 Bids will be opened one after the other,
 All necessary data which deem useful such as Project Name,
Name of bidder, Bid Bond Amount, Tender Price, etc. will be
read aloud and recorded at the opening of bids.
 Bidders representative shall sign a register to attest their
presence during opening,
 Tender approved committee members shall sign and stamp /seal/
on the Tender documents. 38
 Procurement Management
Tender Evaluations Processes;
 It the process of determining the winner based on;

• Technical qualification
• Completion time
• Commercial terms to the offer.
 Least bidder may not necessarily be the winner.
 Based on the above three criteria's the following evaluations has
been taken place.
• Preliminary evaluation.
• Detailed Evaluation.
• Award of Contract
• Signing of Contracts
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END OF LECTURE-4
THANK YOU!

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