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Tendering Bidding & Award of Contract Final Draft

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Tendering Bidding & Award of Contract Final Draft

  1. 1. CONSTRUCTION MATERIALS MANAGEMENT NATIONAL INSTITUTE OF CONSTRUCTION MANAGEMENT & RESEARCH Tendering, Bidding & Award of Contracts A Presentation on
  2. 2. REFERENCES The Winning Bid: a practical guide to successful bid management by Emma Jaques-1st edition (2013). Building and Engineering Contracts by B. S. Patil - 5th Edition (2005). Bids, Tenders & Proposals (Winning business through best practice) by Harold Lewis. Estimation and Tendering of building works by R.C. Smith.
  3. 3. TENDERING TENDER AS BASIS OF CONTRACT.. REQUISITES OF A VALID TENDER.. TENDERING : STEPS INVOLVED. TENDER DOCUMENTS. REQUIREMENTS TO BE FULLFILLED BEFORE INVITING TENDERS. NOTICE INVITING TENDERS. MODES OF INVITING TENDERS. TYPES OF TENDER DOCUMENTS. CONTENTS
  4. 4. TENDER AS BASIS OF CONTRACT  Contract- A legally enforceable ‘Agreement’.  Agreement-An ‘offer’ made by one party and an ‘acceptance’ of that offer by the other party.  Tender-‘Offer’ by one party to another. In construction terms it means an offer by contractor to do a specified work in return of a sum of money.
  5. 5. THE TENDER • Offer for product &/or services in return of a sum. • Generally submitted against specific requirement from client in form of NIT/RFT. • Less flexible& bound by client’s requirements. • Immediate obligation for tenderer upon acceptance by client.
  6. 6. REQUISITES OF A VALID TENDER It must be unconditional. Must be made at the proper place. Must confirm to the place of obligations. Must be made at the proper time. Must be in the proper form. Tender must be made to the proper person. There must be reasonable opportunity for inspection.
  7. 7. TENDERING : STEPS INVOLVED 1) Finalisation of procurement strategy 2) Preparation of tender documents 3) Inviting Tender and issuing tender documents 4) Study of tender conditions 5) Pre-bid meeting and site survey 6) Bid/No bid analysis 7) Preparation of tender 8) Submission of tender 9) Opening of tender 10) Evaluation of tenders 11) Negotiation 12) Acceptance and award of contract.
  8. 8. TENDER DOCUMENTS INCLUDES Notice Inviting Tender (NIT)/Invitation for Bids (IFB) Instruction to tenderers (ITT)/Instruction to Bidders (ITB) Contract Form and Conditions of contract Technical specifications Bills of quantities Tender drawings List of additional information required from Bidders Formats of bank guarantees for advance payment/performance Checklist for of tenders submission
  9. 9. NOTICE INVITING TENDERS •MULTIPLE TERMS •RFP(REQUEST FOR PROPOSAL) •RFT(REQUEST FOR TENDERS) •RFQ(REQUEST FOR QUOTATION) •NIT (NOTICE INVITING TENDER) •IFB(INVITATION FOR BID)
  10. 10. NIT – INFORMATION TO BE PROVIDED 1 . Name of the Project. 2 . Name & Address of the Company floating the tender. 3. Name of work, materials or services. 4. Place of work location. 5. Approximate estimated cost of work. 6. Earnest Money. 7. Period of completion. 8. Date on which the Tender Document sale starts. 9. Date and time up to which tender documents can be obtained. 10. The cost of tender documents. 11. The date and time up to which the tenders to be submitted and are to be opened. 12. Specification. 13. Eligibility Criterion
  11. 11. MODES OF INVITING TENDERS Negotiated Tenders Limited Competition Open Competition
  12. 12.  In this method, client negotiates with one contractor &then awards job to him.  Client’s comfort level with a particular contractor/Secrecy/Urgency/Technology may be the reason. Advantages: Early involvement of the contractor & his expertise. Less cost and time for the client Disadvantages/Shortcomings: Can’t be used in public sector due to accountability issues. Not best way to get lowest price. NEGOTIATED TENDERING
  13. 13.  Instead of inviting tenders openly, an employer may invite tenders from few selected contractors by inviting them to submit the tenders in limited competition.  This method also recommends itself when there are only few recognized firms or companies capable of executing the work. Advantages:  Reduces time, effort& cost of tendering.  Less possibility of any firm quoting unrealistic price, Fair Competition (not as high as open tendering) Disadvantages:  Few good contractor may not get the chance.  Higher prices due to big contractors & limited competition LIMITED COMPETITION .
  14. 14. By far the most common mode of inviting tenders for major works is by inserting an advertisement in newspapers, periodicals, or trade journals, inviting all interested contractors to participate in the invitation. OPEN COMPETITION Advantages  Maximum Competition  No favouritism  Useful for new companies Disadvantages:  Resource & time to evaluate(unless stringent PQ conditions)  New player may quote too low to get access.  No idea of competition.  Good contractors may not quote.
  15. 15. REQUIREMENTS TO BE FULLFILLED BEFORE INVITING TENDERS The person inviting tenders needs to exercise care that all necessary requirements prior to the invitations are fulfilled so that the tenderers are not put to unnecessary trouble and expense, if lack of preparedness requires revoking the tender invitations. Sanction to be obtained to a detailed estimate showing the quantities, rates and amount of various items of work and also the specifications to be adopted in respect of each item. In the case of urgent works, with no time to prepare a detailed estimate, rough quantities and rates for the main items covering the major part Of the cost the should be worked out to facilitate comparison. Splitting of work for the purpose of inviting tenders is to be discouraged and where necessary prior approval of the competent authority must be obtained.
  16. 16. REQUIREMENTS TO BE FULLFILLED BEFORE INVITING TENDERS Before tenders are invited the following tender documents should be ready: a) Notice inviting tenders in appropriate form briefly known as NIT. b) Standard form of tender to be used along with general and special conditions, if any. c) The Schedule of Quantities of works. d) A complete set of drawings referred to in the schedule of quantities. e) A complete set of specifications of the work to be done.
  17. 17. TYPES OF TENDER DOCUMENTS LUMPSUM TENDER: In this form, the intending tenderers are required to quote a lump sum figure or completing the works in accordance with the given drawings, designs, specifications etc. ITEM RATE TENDER: In this form the intending tenderers are supplied detailed bill of quantities showing various items of work to be executed, the approximate quantity under each item, and the unit in which the work done will be measured. PERCENTAGE RATE TENDER: This form is similar to an item rate with the modification that the bill of quantities supplied is filled with rate per unit and cost of each item including total cost.
  18. 18. TYPES OF TENDER DOCUMENTS COST PLUS: This form is of comparatively recent origin and provides for the basis of payments to be made to the contractor for work done on actual "prime cost" plus fee to cover his overheads and profit. Types of Cost Plus: Cost Plus fixed fee Cost Plus percentage Cost Plus Fluctuating Fee Contract Target Cost
  19. 19. TYPES OF TENDER DOCUMENTS PACKAGE DEAL:In the "package deal" or "industrialized building" or "turn key" contracts, the necessity on the part of the owner to employ professional staff is eliminated. By broad outline specifications, the owner's requirements are made known to the intending tenderers and it is for the tenderers to produce designs, drawings, and specifications and quote the price for completion of the work. STANDING OFFER:An offer which is submitted in response to an invitation to tender, unit prices for the supply, as required from time to time and on order, of goods or materials and/or labour , over a fixed period of time is called 'standing offer'. LABOUR CONTRACT:The special feature of this type of contract is that the owner agrees to supply all the requisite materials to the contractor and the latter agrees to supply all the labour and workmanship necessary to complete the work according to the drawings and specifications.
  20. 20. TYPES OF TENDER DOCUMENTS • SUPPLY OF MATERIALS: The P.W.D. has a special form for use where the purchase of materials is involved. The material suppliers are required to quote rates for supply of the required materials • PIECEWORK: For small works in which it is necessary to start the work in anticipation bf formal acceptance or for running contracts such as laying of pipes for water supply or sewerage, this form is adopted. In the second case, above, the piecework is cancelled as soon as regular contract is signed. In this form, the agreement is in respect of payment at stipulated or agreed rates without specific quantity or time being agreed upon. When the quantity and time limit are mentioned, it contains a provision entitling the engineer to put an end to the agreement at his option at any time.
  21. 21. BIDDING BIDDING DEFINED.. METHODS OF BIDDING.. SIGNIFICANCE OF PRE-BID MEETING. BIDDING DOCUMENTS. KEY ASPECTS OF BIDDING DOCUMENTS. CONTENTS
  22. 22. BIDDING DEFINED Construction bidding is a process of submitting a proposal(tender) to undertake or manage the undertaking od construction project. Starts with a cost estimate from a blueprint and material takeoffs. Parties competent to each other based on their past experience and with the aid of BOQ, specification prepare an estimate of cost for which they are willing to undertake particular project. The bidding document (invitation to bid) specifies the last date and time of submission of respective to bids
  23. 23. METHODS OF BIDDING Single-stage Single-envelope • The single-stage single-envelope is the most common method of procurement. • A purchaser invites bids indicating the kind of goods required. • The bidders submit bids stating prices, quality and performance characteristics of goods offered and commercial terms for the sale of goods. • There is no prequalification, the bidding document spells out the qualification criteria for bidders. • This method has the advantage of simplicity. • Bids are invited quickly and a decision taken promptly. • This method is normally used for standardised goods, when specifications and performance characteristics are known.
  24. 24. METHODS OF BIDDING Single-stage Two-envelope • In the single-stage two-envelope method a purchaser asks the prospective bidders to submit bids in two envelopes. • One envelope contains the technical specifications and performance parameters of the goods to be purchased or the plant or equipment to be installed. • It also spells out the qualification criteria for bidders, and all the other commercial terms except the price bid. • The second envelope contains the price details. • The bidders submit both the envelopes to the buyer at the same time. • The purchaser first opens the technical envelopes of all the bidders. • It critically analyses the technical competence of bidders, their financial viability, and their track record in fulfilling obligations under contracts in time. In addition, the goods offered are evaluated with reference to the bidding documents to see if these fulfil the purpose of purchase.
  25. 25. METHODS OF BIDDING Two stage single envelope • This type of procedure is adopted in large and complex contracts where technically unequal proposals are likely to be encountered or where the purchaser is aware of its options in the market but, for a given set of performance requirements, there are two or more equally acceptable technical solutions available to the purchaser. • At first bidder shall submit only technical proposals without prices • Technical details are discussed between the bidders and the technical solution for the work is finally agreed to. • At second stage bidders are given a choice to revise and submit price proposal to confirm to the standards agreed along with the revised technical proposal
  26. 26. METHODS OF BIDDING Two-stage Two-envelope The two-stage two-envelope method first asks the bidders to send envelopes with the technical specifications of goods their performance characteristics, evidence of technical competence and financial soundness of the bidder. The qualification criteria for the bidders and other commercial terms of bids except the price. This is called the first stage. It is used to qualify the bidders before asking them for price bids. This method is followed in the WB and the ADB for the complex projects and equipment. In the first stage, the purchaser discusses with the bidders details of the specifications and the performance data. The purchaser also satisfies itself about the comparative consumption of raw materials, power and fuel.
  27. 27. SIGNIFICANCE OF PRE-BID MEETING Pre-bid meetings are usually held, if previously mentioned in the solicitation documents, during the bid/proposal preparation period. Purpose is to clarify any concerns bidders may have with the solicitation documents, scope of work and other details of the requirement. some buyers promise to answer questions from bidders, and also hold a pre-bid conference to answer questions.
  28. 28. BIDDING DOCUMENTS These documents help in obtaining uniformity of knowledge as both the parties have the same set of information. It essentially consists of:- 1.Invitation for bid 2.Instruction to bidders 3.General Conditions of Contract 4.Special Conditions of contract 5.Contract Data 6.COPA 7.Specifications 8.Drawings
  29. 29. Bid Form & Price Schedule Bid Currencies Language of the bid Bidder's qualifications Bid security - Bid validity period.- Signature on Bids- Secrecy of Bids Deadline for Submission of Bids Withdrawal of bids. Bid opening and evaluation KEY ASPECTS OF BIDDING DOCUMENTS
  30. 30. CONSTRUCTION SCHEDULE
  31. 31. BID FORM
  32. 32. BID CURRENCIES • In international competitive bidding, instructions to bidders have a clause on bid currencies. • It states how bids in different currencies will be converted into the domestic currency. • A bidder may choose to ask for bids in its own currency; in such a case, the prices may be higher as the supplier will have to accept the risk of exchange rate variations. • For example, if a bid is accepted for, say, US dollars 1000, and the rate of exchange on the date of opening bids is Rs. 61 to one US dollar, the purchase transaction is valued at Rs. 61,000. • However, when the buyer pays for the goods, it may have to buy US dollars for a higher amount of, say, Rs. 64,000 if the US dollar is quoted at Rs. 64 to a dollar
  33. 33. BID LANGUAGE • In private trade, and for domestic bids, language may, perhaps, not be a very important clause. • However, in international trade, it is important to specify the language of bids as the bids may be from several countries with different languages. • If bids are received in many languages, the buyer may find it difficult to get them translated properly. • Moreover, as the contract will be governed by the language of the offer, the buyer's unfamiliarity with it may give use to difficulties and disputes.
  34. 34. SECRECY OF BIDS • Opening any bid before the deadline for opening bids violates the sanctity of the bid process. • The need for secrecy arises because it is essential that the bidders should not come to know the bid price of their competitors. • Suppliers, when they come to know of it, may decline to bid for buyers who violate this principle- • Therefore, a buyer instructs bidders to seal their bids carefully; and offers the assurance that the bids will be opened publicly, only at a given time and place
  35. 35. DEADLINE FOR SUBMISSION OF BIDS • A buyer cannot keep the date of receiving bids uncertain. • The last date of receiving bids is also linked to the bid validity period. • A good practice is to refuse to consider bids that are received late, whatever the reasons. • If a buyer thinks that the time allowed for preparing bids is not sufficient, it may extend the deadline for bid submission, instead of considering late bids.
  36. 36. WITHDRAWAL OF BIDS • The law of contract allows a bidder to withdraw its bid before acceptance. • In competitive bidding, a bidder may withdraw or modify its bid before bid opening; this action does not result in the loss of bid security. • If a bidder withdraws its bid after the bid opening, then the buyer may forfeit the bid security
  37. 37. • Keep it simple, yet professional • Address exactly what the Buyer asks for, and ONLY what the Buyer asks for! • Writing Style • Format and Presentation • Approach/Solution • Pricing • Other Information Writing a successful tender response:
  38. 38. BID SECURITY  A buyer does not wish to receive bids from firms who have no intention to meet their obligations.  A supplier/contractor may make a bid with the idea of seeing the market trend; it may refuse to accept the contract.  Such frivolous or speculative bids do arise when there is no bid security, particularly for large value contracts.  Therefore, buyers insist on a suitable amount from bidders as bid security  Bid security gets forfeited if a bidder refuses to honour the contract when its bid gets accepted. A very high bid security amount may discourage bidders as their money gets blocked and a poor response will mean not receiving competitive bids.
  39. 39. BID VALIDITY PERIOD • A buyer assures suppliers about the period within which it will decide on the bids. • After all, a supplier invests money in bid security on the chance of getting its bid accepted. • The investment can be made only for a reasonable period, Moreover, a supplier takes into account the likely increase in prices by the time a contract is awarded and the goods are delivered. • In an inflationary economy, the risk of inflation is built into the price. • If the bid validity period is not indicated, suppliers may not bid at all.
  40. 40. SIGNATURES ON BIDS • The law of contract recognises a contract between legally competent parties only. • A minor is not competent to enter into a valid contract. • Many suppliers may be firms in the nature of partnerships, joint ventures, or incorporated companies. • The laws of partnership, joint ventures, or companies have a legal framework as to who is competent to bind them. • Only persons having this authority can bind their firms. • A buyer has to check the authority letters, on the basis of which bids are signed, Therefore, a buyer instructs bidders to seal their bids carefully; and offers the assurance that the bids will be opened publicly, only at a given time and place.
  41. 41. BID OPENING • Opening of bids. Bidders or their representatives are invited to be present at the bid opening ceremony. • At the bid opening, a buyer announces the major details of bids, like bid price, discounts offered, whether bid security is there, etc. • The public opening of bids in stills confidence in the bidding process; otherwise, some suppliers may decline to bid.
  42. 42. BID EVALUATION • Preliminary Examination: The preliminary examination of bids means checking that the bids are complete, there is bid security, and that the bids meet all the essential conditions of eligibility laid down in the Instructions to Bidders. • The bids, which meet all these criteria, are then taken up for further examination. These bids are called 'substantive responsive bids’.
  43. 43. AWARD OF CONTRACT AWARD OF CONTRACT DEFINED.. STAGES OF CONTRACT.. METHODS. WEIGHTED RATING SYSTEM. RANKING SYSTEM. AWARD OF CONTARCT. CONTENTS
  44. 44. DEFINITION Contract awarding is the method used during a procurement in order to evaluate the proposals (tender offers) taking part and award the relevant contract.
  45. 45. Preparation of contract documents Advertising the tender, tender notice Pre-bid meetings Submitting tender by contractor Study of the tender by owner Clarification regarding conditions or specifications Preparing comparative list Awarding of contract STAGES OF CONTRACT
  46. 46. METHODS 1. Least price This method is the simplest and oldest of all. Under this the procurement contract is awarded to the best price. 2. Most economically advantageous This is applicable to proposals of different quality within the limits set. Under this the proposals are graded according to their price for value and the contract is awarded to the one with the best grade.
  47. 47. 3.Mean value The contract is awarded to a bid closer to the mean value of the proposals. 4.Exclusion of the extremes Under this method the proposals that are deviating the most from the mass of the proposals are excluded and then the procedure continues with one of the above methods. METHODS
  48. 48. COMPA NY EXP PROFIT STAFF PRESENT PROJECTS SIMLAR PROJECTS TURN OVER ABC 20 YEARS 10% 250 5 4 25 XYZ 25 YEARS 11.33% 200 4 4 15 BCA 25 YEARS 9% 180 2 3 20 WEIGHTED RATING SYSTEM
  49. 49. COMPA NY PROFIT =0.16 TURN OVER=0 .16 STAFF =0.16 PRESEN T PROJEC T =0.16 SIMILA R PROJEC T =0.16 EXP =0.16 ABC=1. 28 0.32 0.16 0.16 0.16 0.16 0.32 XYZ=1.6 0 0.16 0.48 0.32 0.32 0.16 0.16 BCA=1. 92 0.16 0.32 0.48 0.48 0.32 0.16 WEIGHTED RATING SYSTEM
  50. 50. COMPANY PROFIT EXP TURN OVER SIMILAR PROJEC TS PRESEN T PROJEC TS STAFF ABC TOTAL=8 10% (2) 20YEA RS (2) 25 (1) 5 (1) 4 (1) 250 (1) XYZ TOTAL=12 11.3% (3) 25YEA RS (1) 15 (3) 4 (2) 4 (1) 200 (2) BCA TOTAL=12 9% (1) 25 YEARS (1) 20 (2) 2 (3) 3 (2) 180 (3) RANKING SYSTEM
  51. 51. • Instructions to Bidders make it known that a buyer has the right to accept or reject any bid. • The bidders cannot force a buyer to accept a particular bid. • A buyer awards a contract after the evaluation of bids. • He or she also has a right to increase or decrease the quantity of items to be purchased within the range given in the Instructions to Bidder. • The bidder, whose bid is accepted, is asked to sign a contract to formalise the acceptance of the offer. AWARD OF CONTRACT
  52. 52. Thank You !!! Presented By:- Shiva Prasad (AP16017) Utkarsh Kumar Singh (AP16018) Saylee Patil (AP16019) Sachin Amane (AP16020) Nikhil Kulkarni (AP16021) Muneesh Methwani (AP16022) Manoj I.(AP16023) Karan Pawar (AP16025)

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