Tenders and Contracts

1. Overview of
Procurement Methods

2. WHAT IS
TENDER?

3. Tender is an offer which
incorporates the sum of money,
time and other conditions
required to carry out the
contract obligations in order to
complete a project or a part of
it consisting of specified works.

4. WHAT IS
TENDERING ?

5. Stages of a project
O Stage 1: inception & feasibility – identifying
project objectives / set up project brief
O Stage 2: design – develop further project
brief / develop concept & schematic design /
Undertake detailed design & detailing /
prepare cost plan & budget
O Stage 3: tendering – issue tender documents /
prepare & submit tender / evaluation of tender
/ award tenders / prepare contract documents

6. Stages of a project
O Stage 4: construction – site possession &
mobilization / undertake procurement fabrication,
installation, construction / carry out contract
admin
O Stage 5: handover & maintenance – undertake all
testing, commissioning & training / obtain CF /
handover project to owner /carry out necessary
maintenance / Defect rectification / etc

7. Tendering
Will be started after the design complete and
project budget must be approved
The process that is used to obtain offers
leading to a contract between:
client contractor
client consultant
main contractor sub-contractor

8. Purpose of tendering
process
O To select a suitable contractor at a
time appropriate to the situation of the
project.
O To obtain from the contractor selected
at the proper time, an acceptable
tender or offer upon which a contract
can be let.

9. Difference between a contract and a
tender
OA tender formally means an invitation
to trade under the terms of offer.
OA contract is the term used for when
the parties have reached agreement.

10. General
TENDERING
PROCESS

11. Tendering process –
PRINCIPAL ACTIVITIES
1. Selection of the most preferable or
appropriate contract procurement
method.
2. Development of tender list
3. Preparation of tender documentation
4. Invitation / calling off tender
5. Preparation and submission of tenders

12. Tendering process –
PRINCIPAL ACTIVITIES (cont’d)
6. Receipt and opening of tenders
7. Evaluation of tenders
8. Acceptance of tender award or
award of contract

13. Stage 1: Selection of the most preferable or
appropriate contract procurement method.
O Traditional contract procurement route
OLonger time – lead to critical work
scheduling
OLess errors – more precise
OFast-track contract procurement route
OShorter time
OConsequences – may be lead to critical
error, variation.

14. Stage 2: Development of tender
list
OPotential tenderers can directly
apply to the employer for future
works.
OEmployer generate list based on
previous dealings
OThe professional team generate
their own list and recommend to
the employer.

15. Stage 3: Preparation of tender
documentation – typical contents
O Letter of invitation
O Checklist for submission of tender
O Articles of agreement
O Conditions of contract
O Form of tender
O Tender specifications
O Bills of quantities
O Tender drawings
O Sample copy of letter of acceptance
O Sample copy of bank guarantee for performance bond
O Schedule of day work rates
O Sample copy bank guarantee for advance payment

16. Tendering process
Stage 2:
APPROVAL TO
TENDER
Stage 1:
PREPARATION
Stage 3:
DOCUMENTATION
Stage 4:
INVITATION
Stage 5:
PROCESSING
Stage 6:
AWARD
CONTRACT

17. Stage 1: Preparation
O Final completion of drawings,
specification, measurement / take-off
process.
O Choose conditions of contract.
O Parties involved: architect, engineers,
QS, client, project manager

18. Stage 2: Approval to
tender
O Discussion and decision on type of
tender to be used.
O Selection of tender:
O Open
O Selective
O Negotiate
O Parties involved: CLIENT,
CONSULTANT, PROJECT MANAGER
Shortlist the selected contractor

19. Stage 3: Documentation
Contract based on quantities
O Compilation of:
O Letter of invitation to
tenderers
O Articles of agreement /
conditions of contract
O Form of tender
O Form of tenderer’s details.
i.e: contractor’s
registration, organization
background, track record
(past and present projects)
O Letter of acceptance
O Bank and insurance
guarantee forms
(performance bond)
O Bank and insurance
guarantee forms (advance
payments)
O Specifications
O Bills of quantities
O Relevant drawings
19
Contract based on tender & specs
 Compilation of:
 Letter of invitation to tenderers
 Articles of agreement /
conditions of contract
 Form of tender
 Form of tenderer’s details. i.e:
contractor’s registration,
organization background, track
record (past and present
projects)
 Letter of acceptance
 Bank and insurance guarantee
forms (performance bond)
 Bank and insurance guarantee
forms (advance payments)
 Specifications
 Summary of tender
 Schedule of rates
 Relevant drawings

20. Stage 4: Invitation
O Based on selection of tendering
methods
O Open / competitive / bid tender –
produce tender notice
O Selective – shot listed contractors will
be invited to tender if they wish
O Negotiated – only one contractor is
approached- direct entry to project

21. TENDER NOTICE OR
NOTICE INVITING
TENDER

22. The Tender Notice is a brief
description of the job being
tendered which is to be
published in Newspapers and on
the Internet.
The Internet is a very cost
effective way of publishing the
tenders.

23. Format of an ideal
Tender Notice
a. Name of the Project.
b. Name & Address of the Company
floating the tender.
c. Name of work, materials or
services.
d. Place of work location.
e. Approximate estimated cost of
work.
f. Earnest Money.
g. Period of completion.
h. Date on which the Tender
Document sale commences.
i. Date on which the
Tender Document sale
commences.
j. Date and time up to
which tender documents
can be obtained.
k. The cost of tender
documents.
l. The date and time up to
which the tenders to be
submitted and are to be
opened.
m. Specification.
n. Eligibility Criterion.

24. Stage 5: Processing
O Received tender submitted by contractor
O Tender assessment / evaluation
O Completed tenders are received
O Arithmetical check
O Reasonable tender sum
O Reasonable completion time
O Capabilities of tenderers under considerations
O Tender recommendation / report – tender board

25. Guidelines to fulfill in the
Tender System
 The capacity, past credentials and financial status
of the tendered is thoroughly investigated before
awarding the contract. These aspects should be
commented in detail along with the tender
documents.
 The rates should be quoted in the numbers and
words without any corrections. To take advantage
of any possible increase in statutory taxes &
duties, the tax component such as excise duty,
Sales Tax, VAT, Works Contract Tax, etc. should
be clearly indicated.

26. Tenderers should not quote many
special conditions as some of them
may have financial implications, did
this can be added to your quoted
cost. Also it creates confusion and
creates room for manipulative
forces.
The rates quoted for individual items
should be realistic and should not be
abnormal and unworkable.

27. Stage 6: Award contract
O Pre-award meeting with contractors –
validation of lowest complying bid
O Validate lowest bid - Pre-contract meeting with
contractor for contract signing
O Approval by tender board / treasury (tender
exceeds say for Ex., USD X mill.) – an
acceptance of tender form is issued to
tenderer , signed by the authorised officer

28. TENDER PROCESS FOR
CONTRACTOR

29. Tendering process
Stage 2:
Determine
basis of
tender
Stage 1:
Decision to
tender
Stage 3:
Preparation of
cost estimates
Stage 4:
Commercial
appreciation
Stage 5:
Conversion
of estimate
to tender
Stage 6:
Submission
of tender

30. Stage 1: Decision to
tender
O Receipt of tender documents
O Pre-tender data sheet
O Decision to tender
O Consider implications of:
O Bonds
O Warranties
O Parent company
O Guarantees
O Funding

31. Stage 2: Determine basis
of tender
O Abstract materials and subcons
O Sent out enquiries
O Consider construction methods / prepare
method statement
O Design temporary works / consider alternatives
O Prepare outline programme
O Check major quantities
O Identify restrictions
O Visit site and compile site report
O Campaigning meeting (designating areas
responsibilities)

32. Stage 3: Preparation of
cost estimate
O Calculate recurrent rates using:
O Operational
O Unit rates
O Man-hours estimating
O Analyse and check subcontractors’
quotations
O Price prelims / general items (in
association with members of the team
O Prepare summary sheets

33. Stage 4: Commercial
appreciation
O Tender committee meeting part 1-
O Review:
O Method
O Programme
O Technical and commercial risks
O Cash flow and finance
O Use of own plant
O Competition
O Commercial opportunities
O Economic climate
O Check prelims against historical cost data

34. Stage 5: Conversion of tender
estimate to tender bid
O Tender committee meeting – part 2
O Calculate ‘spread’ and add to estimate

35. Stage 6: Submission of
tender
O Submit in format required
O Organize delivery

36. Procurement Rules
O All public sector contracts, no matter what their value,
are covered by an EC treaty. This sets down principles
to prevent discrimination against companies from any
member state and ensure open competition. These
principles are backed up in law by the EC procurement
directives.
O Most public sector contracts are tendered because by
tendering contracts public bodies can make sure that
they:
O get value for money
O are open and fair in their purchasing activities
O comply with procurement law

37. What is competitive tendering
OCompetitive tendering means seeking
competitive bids (tenders) for contracts.
OContracts are advertised and any interested
companies can tender for them.
OThe values for tendering can differ between
public sector bodies.

38. What is competitive tendering
LOW VALUE CONTRACTS
Services & Suppliers
Below say USD100,000
Works
Under say USD 3.8 million
HIGH VALUE CONTRACTS
Services & Suppliers
Above £100,000
Works
Over USD 3.8 million
Types of Services / Good tendered for
• Catering
• Cleaning
• Construction
• Food
• IT Services
• Leisure
• Office Furniture
• Property Management Works
• Stationery
• Vehicle Acquisition
• Venue Hire
Plus much more

39. Common procurement methods
Open Contracts – single stage process
O A notice is placed giving all interested suppliers the
opportunity to tender.
O 52 days must be allowed from despatch of the
notice to receipt of tenders.
O Contract documentation must be sent to suppliers
within 4 days of receiving a request.
O Any additional information must be provided at least
6 days before the final date of receipt of tenders.

40. Example Open Process
Tender
information is
received
Request for the
documentation is
sent
Contract Notice
is issued
Document
collated and
submitted
All submissions
are evaluated
Contract award
notice is issued
Alcatel period
Contract
started

41. Proc Procedures -Services
Restricted international tender procedure: (contracts >
EUR 300 000)
 Requirements for publicity: International publication
 Complete tender dossier
 2 phases:
• pre-selection phase based on selection criteria /
short-list
• tendering phase – submission of tenders by short-
listed companies
 Award criteria: best price-quality ratio

42. Framework Contract
OFramework contract (contracts below 300 000
EUR)
 Multiple framework contracts
 FWC- consultancy contracts awarded by the
European Commission
 A number of lots awarded which cover almost all
type of sectors
 Rules for award of specific contracts under the
Framework contracts

43. Competitive Negotiated
Procedures
O Competitive negotiated procedure: (contracts under
EUR 300,000)
 Without publication of contract notice
 at least three service providers must be invited to
submit offers
 a simplified tender dossier is prepared
 the candidates must be allowed at least 30 days to
prepare and submit offer

44. Single Tender
OSingle tender: (contracts for value of
less than EUR 20 000)
Works for less than EUR 20 000 may
be awarded on the basis of a single
tender

45. Procurement Procedures -
Supplies
International Open tender procedure: (contracts >
EUR 300 000)
 Requirements for publicity: International publication
(OJ, Europe Aid)
 Complete tender dossier
 Allow at least 60 days for submission of offers
 Award criteria: cheapest offer which complies with TS

46. Proc. Procedures - Supplies
O Local Open tender procedure: (contracts > 100 000
EUR but < 300 000)
 Requirements for publicity: local publication + Europe
Aid
 Complete tender dossier
 Allow at least 30 days for submission of offers
 Award criteria: cheapest offer which complies with TS

47. Proc Procedures - Supplies
Competitive negotiated tender procedure: (contracts
below EUR 100 000)
 Without publication of a contract notice
 At least three firms must be invited to submit an offer
 Simplified tender dossier
 Allow at least 30 days for submission of offers
 Award criteria: cheapest offer which complies with TS

48. Proc. Procedure - Supplies
O Single tender: (contracts with value less than 20 000
EUR)
 May be awarded on the basis of a single tender
 For supplies with a value of less than/ equal
to EUR 2 500, the contracting authority may
pay on the basis of an invoice

49. Proc. Procedure - Works
O International open tender (for contracts of
EUR 5 000 000 or more)
 Requirements for publicity: International publication
(OJ EU, Europe Aid)
 Complete tender dossier
 Allow at least 90 days for submission of offers
 Award criteria: usually the lowest price (can be
exceptions)
O International restricted tender (exception) - for
contracts above EUR 5 000 000

50. Proc. Procedure - Works
O Competitive negotiated procedure: works contracts
under EUR 300 000 by competitive negotiated
procedure
 Without publication of contract notice
 Specific procurement dossier
 Allow at least 30 days for submission of offers
 Award criteria: usually the lowest price (can be
exceptions)

51. Proc. Procedure - Works
O Single tender (for works contracts of less than
EUR 20 000)
 Works for less than EUR 20 000 may be awarded on
the basis of a single tender

52.  Evaluation Committee – formation; roles
 Evaluation procedures for services/ supplies/ works
contracts
 Evaluation Report structure and contents
 Good practices?
Tender Evaluation