Tenders in professional practice

TENDERTENDER
It is an invitation from the owner to the
contractor to execute some work at
specified cost in specified time. It is
published in the form of tender notice in
news papers, notice boards, gussets,
etc. according to the cost of works.

Classification of tenders:-Classification of tenders:-
1.1. Open tenderOpen tender– An oral talk or written– An oral talk or written
document between the Engineerdocument between the Engineer
and the Contractor for certain smalland the Contractor for certain small
jobs to be performed. Sometimes itjobs to be performed. Sometimes it
is advertised.is advertised.
2.2. Sealed tenderSealed tender—Invited for—Invited for
important or huge projects; wideimportant or huge projects; wide
publicity is given; always writtenpublicity is given; always written
documents are made.documents are made.

3.3. Limited tenderLimited tender—Only a selected no. of—Only a selected no. of
contractors are invited to quote theircontractors are invited to quote their
ratesrates
4.4. Single tenderSingle tender—Invitation is given to only—Invitation is given to only
one firm to render a service by quotingone firm to render a service by quoting
their rates. If the quoted rates are high,their rates. If the quoted rates are high,
it will be negotiated prior to theit will be negotiated prior to the
agreement of the contract.agreement of the contract.
5.5. Rate contractRate contract—usually adopted for—usually adopted for
supply of materials, machine, tools &supply of materials, machine, tools &
plant, etc. (items to the store). Itplant, etc. (items to the store). It
specifies the supply at a fixed ratespecifies the supply at a fixed rate
during the period of contract. Theduring the period of contract. The
quantities are not mentioned in type ofquantities are not mentioned in type of
contract and the contractor is bound tocontract and the contractor is bound to
accept any order which would be placedaccept any order which would be placed
before him.before him.

For a CONTRACTCONTRACT to be valid, there
must be an offer from the owner in
the form of tender notice to get some
specified work to be executed and
there must be an acceptance from
the contractor to execute the work,
both the offer and the acceptance
must be definite and legal.

Procedure for inviting tender:-Procedure for inviting tender:-
1.1. Preparation of tender documentsPreparation of tender documents
2.2. Issue of notice inviting tender or tenderIssue of notice inviting tender or tender
call noticecall notice
3.3. Submission and opening of tenders andSubmission and opening of tenders and
their scrutinytheir scrutiny
4.4. Acceptance of tender and award ofAcceptance of tender and award of
contractcontract

Information to be given in a tenderInformation to be given in a tender
notice :-notice :-
1.1. Name of the department inviting tenderName of the department inviting tender
2.2. Name of work and locationName of work and location
3.3. Designation of officer inviting tenderDesignation of officer inviting tender
4.4. Last date and time of receipt of tenderLast date and time of receipt of tender
5.5. Period of availability of tender documentPeriod of availability of tender document
6.6. Cost of tender documentCost of tender document
7.7. Time of completion and type of contractTime of completion and type of contract
8.8. Earnest Money Deposit to be paidEarnest Money Deposit to be paid
9.9. Date, time and place of opening the tenderDate, time and place of opening the tender
10.10. Designation of the officer opening the tenderDesignation of the officer opening the tender

1.1. General conditions of tenderGeneral conditions of tender
2.2. Schedule of items of work with clearSchedule of items of work with clear
specificationsspecifications
3.3. Special conditionsSpecial conditions
contd………contd………
Information to be given in a tenderInformation to be given in a tender
document:-document:-

1. The notice inviting tender in specified form like PWD 6
2. Layout plan, location of work
3. Division in which location is situated
4. Schedule of quantities of work
5. Nearest road/railway link
6. Set of drawings including working drawings
7. Availability of materials in the vicinity
8. Detailed specifications or reference to standard
specifications for each item of work
9. Complete architectural and structural drawings
contd……..

10.10. Schedule of stores to be issued by the owner ofSchedule of stores to be issued by the owner of
the project indicating the rates and their place ofthe project indicating the rates and their place of
supplysupply
11.11. Schedule of tools & plant and other facilities toSchedule of tools & plant and other facilities to
be made available by the owner, indicating thebe made available by the owner, indicating the
conditions, hire charges and place of deliveryconditions, hire charges and place of delivery
12.12. Rate of supply of power and the point of supplyRate of supply of power and the point of supply
13.13. Location of water supply pointLocation of water supply point
14.14. Time for completion and the progress to beTime for completion and the progress to be
made at intervals of timemade at intervals of time
15.15. Conditions regarding employment of technicalConditions regarding employment of technical
personnelpersonnel
16.16. Weather conditions in the areaWeather conditions in the area
17.17. Amount of EMD and the form in which it is to beAmount of EMD and the form in which it is to be
paidpaid
contd….contd….

18.18. Insistence on Income tax and sales taxInsistence on Income tax and sales tax
clearance certificateclearance certificate
19.19. Amount of Security deposit to be paid/ deductedAmount of Security deposit to be paid/ deducted
from running bills of contractors should befrom running bills of contractors should be
notified in the tender call noticenotified in the tender call notice
20.20. Mode of payment for work doneMode of payment for work done
21. Power to reject tenders without assigning21. Power to reject tenders without assigning
reasonsreasons
22. Penalty conditions for slow progress and delay in22. Penalty conditions for slow progress and delay in
the completion of workthe completion of work
23. Designation of arbitration authority in case of23. Designation of arbitration authority in case of
disputesdisputes

Short Tender NoticeShort 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.

QUOTATIONQUOTATION
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 DEPOSITEARNEST 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 DAMAGESLIQUIDATED DAMAGES
It is an amount of compensation payable by aIt is an amount of compensation payable by a
contractor to the owner due to delayedcontractor to the owner due to delayed
construction. This amount of compensation isconstruction. This amount of compensation is
not related with real damage. This does notnot related with real damage. This does not
relieve the contractor from his obligations andrelieve the contractor from his obligations and
liabilities under the contract. In case if a part ofliabilities under the contract. In case if a part of
the project or premise is used by the ownerthe project or premise is used by the owner
before its completion, the amount to be paid isbefore its completion, the amount to be paid is
reduced in proportion to the value of the partreduced in proportion to the value of the part
that has been utilised, after issuing thethat has been utilised, after issuing the
certificate of occupancy.certificate of occupancy.

UNLIQUIDATED DAMAGESUNLIQUIDATED DAMAGES
It is an amount of compensation payableIt is an amount of compensation payable
when a contract is broken. The party whowhen a contract is broken. The party who
suffers such a breach is entitled tosuffers such a breach is entitled to
receive this amount from the party whoreceive this amount from the party who
has broken the contract.has broken the contract.

FIRM PRICE & FIRM PERIODFIRM PRICE & FIRM PERIOD
Sometimes owner award the work at aSometimes owner award the work at a
firm price or fixed ratefirm price or fixed rate. As the labour. As the labour
wages and materials cost increases, it iswages and materials cost increases, it is
advisable to provide escalation and overadvisable to provide escalation and over
run compensation.run compensation.
Firm periodFirm period is the duration of time overis the duration of time over
which the firm price is valid.which the firm price is valid.

CONTRACT DOCUMENTSCONTRACT DOCUMENTS
When the tender of a contractor isWhen the tender of a contractor is
accepted, an agreement between theaccepted, an agreement between the
contractor and the owner takes place and thecontractor and the owner takes place and the
documents defining the rights and obligationsdocuments defining the rights and obligations
of he owner and the contractor are attached toof he owner and the contractor are attached to
the agreement bond and this is called athe agreement bond and this is called a
contract document. Each page of the contractcontract document. Each page of the contract
document bears the signature of the contractordocument bears the signature of the contractor
and the accepting authority and any correctionand the accepting authority and any correction
in it is initialed.in it is initialed.

The contract document must containThe contract document must contain
1.1. Title page – name of work, name of owner, nameTitle page – name of work, name of owner, name
of contractor, contract agreement no., contents,of contractor, contract agreement no., contents,
etc.etc.
2.2. Index page – contents of the agreement withIndex page – contents of the agreement with
reference pagesreference pages
3.3. Tender notice – brief description of work,Tender notice – brief description of work,
estimated cost of work, date and time of receivingestimated cost of work, date and time of receiving
tender, amount of EMD and security deposit, timetender, amount of EMD and security deposit, time
of completion, etc.of completion, etc.
contd….contd….

4. Tender form – the bill of quantities, contractor’s rate, total cost of4. Tender form – the bill of quantities, contractor’s rate, total cost of
work, time of completion, amount of security deposit, etc.work, time of completion, amount of security deposit, etc.
5. Schedule of issue of materials – list of materials to be issued by5. Schedule of issue of materials – list of materials to be issued by
the owner/department to the contractor with the rates and place ofthe owner/department to the contractor with the rates and place of
issue.issue.
6. Drawings – complete set of drawings including plan, elevation,6. Drawings – complete set of drawings including plan, elevation,
sections, detailed drawings, etc. all fully dimensioned.sections, detailed drawings, etc. all fully dimensioned.
7. Specifications – (a) General Specifications which specify the class7. Specifications – (a) General Specifications which specify the class
and type of work, quality of materials, etc. (b) Detailed specificationsand type of work, quality of materials, etc. (b) Detailed specifications
– detailed description of each item of work including material and– detailed description of each item of work including material and
method to be used along with the quality of workmanship required.method to be used along with the quality of workmanship required.
contd….contd….

8. Conditions of contract8. Conditions of contract
a)a) Rates of each item of work inclusive of materials, labour, transport,Rates of each item of work inclusive of materials, labour, transport,
plant/equipment and other arrangements required for completion ofplant/equipment and other arrangements required for completion of
workwork
b)b) Amount and form of earnest money and security depositAmount and form of earnest money and security deposit
c)c) Mode of payment to contractor including running payment, finalMode of payment to contractor including running payment, final
payment and refund of security money, etc.payment and refund of security money, etc.
d)d) Time of completion of workTime of completion of work
e)e) Extension of time for completion of workExtension of time for completion of work
f)f) Engagement of sub contractor and other agencies at contractor’sEngagement of sub contractor and other agencies at contractor’s
cost and riskcost and risk
g)g) Penalty for poor quality and unsatisfactory work progressPenalty for poor quality and unsatisfactory work progress
h)h) Termination of contractTermination of contract
i)i) Arbitration for settlement of disputesArbitration for settlement of disputes
contd….contd….

9.9. Special conditions – depending upon theSpecial conditions – depending upon the
nature of work taxes and royalties included innature of work taxes and royalties included in
the rates, labour camp, labour amenities,the rates, labour camp, labour amenities,
compensation to labour in case of accidents,compensation to labour in case of accidents,
etc.etc.
10.10. Deed of pledgeDeed of pledge

Classification of ContractsClassification of Contracts
1.1. Lump-sum contractLump-sum contract
2.2. Cost plus a fixed percentage contractCost plus a fixed percentage contract
3.3. Cost plus a fixed fee contractCost plus a fixed fee contract
4.4. Target contractTarget contract
5.5. Percentage rate contractPercentage rate contract (B1 system)(B1 system)
6.6. Item rate contractItem rate contract (B2 system)(B2 system)
7.7. Labour contractLabour contract
8.8. Joint venture contractJoint venture contract
9.9. Turn-key contractTurn-key contract
10.10. Indirect lump-sum contract for flats or bungalowsIndirect lump-sum contract for flats or bungalows
11.11. BOT systemBOT system

1. Lump-sum contract1. Lump-sum contract
In this system, the contractor undertakes theIn this system, the contractor undertakes the
execution of a specific work for a definite lump-execution of a specific work for a definite lump-
sum amount within a specified time period. Onsum amount within a specified time period. On
completion of the work, it is checked as percompletion of the work, it is checked as per
drawings and specifications and if approved thedrawings and specifications and if approved the
amount is paid to the contractor.amount is paid to the contractor.
The quantities of various items is not measured.The quantities of various items is not measured.
For the construction of sculptures and decorativeFor the construction of sculptures and decorative
works this system is adopted.works this system is adopted.

2. Cost plus a fixed percentage contract2. Cost plus a fixed percentage contract
Under this system, the contractor furnishes labour andUnder this system, the contractor furnishes labour and
materials and completes the work for the actual totalmaterials and completes the work for the actual total
cost plus an agreed percentage of it as the profit of thecost plus an agreed percentage of it as the profit of the
contractor.contractor.
The speed and quality of work is maintained in thisThe speed and quality of work is maintained in this
system but there is always tremendous wastage ofsystem but there is always tremendous wastage of
materials as the contractor’s aim is to increase thematerials as the contractor’s aim is to increase the
total cost of the work.total cost of the work.
This system is adopted only in the case of emergencyThis system is adopted only in the case of emergency
works.works.

3. Cost plus a fixed fee contract3. Cost plus a fixed fee contract
In this system a fixed fee is given as contractor’sIn this system a fixed fee is given as contractor’s
profit irrespective of the total cost of work. Thisprofit irrespective of the total cost of work. This
is to control the tendency of the contractor tois to control the tendency of the contractor to
increase the cost of the project unnecessarily.increase the cost of the project unnecessarily.
Smaller the completion time more is the profit andSmaller the completion time more is the profit and
hence the contractors hurry to complete thehence the contractors hurry to complete the
work and the quality of workmanship is notwork and the quality of workmanship is not
maintained.maintained.
This system is not generally used.This system is not generally used.

4. Target contract4. Target contract
The contractor is paid a fixed fee on a prime costThe contractor is paid a fixed fee on a prime cost
basis for the work performed under the contractbasis for the work performed under the contract
and in addition he receives a percentage on theand in addition he receives a percentage on the
savings effected against either a prior agreedsavings effected against either a prior agreed
estimated total cost or a target value arrivedestimated total cost or a target value arrived
without changing the specification.without changing the specification.
It was presumed that by proper management ofIt was presumed that by proper management of
the work, the contractor can reduce the cost ofthe work, the contractor can reduce the cost of
work. But due to tremendous increase in thework. But due to tremendous increase in the
cost of materials it never materialise and hencecost of materials it never materialise and hence
this system is not getting popularity.this system is not getting popularity.

5. Percentage rate contract (B1 system)5. Percentage rate contract (B1 system)
In this system the contractors are required toIn this system the contractors are required to
quote single percentage either higher orquote single percentage either higher or
lower at which he wants to execute the job.lower at which he wants to execute the job.
Here scrutiny of the tenders become easierHere scrutiny of the tenders become easier
and as cement and steel is usually suppliedand as cement and steel is usually supplied
by the department chances of manipulationby the department chances of manipulation
is less. This the most commonly adoptedis less. This the most commonly adopted
system of contract in the differentsystem of contract in the different
departments of our state.departments of our state.

6. Item rate contract (B2 system)6. Item rate contract (B2 system)
Here the contractor gets the paymentHere the contractor gets the payment
depending on the rate at which he hasdepending on the rate at which he has
quoted every item of the work. It wasquoted every item of the work. It was
rather difficult to scrutinise the tendersrather difficult to scrutinise the tenders
submitted by various bidders and thesubmitted by various bidders and the
system was hence modified and now thesystem was hence modified and now the
department quotes the items of workdepartment quotes the items of work
along with their quantities and the biddersalong with their quantities and the bidders
are required to quote the percentages atare required to quote the percentages at
which he can execute the various items.which he can execute the various items.

7. Labour contract7. Labour contract
This is the most commonly adopted system for theThis is the most commonly adopted system for the
construction of private individual buildings inconstruction of private individual buildings in
small cities. The contractor arranges allsmall cities. The contractor arranges all
necessary labour, tools & plant and equipmentsnecessary labour, tools & plant and equipments
required. The materials are supplied by therequired. The materials are supplied by the
owner and he appoints an Engineer to superviseowner and he appoints an Engineer to supervise
the work to maintain the quality and economy inthe work to maintain the quality and economy in
construction.construction.
This system is suitable in the works of Govt.This system is suitable in the works of Govt.
departments as they are in a privileged positiondepartments as they are in a privileged position
to buy large quantities of materials at cheapto buy large quantities of materials at cheap
rates.rates.

8. Joint venture contract8. Joint venture contract
In case of huge important projects the constructionIn case of huge important projects the construction
works can be categorised into different parts andworks can be categorised into different parts and
each part can be given to a specialisedeach part can be given to a specialised
contractor in that field. This method improvescontractor in that field. This method improves
the quality of work and the project can bethe quality of work and the project can be
completed within a short period of time.completed within a short period of time.
Thus the project works can be divided amongThus the project works can be divided among
different contractors and hence joint venturedifferent contractors and hence joint venture
system of contract developed.system of contract developed.

9.Turn-key9.Turn-key contractcontract
In this system all the works related to aIn this system all the works related to a
project including designing, planning,project including designing, planning,
execution etc. are to be done by theexecution etc. are to be done by the
contractor. Once the project iscontractor. Once the project is
completed it is handed over to thecompleted it is handed over to the
owner. The owner has to completeowner. The owner has to complete
the transaction works and occupythe transaction works and occupy
the structure by simplythe structure by simply turning theturning the
keykey, ie. opening the door., ie. opening the door.

10.Indirect lump-sum contract for flats or bungalows10.Indirect lump-sum contract for flats or bungalows
In this system the rate of construction perIn this system the rate of construction per
sq.m. of plinth area is jointly fixed by thesq.m. of plinth area is jointly fixed by the
contractor and owner which includescontractor and owner which includes
contractor’s profit also. Once thiscontractor’s profit also. Once this
agreement is made the contractor startsagreement is made the contractor starts
the work and receives payment at regularthe work and receives payment at regular
intervals during the different stages ofintervals during the different stages of
work. Sometimes the specifications,work. Sometimes the specifications,
drawings are prepared by the builder.drawings are prepared by the builder.

11. BOT system11. BOT system
Build operate and transfer is a new system in which the land isBuild operate and transfer is a new system in which the land is
acquired by the Govt. and the contractor is asked to build theacquired by the Govt. and the contractor is asked to build the
structure and then operate it until he collects the money hestructure and then operate it until he collects the money he
had spent for the construction, as fees from the users. Oncehad spent for the construction, as fees from the users. Once
the construction cost is recovered, the structure is handedthe construction cost is recovered, the structure is handed
over to the owner. No payment is made to the contractor byover to the owner. No payment is made to the contractor by
the owner/Govt.the owner/Govt.
Security is provided to the builder by the Govt. regarding law andSecurity is provided to the builder by the Govt. regarding law and
order problems if any.order problems if any.
Bridges and roads are usually constructed by adopting thisBridges and roads are usually constructed by adopting this
system of contract. Toll is collected from the users/vehiclessystem of contract. Toll is collected from the users/vehicles
passing over it by the contractor to recover the constructionpassing over it by the contractor to recover the construction
cost.cost.

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

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.

QUALIFICATIONS OF THE CONTRACTORSQUALIFICATIONS OF THE CONTRACTORS
Registration of contractors:-Registration of contractors:-
The contractor must get himself registered inThe contractor must get himself registered in
the departments ( or Government - govt. Contractor) forthe departments ( or Government - govt. Contractor) for
which he is interested to take up works.which he is interested to take up works.
Government contractors are entitled to do govt. jobs ifGovernment contractors are entitled to do govt. jobs if
awarded.awarded.
Contractors are classified according to the registration andContractors are classified according to the registration and
registration fees and depending on this they canregistration fees and depending on this they can
undertake works up to certain amount.undertake works up to certain amount.

To get a contractor to be registered under certain class, heTo get a contractor to be registered under certain class, he
has to apply to the competent authority.has to apply to the competent authority.
The application should contain the following documents:The application should contain the following documents:
1.1. Current income tax certificateCurrent income tax certificate
2.2. Work certificates for all the works performed during theWork certificates for all the works performed during the
last three years and those in progresslast three years and those in progress
3.3. Solvency certificate for an appropriate amountSolvency certificate for an appropriate amount
4.4. Attested copy of deed of partnership and power ofAttested copy of deed of partnership and power of
attorney on stamp paper if neededattorney on stamp paper if needed
5.5. Undertaking for employment of the Class I & II staffUndertaking for employment of the Class I & II staff
6.6. Application in duplicate with all documentsApplication in duplicate with all documents
7.7. Attested photos of all the partners if anyAttested photos of all the partners if any

Pre-qualification of contractorsPre-qualification of contractors
Sometimes works are awarded on the basisSometimes works are awarded on the basis
of quotations invited from a group ofof quotations invited from a group of
‘selected tenderer’ (a group of known‘selected tenderer’ (a group of known
reputed contractors) who are consideredreputed contractors) who are considered
suitable for that job. This method is knownsuitable for that job. This method is known
asas ‘pre-qualification’‘pre-qualification’ and saves a lot ofand saves a lot of
time.time.
In the advertisement itself it must beIn the advertisement itself it must be
mentioned that only contractors havingmentioned that only contractors having
experience in the particular work shouldexperience in the particular work should
submit the tender.submit the tender.

1. Quality characteristics1. Quality characteristics
This include the characteristics and propertiesThis include the characteristics and properties
of the materials, machines, man power, etc.of the materials, machines, man power, etc.
used for the work.used for the work.
For example if the material used is concrete,For example if the material used is concrete,
slump, strength, water cement ratio, etc. areslump, strength, water cement ratio, etc. are
checked frequently.checked frequently.

Quality control in constructionQuality control in construction
The basic elements of quality are:The basic elements of quality are:
1.1.Quality characteristicsQuality characteristics
2.2.Quality of designQuality of design
3.3.Quality of conformanceQuality of conformance

2. Quality of design2. Quality of design
No design can produce perfect results. Hence theNo design can produce perfect results. Hence the
desired standards that define a material such asdesired standards that define a material such as
dimension, strength, etc. and the tolerances, thedimension, strength, etc. and the tolerances, the
acceptable variations from the standards are alsoacceptable variations from the standards are also
specified.specified.
For example if the material used is concrete, in addition toFor example if the material used is concrete, in addition to
specifying the required compressive strength, the rangespecifying the required compressive strength, the range
of variation permitted, viz. no more than 20% of theof variation permitted, viz. no more than 20% of the
sample can have value less than the one specified.sample can have value less than the one specified.
If very high standards of quality and stiff tolerance limitsIf very high standards of quality and stiff tolerance limits
are set, then this will increase the cost of the project.are set, then this will increase the cost of the project.

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