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Tendering Process in The Construction Industry

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Happy Contractor after Tendering Process
Tendering Process

Step 01 – Preparation of Tender Document

Usually, the tendering process is starting with the preparation of the tender document. This is one of the main tasks handled by a consultancy organization.

Content of Tender Document (Bidding Document)

The number and nature of the tender documents will vary with the type of contract.

For a complete tender document also called the bidding document, all the following sections will be included normally.

  1. Instructions to bidders (or tenders)
  2. Bidding data
  3. Conditions of Contract (General Conditions)
  4. Contract Data (Particular conditions of contract)
  5. Form of Tender (or Bid)
  6. Draft form of agreement
  7. Specimens of all related bonds & guarantees
  8. Specifications (General and Particular)
  9. Set of Tender Drawings
  10. BOQ
  11. Any Others

Instructions to Bidders

All the bidders will give the necessary instruction pricing in these sections. Thus it is important to read all the instructions prior to starting the pricing carefully.

Bidding data

This section includes all amendments to the instructions to bidders. The Employer shall fill the necessary information and add under this section before issuing the tender document. The following details will be included usually.

  1. Employer’s Name and Address
  2. Scope of Works
  3. Time for Completion
  4. Source of funds
  5. Essential Equipements (Type and Capacity)
  6. Qualifications and Experiences of the Contract Manager
  7. The minimum amount of liquid assets and or credit facilities
  8. Employer / Engineer’s address for any clarifications (Contact details)
  9. Adjustment for change in cost (Allow for price adjustments or not)
  10. Currency of Bid
  11. Period of Bid validity
  12. Amount of Bid security
  13. The validity of Bid security
  14. Pre-Bid meeting date, time and venue
  15. Tender Submission address
  16. Deadline for submission of tender
  17. Bid opening date, time and venue
  18. Amount of Performance security

Conditions of Contract

It is important to comply with the bid with the Conditions of contract since in the end the bid is going be governed by these “Conditions of Contract”.

This document sets out the obligations and rights of the parties and the detailed conditions under which a subsequent contract will operate. If a standard form of contract, such as the FIDIC red book is used, it will not be sent out with the tender documents. It is assumed that the tenderers will have a copy or can readily obtain one. However, clause headings will be listed in the preliminaries section of the bills of quantities or specifications.

Contract Data

This section includes all amendments to the Conditions of Contract. The following conditions will be included normally.

  1. Employer’s, Engineer’s and Contractor’s Name and Address
  2. Time for Completion of the Works (No of days)
  3. Defects notification period (normally 365days)
  4. Right to access to the site (No of days after Letter of Acceptance)
  5. Engineer’s duties and Authorities
  6. Liquidated damages for the works (% of the initial Contract price per day)
  7. The maximum amount of liquidated damages
  8. Method of Measurements
  9. Percentage of adjustment for Provisional Sums
  10. Total Advance Payment (% of the initial Contract Price excluding Provisional Sums and Contingencies)
  11. Percentage of Retention
  12. Limit of retention money (% of the initial Contract Price)
  13. The minimum amount of Interim Payment Certificates
  14. The amount of third party insurance

Form of Tender

This is a pre-printed formal statement, often in the form of a letter, in which a tenderer fills in, in the blank spaces, his name and address and the Contract Price in words and letters for which he offers to carry out the work shown in the drawings and described in the bills of quantities or specifications. Finally, the Authorized person will Sign the document. Then, it provides legal validity for the submitted Bid.

 Standard Forms (Specimens)

  1. Draft form of agreement
  2. Performance security specimen
  3. Advance payment specimen
  4. Retention Money Guarantee specimen

Advantages of specimens

  • Save times – only requires to fill a few blank spaces
  • It is a pre-printed document
  • No need to give lawyer fees
  • Limited opportunity to eliminate the negotiation process
  • The forms are generally through and cover virtually any issues

Drawings, Specifications & BOQ

All these to be read together to get the full view on the project.

BOQs are normally used for contracts based on Bills of Firm Quantities or Bills of Approximate Quantities.

In the case of lump-sum contracts without quantities, a detailed specification, instead of a Bills of Quantities, will be supplied to the tenderers. A specification may be in a form for detailed pricing.

Normally general arrangement drawings will be provided, showing site location, the position of the building(s) on and means of access to the site and floor plans and elevations. Tenderers are not normally given working drawings; however, they are informed that they can inspect drawings not supplied to them, at the consultant’s office.

Schedule of prices

As an alternative to a specification in the case of without quantities contracts, tenderers may be supplied with a Schedule of Works. This lists the work comprised in the contract under appropriate headings. The tenderers may be required to price the schedule.

Step 02 – Invitation to Tender

First of all, the Client should decide the type of tendering to give an invitation to tenderers in the tendering process.

After completion of the tender document, the client/Employer will publish the tender notice. In the notice of tender following details will be included for the information of the prospective bidders.

  • Name of the project
  • Brief description of the project
  • Details of the Client
  • In some cases source of funds
  • Eligibility criteria for the biding
  • Time & place for the collection of Bids
  • Cost of tender documents (Tender Fees)
  • Time & place to return the sealed bids
  • Submission criteria of the Bids, etc..

For most of the government project Engineer’s Estimated value also will be published in the tender notice.

Tender notice is behaving as an invitation to treat in the Contract law.

Preliminary Inquiry of Tendering Process

In the case selective tendering method, it is the practice to send, about a month beforehand, to each of the firms from whom it is proposed to invite a tender, a preliminary inquiry letter, to ascertain that they are willing to submit a bona fide tender.

Sufficient information about the project should be given in the preliminary inquiry letter to enable each contractor to decide whether he is in a position to comply and, if so, whether he would be able in view of other commitments, to carry out the contract if it is awarded to him.

Step 03 – Tender Collections

After receiving the notice of tender, the contractors are to decide whether to bid or not.

If the decision is to bid, then the contractors to obtain the tender documents from the relevant place by paying the relevant fees. There are two types of tender fees.

  1. Refundable Tender fees (Higher valve)
  2. Non-refundable tender fees (To recover the cost of the documents)

Step 04 – Tender Clarifications

After purchasing the tender documents then in the tendering division of the contractor, it is required to examine the documents carefully.
During this process contractor’s quantity surveyors are required to identify & list out all the ambiguities in the documents & need to notify them to the consultants as stated in the tender documents.

Next, in the pre-bid meeting, these notified questions will be answered by the consultants.

Step 05 – Tender addenda

The next step in the tendering process is preparing addenda by the consultant’s quantity surveyor. Based on these questions & answers necessary addenda (Plural of addendum) will be issued & circulated to all the contractors who have purchased the tender documents.

Parity of Tender

It is very important that all tenders should be based on the same information. Consequently, all the tender documents must be identical. It would be possible for some copies of a drawing to contain the latest amendments while other copies are of the un-amended drawings.

A tenderer may telephone the consultants about an item in the bills of quantities or a clause in the specification. He may question the accuracy of a quantity in a billing item. Such queries should be answered and must be dealt with promptly. If the reply given to the enquirer adds to vary in any way the information given in the tender documents, it must be communicated to all tenderers.

If a tender is qualified in any respect which it is considered has given the tenderer an unfair advantage over the others, or makes the comparison of the tenders unreasonable, then that tenderer should be given the opportunity of withdrawing the qualification without amending the tender sum. If he is unwilling to do so, his tender should be rejected.

If a contractor wants to offer to do the work in a shorter time, then the procedure which he should follow is the same as for any other qualification to the printed documents, as described above.

Step 06 – Tender Submission

Thereafter contractors are required to complete the tender and to submit the documents according to the given instruction to the given place prior to the deadline state in the tender document.

Period for Preparation of Tenders

It is important that tenderers are given sufficient time to make all necessary inquiries from suppliers, sub-traders, etc. and the date for return of tenders should be fixed so as to allow for the amount of work likely to be involved in preparing a tender for a job of the size and character of the proposed project.

Time of day should be specified as the latest time for tenders to be received on the date fixed. Any tenders arriving later should be returned and should be excluded from the competition.

Step 07 – Tender Closing

At the time of tender closing, a list of all the bidders will be announced according to the alphabetical order and then the bid valued will be announced according to the ascending order.

Step 08 – Tender Evaluation

Tender evaluation is the most important step in the tendering process. The tender evaluation process is taking place in the consultancy organization.

As the very first item, it will be checked on the Bid security.

If anyone has not submitted the bid security or if the submitted bid security is not in the correct order, the bids may immediately be rejected without evaluating.

Next, Arithmetical errors will be checked, and necessary corrections will be done to the tender sums. If there any arithmetical errors, that will be immediately notified to the relevant bidders by the consultant.

Then the evaluation process carried out, and Evaluation reports will be submitted to the client, including the consultant’s suggestions.

Step 09 – Tender Negotiation

After the Tender evaluation, If the Employer will not satisfy with the submitted bids,  He would directly invite two or three selected bidders according to the evaluation report to the purpose of negotiating the tender sum.

In that case, the Employer will request discounts from the bidders.

Step 10 – Tender Award

As the final stage of the tendering process, the successful bidder will be selected according to the evaluations and negotiations. Finally, the project will be awarded to the successful bidder called as “Contractor” of the project.

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