SSSIHL, BRINDAVAN CAMPUS

TENDERS
A Report on seminar presented as part of
the Project management course.
S Karthik Ramakrishnan
9/2/2015

A written report on the seminar delivered about Tenders and its features, as a part
of Project Management subject. The Seminar covered the features, types and the
process of tendering.

Features of Tender documents

1. Invitation to offer

Tender document is not just a mere offer but essentially an invitation to offer.
Offer
1. Offer means a proposal by a
person in which he makes his
willingness to enter into a legally
binding contract for some consideration.
2. An offer is made with the object
of getting consent of the offeree.
3. An offer can be accepted by the
offeree.
4.
An
offer
when
accepted
becomes an agreement.
Invitation to Offer
1. An Invitation to offer means an
intention of a person to invite
others with a view to enter into an
agreement.
2. An invitation to offer on the
other hand is made with
3. An invitation to offer cannot be
accepted by the person to whom it
is made.
4. An invitation to offer cannot be
accepted at all.
2. Letter or a published document

The tender document is published in the national daily for bringing it in the
notice of all. The tender documents are also published also act as a material
of evidence for future.
3. Detailed description of Terms and conditions of the service.

All the terms and conditions required for the participants to know are
mentioned in the document itself.

4. Mentioning the desired period.

The tender shall clearly mention the time period the objective is up to, and
the party interested shall approach to offer based on the time period
mentioned only.

5. Objective is to find the right price provided.

Tenders advertised in the daily ensure a lot of interested party approach the
offerer of the invitation and the offered would get a better price.

Pre-qualification of the contractor

There would be a set of qualification to participate in the bidding process.
Theses qualifications will be laid down by the offerer of the invitation. The
main purpose of this pre qualification is for short listing the participants and
reduces the number of offerings and restricts the offerings to good and
credible offerings. So the pre-qualification norms lie generally on
1. Previous experience
2. Past turnover and track record
3. Credibility of job performance

Table 1 : Pre-Qualification factor scale

1 Source: World bank data base

These factors based pre-qualification is given by the World Bank group and
the points scale rating and factor based rating is purely subjective and
dynamic with respect to different projects. These are not water tight
compartments. This is not a very rigid framework. The factors can be
changed on a case-to-case basis. The sole objective of this factor scale is to
avoid wastage of time by the organization who invites for tender in
segregating all the request forms which he would have received, if he had
not laid down certain conditions regarding the qualifications of the
contractor.

Tender document preparation & floatation

Tender document includes:
1.
2.
3.
4.
5.
6.

Letter of invitation
Instructions
GCC (General conditions of contract)
SCC (Special conditions of contract)
Technical specifications
Form of tender (to apply)

Open tenders, open calls for tenders, or advertised tenders are open to all
vendors or contractors who can guarantee performance. Restricted tenders,
restricted calls for tenders, or invited tenders are only open to selected
prequalified vendors or contractors. This may be a two-stage process, the
first stage of which produces a short list of suitable vendors. The reasons for
restricted tenders differ in scope and purpose. They are called because there
is essentially only one suitable supplier of the services or product, there are
confidentiality issues such as military contracts, there are reasons for
expedience such as emergency situations, and there is a need to weed out
tenderers who do not have the financial or technical capabilities to fulfill the
requirements.

In an open bid or tender system, a double envelope system may be used.

The double envelope system separates the technical proposal (statement of
work) from the financing or cost proposal in the form of two separate and
sealed envelopes.

During the tender evaluation, the technical proposal would be opened and
evaluated first followed by the financing proposal.

The objective of this system is to ensure a fair evaluation of the proposal.

The technical proposal would be evaluated purely on its technical merits and
its ability to meet the requirements set forth in the Invitation without being
unduly skewed by the financial proposal.

Receipt & Evaluation of the tenders

Evaluation of the tenders is most crucial part. This process needs lots of skill
based approach and also a lot of integrity. The answers to all the queries will
be answered promptly till the bidding date is closed. The bidding close date
in mentioned in the tender document and any offer made after date will be
rejected. The receipt of all tenders will results in collecting all the tender
application forms from the tender box and hence shall be evaluated for the
final acceptance.

T E C H N IC A L

E
v
al
u
at
io
n
cr
it
er
ia

C O M M E R C IA L

CO NTRACTU AL

M A N A G E R IA L

Figure 1: Tender evaluation factor

The evaluation can be based on a single thumb rule principle.

But, off late many private players are shifting way form the conventional low
price bid evaluation to sophisticated vendor/Tender rating models, which
consider the quality, delivery, and also the price aspect. Price is not the only
criterion. There are several other categories which have come into the
picture while evaluating a proposal.

Tender evaluation

Tender evaluation is a term used in business and refers to the process of

evaluating and approving potential tenders by quantitative assessment. The
purpose of tenders evaluation is to ensure a portfolio of best in class tenders
is available for use. Tenders evaluation is also a process applied to current
tenders in order to measure and monitor their performance for the purposes
of reducing costs, mitigating risk and driving continuous improvement. Some
of the challenges associated with tenders evaluation may be mitigated by
the use of appropriate tools. For simple projects a spreadsheet can be used.
But as evaluations become more complex or more frequent data
management and data integrity issues become significant. They have
developed models like the Vendor index model.
VENDOR INDEX MODEL

Three major factors of evaluation

1. Quality
2. Delivery
3. Price
Input
1.
2.
3.
4.
5.

details for the index model:

Total delivery
Numbers rejected
Delivery on schedule
Lowest bid price
Vendor's price

The parameters on which the ratings are made

Quality index = Numbers accepted / Total delivery

Delivery index = Delivery on schedule / Total delivery
Price index = Lowest bid price / Vendor's price

Each factor is given a certain weight. The weighted average of all the three
parameters is the vendor index. Based on the vendor index, the organization
which has invited for the tender can choose one contractor. This is one of the
objective methods of arriving at a contractor.

EMD or Earnest Money Deposit

To ensure that a bidder does not submit a dummy bid or back out at time of
tender opening, government department collects a small refundable fee from
each bidder, which is called EMD. EMD is always in form of a demand draft &
cheques or cash are strictly not allowed. EMD is returned when all bids are
opened & tender is awarded. In case tender is cancelled, the EMD is
returned. Most of the time the EMD is not credited into government banks
but is kept with buyers in as it is form.
After tender opening the same is returned. Some government departments
however deposit the EMD into their bank and enjoy the interest. Some
departments which are not cash rich even go to the extent of using bidders
money and poor bidder actually have to bribe accountants to
get
their EMD back.
Security deposit - once it is decided that a tender is awarded to a bidder, he
has to deposit a security deposit with the buyers such that if he does not
complete the task as per the work order, the buyer can recover the loss
by forfeiting his security deposit.
E.g. If a bidders gets rs.10 cr contract to construct a bridge within 12 months
, than he has to deposit a security deposit of 10% i.e. 1 cr with buyers. Now if
he does not complete the bridge on time or leaves it incomplete, the
government can forfeit his 1 cr as penalty.
Security deposit can be in form of EMD, bank guarantee, national saving
certificates, cash, etc. Only when the winning bidder makes the security
deposit, he gets his EMD back.

Purpose of EMD

It acts as a guarantee for his commitment towards the offer made.

It indicates seriousness of the party
It ensures active participation in competing with others.

It safeguards genuine players

It prevents frisky contactors from cheating the organization which has
invited for tender.

The EMD maybe either refunded if the bidders offer is declined or it may be
forfeited.

Types of Tenders
Request for Information (RFI)
A Request for Information (RFI) is usually used when the purchaser does not
have sufficient information or understanding to write a detailed Request for
Tender (RFT) or Request For Proposal (RFP). An RFI is, in essence, a market
research and planning tool to help purchasers identify the scope for a
second, more formal request. Purchasers might want to identify the type of
service they need, best practice standards, pricing structures, the providers
who are capable of delivering the service and what processes they will use.
They may even seek industry input into the scope of a contract that will later
be put to tender. At the RFI stage the purchaser is often not committed to
buying they are simply assessing the market. In other words, the purchaser
may decide not to proceed and not appoint a supplier at all. If this is the
case, it will be stated in the RFI. Its unlikely that a purchaser would appoint a
contractor following an RFI alone and they would usually progress to a more
formal RFP or RFT.

Expression Of Interest (EOI) and Registration Of Interest

(ROI)
An Expression Of Interest (EOI) or Registration Of Interest (ROI) is similar to
an RFI and is used in the same way. A company releasing an EOI may need to
assess the markets ability to supply, or gather additional information before
progressing to an RFT. An EOI is often also used as a screening process in the
early stages of procurement in order to generate a shortlist for a more
specific and formal RFT. As with an RFI, it is unlikely that a purchaser would
appoint a
contractor directly from an EOI and the process would usually progress to a
second, more formal request such as an RFT.

Request For Proposal (RFP) and Request For Offer (RFO)

A Request For Proposal (RFP) or Request For Offer (RFO) is a flexible
procurement document used when purchasers seek solutions-based
responses to meet their needs. An RFP might be used when factors other
than price are central to the evaluation of each offer, or where there is no
clearly defined specification or solution and the purchaser is seeking a range
of options or innovations. RFPs therefore provide greater flexibility than an
RFT (which usually have very clearly defined specifications), although they
may appear to be similar in practice. An RFP may be more suited to
professional services, where the best solution is often not easily defined.

Request For Tender (RFT)

A Request For Tender (RFT) is a process used to appoint a service provider
via formal response. A purchaser uses an RFT when they have very clearly
defined criteria or specifications. Notwithstanding this, RFTs are normally
judged based on both price and qualitative factors and purchasers usually
follow strict assessment criteria to ensure a fair and objective process. An
RFT usually has both a Price and Qualitative components. In the Price section
respondents summarizes the fees they will charge to provide the service. In
the Qualitative section respondents respond to a range of questions about
their experience and capabilities. While an RFT usually contains a very
specific scope, purchasers sometimes encourage innovative solutions
outside of the scope of the tender, or alternative bids. A respondent
typically has to make one conforming bid within the scope of the tender
before it can make a second, alternative bid.

Request For Quotation (RFQ)

A Request For Quote is used by a purchaser when they have very clearly
defined criteria or specifications, are not seeking alternative or innovative
options and will make an assessment based largely, or solely, on price. The
purchaser may make additional qualitative assessments based on other
factors such as capability statements or an earlier EOI or RFI process.

Conclusion

The practice of assigning a part of the obligations and tasks under a contract
to another party known as a subcontractor is known as subcontracting.
Subcontracting is especially prevalent in areas where complex projects are
the norm, such as construction and information technology. Subcontractors
are hired by the project's general contractor, who continues to have overall
responsibility for project completion and execution within its stipulated
parameters and deadlines. Subcontracting is very useful in situations where
the range of required capabilities for a project is too diverse to be possessed
by a single general contractor. In such cases, subcontracting parts of the
project that do not form the general contractor's core competencies may
assist in keeping costs under control and mitigate overall project risk.
Tender is an objective way of arriving at the right price for the desired level
of quality for a product or a service that the organization wants to
subcontract. There are different types of tenders and an organization can
choose that type which suits best to the requirement of the organization.