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Engineering
Manager
Procuremen
t
Manager
Quality
Manager
Accounting
Manager
Production
Manager
Sales
Manager
FIGURE 17-2
BID PROPOSAL PREPARATION SCHEDULE
N
o
Task Name
Decision to Bid
Organize Proposal
6
7
10
11
Submit Proposal
July
7/2
3
7/3
8/6
0
Executive
August
8/1
8/2
3
0
8/2
7
9/3
September
9/1
9/17
0
9/2
4
October
10/
10/
1
8
Management
Project
Manager
Engineeri
ng
Qualit
y
Productio
n
Project
Project Manager
Manager
Estimati
ng
Estimati
ng
Executive
Management
Sale
s
TECHNICAL SECTION
Chapter 8 addressed the two principal types of technical specifications
included in RFPs, detailed and performance specifications. These two
types of specifications require different approaches from bidders. Detailed
specifications and drawings included in the RFP result in minimal design
work on the part of a bidder since the detailed technical requirements are
specified. Detailed specifications and drawings do require considerable
effort on the part of a bidder in determining the scope of work included in
the RFP. Performance specifications require that a bidder perform design
work prior to completing its proposal. The following sections address the
activities that bidders perform to respond to detailed and performance
specifications.
Detailed Specifications and Drawings
Detailed specifications and drawings included in the RFP require
considerable review by a bidder to assure that the technical requirements
are clearly understood. Particular care is taken for RFPs for fixed, unit,
and target price contracts since the prices quoted for the contract include
all of the work indicated in the specifications and drawings. Reimbursable
with incentive fee contracts also require careful review of the detailed
specifications and drawings since these documents are part of the basis
for determining incentive fees.
A bidder may or may not agree with the technical approach that is
indicated in the detailed specifications and drawings included in the RFP.
Due to the time and money that an owner has invested in the preparation
of these specifications and drawings, the owner is unlikely to be
responsive to suggestions by a bidder for major changes in the design
after the RFP is issued. Minor design changes can be requested by a
bidder if there are quality, schedule, or cost benefits to an owner in
accepting the changes. These changes should be requested prior to
submitting a proposal. Bidders that have technical questions concerning
the specifications and drawings should submit these questions to the
owner as early as possible in the bid period to allow adequate time for the
owner to respond.
Bidders have two major concerns in reviewing the detailed
specifications and drawings included in the RFP. The first concern is with
the quantity of work that they must perform to complete a contract. If
there are a significant number of drawings, the bidder spends
considerable effort in analysing the drawings to determine the quantity of
work. The accuracy of a bidders determination of the quantity of work is
very important for fixed price contracts. The quantity of work affects the
labour cost, material cost, and schedule for completing the contract work.
Although the determination of the quantity of work included in detailed
specifications and drawings is often a tedious task, it is one that must be
properly done to have a good bid proposal.
The second concern for bidders with the detailed specifications and
drawings is the complexity of the work. The complexity of the work
defined in the technical documents has a direct impact upon the quality,
cost, and schedule of the work that will be performed by a bidder. Bidders
are more likely to encounter quality problems with complex work activities
if they are awarded a contract. The cost and time required to complete
complex work activities will be greater than what is required for less
complex work. To adequately evaluate the complexity of the work defined
in detailed specifications and drawings, bidders compare the work to
similar projects that they have completed. If they have not performed
similar work, bidders must estimate the detailed activities that will be
necessary to complete the work.
Performance Specifications
Performance specifications can require a substantial amount of
design work by a bidder prior to submitting a proposal. RFPs with
are for using owner furnished equipment that is shared with other
contractors.
Safety Requirements
The strength of a bidders safety program for construction contract
work is an important element in bid evaluations. Many RFPs for
construction contracts contain specific safety requirements including a
requirement that bidders submit their safety program with their proposals.
These safety programs must meet federal OSHA requirements as well as
specific owner requirements. Bidders should review their existing safety
programs against the safety program requirements in the RFP to
determine if their existing programs satisfy all of the requirements. A
Bidders proposal should include the safety program that it will use for its
construction work.
If an owner indicates in the RFP that it intends to perform safety
inspections of construction contractor work, a bidder takes this into
account in its proposal. Owner safety requirements can be more restrictive
that construction contractor safety program requirements. These safety
requirements can increase the time required to perform contract work
activities. A bidder needs to be knowledgeable of these requirements to
properly account for them in the pricing section of its proposal.
Environmental Requirements
Environmental requirements can have a significant impact upon
activities performed by suppliers and contractors. RFPs define the specific
environmental requirements that apply to contract work. The design work
performed by engineering contractors and equipment suppliers is often
affected by environmental requirements. Satisfaction of these
requirements is often a prerequisite to obtaining a license fix a project.
Construction contract involving the handling of hazardous materials must
comply with federal environmental requirements. Bidders for RFPs
containing environmental requirements include their proposed approach
for dealing with environmental requirements in their proposals.
COMMERCIAL SECTION
Chapter 14 addressed the extensive commercial requirements that
are included in many contracts. Certain commercial requirements in RFPs
result in additional costs to a supplier or a contractor. Other requirements
should be carefully evaluated by bidders to assess their potential financial
impact upon a company. This potential financial impact is assessed as part
responsible for performing the contract work define the detailed activities
that the bidder will perform if awarded the contract.
The level of detail in the bidders estimate is affected by two factors.
The level of detail is sufficient to prepare an estimate that includes all of
the work specified in the RFP. The level of detail is also sufficient to
prepare budgets that can be compared to actual costs.
Productivity and Hours
Bidders for engineered materials, equipment, and engineering
contract RFPs use their experience from previous contract work to
estimate the productivity and hours required to complete a new contract.
Since the personnel that will work on a new contract usually are already
working in a suppliers or a contractors facility, the productivity of these
personnel should be known. The hours required to complete the new
contract are affected by the technical and management requirements in
the RFP. The quantity and complexity of the work involved are major
factors that affect the labour hours required to perform the work. The
managers of the groups that will perform the contract work assist in
estimating the hours.
Bidders for construction contracts have difficulty in estimating
labour productivity if they have not previously worked in the area where a
project is located. Labour productivity levels of construction craft labour
vary considerably with the region of the country where the work is
located. Estimating guides published by certain companies provide an
indication of the variation in labour productivity that may be experienced.
quotations from material suppliers, the bidder often relies upon material
costs data from its previous projects or estimating guides.
Equipment Cost
Many contracts require a supplier or a contractor to provide the
equipment required to complete the contract work. Engineered materials
and equipment contracts require the supplier to the specialized
equipment to manufacture the items. Engineering contractors use
computers and computer assisted drafting equipment to perform their
work. Construction contractor use tools and construction equipment to
perform their work. RFPs usually do not specify the type of equipment
that a supplier or a contractor must use to perform the contract work and
the duration for using the equipment are included in the contract price.
Risk Analysis
After a bidder has completed its detailed estimate, an evaluation of the
potential for actual cost expenditures that are greater than the estimate is
made. There are many factors that can affect the bidders cost estimate
for example.
Underestimates of quantities of work
Underestimates of the complexity of the work.
Schedule delays that are the responsibility of the bidder.
Underestimates of increases in wage rates.
Underestimates of material prices.
Underestimates of the amount and types of equipment required to
perform contract work.
The amount of contingency that a bidder includes in its bid price for
uncertainties of this nature is dependent upon the confidence that the
bidder has in its detailed estimate. If a bidder adds to much contingency,
it will not be awarded the contract. Target price contract bids frequently
include a greater allowance in the target price for uncertainties due to the
fact that the scope of work is often not as well defined as it is for fixed
price contracts.
Overhead and Profit
There are certain costs that suppliers and contractors incur as a
result of doing business that are difficult to include in the above
owner. The owner usually requires that one of the joint venture members
be responsible for the overall management of contract work. Joint venture
contract approaches can result in management accountability problems if
responsibilities are not clearly defined. The preparation of a joint venture
bid involves all of the steps addressed in this chapter. The preparation of a
joint venture bid involves all the steps addressed in the chapter. The
parties to the joint venture determine who will be responsible for the
preparation of each part of the bid proposal.
CASE STUDIES AND QUESTIONS
Case Sudy 17-1
Badger Power Company
The Caster Engineering Company is one of the companies that
receives the RFP for the engineering contract for the Badger Power
Company power plant. The Carter Engineering Company has previously
performed engineering work for the Badger Power Company. Mike Jones is
assigned as the Project Manager for Carter responsible for the preparation
of the bid proposal. The bid proposal is due three weeks after it is received
by Carter
Mike Jones meets with the Vice President to discuss staffing for the
bid proposal and projects work. The current workload of the Carter
Engineering Company is significant and there are not many people
available to work on the bid proposal. Personnel projections indicate that
engineering resources from current projects will be available for a new
project in approximately three months. Although currently available
resources are in short supply, the Vice President indicates to Mike Jones
that Carter wants to bid on the new project to maintain good business
relations with the Badger Power Company.
The performance specification in the RFP requires that the bidders
for the engineering contracts provide a description of their technical
approach for the power plant including any reference plant designs that
they intend to use. The RFP indicates that the adequacy of these technical
descriptions will be a major factor in the evaluation of the bid proposals.
The quality requirements in the RFP state that the engineering
contractor is responsible for performing sufficient design review to
minimize to occurrence of errors in specifications and drawings. The
Badger Power Company engineering group will closely monitor the
performance of the engineering contractor in this area. The incentive fee
awarded to the engineering contractor the quality performance will be
determined in part by the accuracy of the specifications and drawings
prepared by the contractor. The cost of correcting errors in specifications
and drawings is the responsibility of the contractor.