PROFESSIONAL PRACTICE I

Scrutiny Of Tender For Award Of

Contracts – A Case Study
Rahul N.Sompura, Student, School Of Building Science & Technology, CEPT University,
Ahmedabad

Freak Rate Items

Tender Scrutiny and c) When the rate quoted by the
Award of Bids/Offers Contractor in figures and in words Rates quoted which are more than
tallies but the amount is not worked out 100%higher/lower than the estimated
Processing and Evaluation of correctly, the rates quoted by the rate, are considered as freak rate items
Bids contractor is taken as correct and not the and are identified. The Engineer as well
amount. as the Nodal officer keeps a strict watch
For Government & International In the case of percentage Rate Tender, over these AHR/ ALR/ freak rate items
Competitive Bidding the tenders are the contractors are required to quote during execution of the work for
decided in line with Government their rates both in amount as well as in possible deletion/decrease of the
Guidelines including that of CVC issued the percentage below/above the rates quantity of such items.
from time to time. The following points entered in the Schedule. In such cases in
are kept in view during the event of arithmetical error Technical Evaluation
scrutiny/evaluation of tender offers that committed in working out the amount
are duly opened. The prices of bidders by the contractor, the tendered Efforts are made to bring all the offers at
during prequalification stage whose percentage and not the amount should par technically after conducting
offer is technically suitable and be taken into account. technical discussions / or seeking
acceptable is only opened. The financial clarification/documents etc., through
bid of other tenderers whose technical Absurdly High Rate correspondence before opening of the
bids are not qualified, are not opened (AHR) / Absurdly Low price bids. For this purpose, the pre-
under any circumstances and the qualified parties are asked to withdraw
Rate (ALR) / Freak Rate
Envelopes containing their financial the deviations and submit revised offers
bids are kept unopened in record. Items: if any, after agreeing to the NIT
conditions. In cases where parties still
Procedure in Scrutiny of Rates AHR/ALR Items insist for technical deviations vis-a-vis
NIT conditions which are not in line
If on checks there are differences The item rates quoted which vary more with the tender documents, offers are
between the rates given by the than 25%as compared to the estimated evaluated on the basis of loading factors
contractor in words and figures or in rates are identified & discussed with the indicated, if any in the tender
amount worked out by him, the L-1 Bidder, and if the bidder does not documents.
following procedure is followed: agree to reconsider his offer of No loading on technical deviations is
a) When there is a difference between AHR/ALR Items following negotiations, permissible in case the loading criteria
the rates in figures and in words, the these items will be kept under serious on such technical deviation are not
rates which correspond to the amounts watch during execution of work. During specified in the tender document. The
worked out by the contractor, is taken as execution, the Engineer as well as the recommendations of TOC, if any, shall
correct. Nodal Officer may allow AHR ± 5% then be approved by competent
b) When the amount of an item is not quantities stipulated in the agreement. authority after scrutiny and vetting by
worked out by the contractor or it does Technical Advisory Committee (TAC),
not correspond with the rates written which then be intimated accordingly to
either in figures or in words, then the all the bidders duly giving them an
rate quoted by the contractor in words is opportunity to submit revised price
taken as correct. bids, if any, to promote transparency.

RAHUL N.SOMPURA (2905) P a g e |1

 PROFESSIONAL PRACTICE I

Acceptance of Tenders at bidder willingly admits to give a rebate

Comparative Statement of Price / discount over his quoted rate; then the
market rates with
Bids bidder is expected to convey his
allowable variations renewed offer or clarifications through
After completion of the techno- letters. All such offers and clarifications
It is not enough to accept the lowest conveyed by the bidder through letters
commercial scrutiny, the price bids are
tender. The tendered rates should also are collected as records and later on
opened and evaluated. The comparative
be reasonable considering the market they form part and parcel of the
statement indicates the item-wise prices,
condition and other factors pertaining to Agreement of Contract between
rebates (if any), taxes, duties, packing
particular works. Variations up to plus EMPLOYER and the Bidder.
and forwarding charges, freight &
5% in amount over the amount worked In the tendering process the Committee
insurance, etc., as applicable for all the
out at prevalent market rates may be holds discussions with the Lowest
accepted bidders. The factors and the
ignored. In case of greater emergency, Bidder only, when it is observed that the
method of their application which have
variation up to plus Lowest Quoted Bid (L1) is more than
been prescribed in the tender
10% might be allowed, but in no case, the Estimated Cost of Bid/Tender.
documents are used while working the
rate higher than 10% should be Eventually, in cases when it is observed
overall price in the comparative
accepted. The adoption of the following by the Consultant that the Comparative
statement. If any additional factor has
method for assessing the reasonable Statement and Evaluation Report on the
emerged during technical clarifications
amount may be followed as per the Financial Bids, there are Abnormally
meetings, to be adopted for evaluation
procedure approved by the Board of High Rates (AHR) quoted by L1 Bidder
of the tenders, then in that case an
Directors, which shall be reviewed by for any of the items, then in such cases
opportunity is given to all the bidders to
them from time to time and also with attempts shall be made by the
confirm such an additional factor to be
due regard to specific nature and factors Committee through discussions for
considered for evaluation of tenders.
of difficulties related to work(s) to be justification and remedy.
The evaluated prices worked out in the
awarded. The reasonable rate of the
comparative statement for different
item will be arrived in case of any
bidders will be ranked as L1, L2, L3 Award of Contract
changes in rates of key materials like
..........., L1 being the lowest. The
cement, steel, coarse & fine aggregate,
estimated price as per the estimate and After approval of Bid of the successful
and Bitumen as follows:
its percentage variation from the total bidder by the competent authority, the
 Reasonable Rate = Rate of item
quoted price worked out as per successful bidder will be formally
in latest CEA’s SOR + A2
comparative statement for each bidder notified of the award by the order prior
 Where A2 will be arrived by
will also be recorded in the comparative to expiration of validity period. The
adding difference in rates
statement. letter called “WORK ORDER / LETTER
existing in the market and the
OF ACCEPTANCE” will state the
corresponding item rate in
Analysis / Justification of sum(contract price) that the Employer
CEA’s SOR.
Rates will pay to the contractor in
consideration of the
Negotiations by Tender execution/completion of works by the
The rates quoted by the lowest bidder
(L-1 bidder) for entire scope of work are
Negotiation Committee contractor subject to furnishing of a

compared with the total estimated rates. performance security by stipulated date
The EMPLOYER shall have a (period stated in the ITB). The letter of
Further, the item rates quoted by L-1
Committee which is constituted to hold Intent/ Work order will be sent to the
bidder is also compared with the item
discussions with the lowest bidder in contractor by FAX/Telex duly confirmed
wise estimated rates and an attempt is
the opening of a tender. This shall be by Registered Letter.
made to negotiate the AHR/high freak
only in cases where the amount quoted Also, a formal contract agreement duly
rates of items with the L-1 bidder in an
is found to be more then the Reasonable signed between the Employer and the
effort to bring down the quoted rates of
Estimated Cost of the Project and when successful bidder (Contractor) will be
such AHR/freak rate items to the lowest
certain clarifications are required from entered into, incorporating all
tendered rates for that item in the
the bidder. The composition of the documents which will constitute the
received offers of the tender compiled in
Negotiation Committee is as follows:- contract.
the comparative statement as well as the
In course of discussion between the
estimated rates of such item(s).
committee and the bidder, whenever the

RAHUL N.SOMPURA (2905) P a g e |2

 PROFESSIONAL PRACTICE I

Case Study: Scrutiny of

Tender for International
Competitive Bidding Table 1: List of Bidders
Bidder Country
Name of Bidder Group
No. of origin
Following is the Case Study of Tender Bidder 1 AFCONS Indian Domestic
Scrutiny for the project Mumbai Urban Bidder 2 CITIC – BIECO JV China Others
Transport Project Santacruz – Chembur Bidder 3 Gammon India Ltd. Indian Domestic
Link Road (section II) CH. 1+250 to Bidder 4 IRCON International. Ltd Indian Domestic
2+775 – Main R.O.B & Viaduct, CH. Bidder 5 IJM Corp., Bhd., Malaysia Malaysia Others
Bidder 6 Larsen & Toubro Indian Domestic
0+375 to 1+200 – Nehrunagar - L.T.T
Bidder 7 NEC – VNC JV Indian Domestic
Arm which was carried out by Mumbai Bidder 8 SIMPLEX – MRV JV Indian Domestic
Metropolitan Region Development Bidder 9 U. P. State bridge Corporation Indian Domestic
Authority (MMRDA) on behalf of
Government of Maharashtra. The type
Table 2: List of qualified bidders
Sr.No Name of Bidder Bid Price (Rs.)
of bid was International Competitive
1 AFCONS 89,60,00,000.00
Bidding and the type of contract was 2 CITIC – BIECO JV 74,30,68,474.41
Item Rate. The period of construction 3 Gammon India Ltd. 79,90,60,542.00
was 24 months and the bid security to
be provided was Rs. 8.4 million. Table 1
shows the list of the list of the bidders Table 3: Ranking of Substantially Responsive Bids

Out of the 9 bidders only 3 of them were Evaluated Bid

Name of Price in Rs.
qualified in the pre-qualification while Group Rank Bid Price in Rs.
Bidder (After applying
others were rejected because of various (After arithmetic check)
marginal price
reasons. The list of qualified bidders preference)
included AFCONS, CITIC – BIECO JV & B
CITIC –
L1 743,068,474.00 798,798,610.00
Gammon India Ltd. Table 2 shows the BIECO JV
Gammon
bid price they submitted: A L2 799,060,542.00 799,060,542.00
India Ltd.
A AFCONS L3 896,000,000.00 896,000,000.00
Evaluation of substantially
responsive bids
Figure 1.shows the graphical details of The figure shows that AFCONS had bid
the price bid breakdown of each of the the maximum price bid while CITIC-
The substantially responsive bids have
bidders and comparing them with the BIEJC JV had minimum price bid.
been further checked for:
actual cost that was estimated.
a)Arithmetical error.
b)Conversion to single currency
adjustment in the bid price excluding
COST COMPARISON TO ESTIMATED COST
provisional sums. 1E+09
It was noticed that there no arithmetical 900000000
TOTAL COST(RUPEES)

error & Conversion to single currency in 800000000

700000000
respect of M/s AFCONS & M/s CITIC-
600000000
BIECO JV was carried out. There was no 500000000
difference in price quoted including 400000000
euro component when converted to 300000000
INR. Ranking was provided for the 200000000
substantially responsive bids in terms of 100000000
price bid provided by them and in
0
ascending order. Table 3 shows the ESTIMATED AFCONS CITIC-BIECO GAMMONS
ranking of bids.
COST JV INDIA
NAME OF THE BIDDERS

Figure 1: Histogram showing comparison of various price bids

RAHUL N.SOMPURA (2905) P a g e |3

 PROFESSIONAL PRACTICE I

Table 4 : Activity wise breakdown of estimated cost

TOTAL CITIC – GAMMON
SR.NO DESCRIPTION AFCONS
AMOUNT BIECO JV INDIA LTD.
1 Site Clearance 651175.00 2450600.00 2113458.36 1700500.00
2 Earthwork and Ground Improvement 12201060.00 11329708.00 11697819.00 8119435.00
3 Drainage and Protective works 713516.00 676550.00 1182970.00 751280.00
4 Pavement 13951843.00 14462900.00 15488057.00 14261521.00
5 Utility Relocations 2200000.00 220000.00 2200000.00 2200000.00
6 Bridges and Grade Separators 778426212.00 903635664.00 758404367.00 799371880.00
7 Road Markings 1027100.00 636780.00 1482406.00 1205920.00
8 Traffic Signs/ Road Furniture 4619527.00 788350.00 2754325.00 950400.00
9 Traffic Management, Landscaping 4616614.00 769730.00 3361131.00 3451900.00
10 Environmental Mitigation Measures 1744000.00 2675400.00 2722386.00 5485500.00
11 Street Lighting & Electrical 9953310.00 9988400.00 4107370.00 7489990.00
12 Traffic Signal System 688645.00 59800.00 793835.00 787050.00
13 Instrumentation for Structures 4000000.00 1800000.00 1375000.00 1900000.00
Total 834793002.00 949493882.00 807683124.36 847675376.00
Rebate, If Any (%) - 5.686 8.000 5.75
Grand Total 895992329.10 743068474.41 799060541.88
% Above and Below 7.33% above 10.9% below 4.28% below
Rank L3 L1 L2

Table 4 shows the details of the activity
wise costs submitted by the bidders and
from the table the following inferences
were obtained:
a) The estimated price of AFCONS was
7.33 % above the estimated cost which
was the highest while CITIC-BIECO had
10.987 % below the estimated cost which
was the least. This is further elaborated
in the histogram shown in Figure 2.
b) The major reason behind the higher
quotes was that the AFCONS had
quoted Absurdly Higher Rates for
Bridges & Grade Separators which was
higher than even 10 % hence was not
acceptable.
c) The Rebate Value of CITIC-BIECO
was highest because it was a foreign
company and this was the major reason
of their lower quotations.
d) Gammon India had quoted higher
rates for Environmental Mitigation
Measures as well as Instrumentation for
Structures which resulted in higher
quotes than CITIC-BIECO.
e) Therefore after comparing all the
values the bidders were given the ranks
from L1 to L3 where L1 was for the
lowest bidder while L3 to the highest
bidder thereby in ascending order of the
price bid quotations.

COST VARIATION FROM ESTIMATED COST f) Hence CITIC-BIECO were given the
80000000 rank as L1 while GAMMONS INDIA
60000000 were given the rank as L2 where as
TOTAL COST(RUPEES)

40000000 AFCONS were the highest quoted and

20000000
given the rank as L3
0
-20000000 Various other details were also asked to
-40000000
be submitted Table 5 shows the
-60000000
particulars of various bidders while
-80000000
Table 6 shows the General Information
-1E+08
GAMMONS provided by the bidders. They are
AFCONS CITIC-BIECO JV
INDIA shown in the following pages:
Column1 61199327.1 -91724527.59 -35732460.12
NAME OF THE BIDDERS

Figure 2: Histogram showing cost variation from the estimated cost of various bidders

RAHUL N.SOMPURA (2905) P a g e |4

 PROFESSIONAL PRACTICE I

Table 5:Particulars of various Bidders

Sr.No Particulars AFCONS CITIC-BIECO GAMMONS INDIA
1 Country of Origin India China India

2 Classification (Group A / B) A B A

3 Total Bid Price:

3.1 In Bid Currencies INR INR INR

3.2 In INR after conversion and after exercising

895992329.10 743068474.41 799060541.88
arithmetic checks

4 Credentials (Rs. In Million) 160 US$ 15 millions 180

5 Letter of Authority Yes Yes Yes

6 Commercial Assessment Responsive Responsive Responsive

7 Technical Assessment Responsive Responsive Responsive

Substantially Substantially
8 Decision on Responsiveness Substantially Responsive
Responsive Responsive

Capacity cum Capability Assessment (Post Given

9 Given Separately Given Separately
Qualification) Separately

10 Validity of Bid 120 Days 120 Days 120 Days

11 Bid Security Rs. 8.4 Millions US$ 178,000 Rs. 8.4 Millions

11.1 Form of Bid Security Bank Guarantee Bank Guarantee Bank Guarantee

Bank of India,
UCO Bank, Overseas
Allahabad bank, WTC,
11.2 Bank and Branch Nariman Point, Branch,
Mumbai
Mumbai Mumbai (with
deviation)

11.3 Expiry Date (Due Date 11-02-2004) 31-03-2004 15-02-2004 15-03-2004

11.4 Amount (Required Amount INR 84,00,000/-

Rs. 84,00,000/- US$ 178,000 Rs. 84,00,000/-
or US$ 178,000)

12 Letter of Authorization (POA) Provided Provided Provided

13 Bid Form Filled in Filled in Filled in

14 Exceptions to Clauses, if any NIL NIL NIL

15 Price Adjustment, if any Provided Provided Provided

Alternative - A (in Alternative - A

16 Bid Currency INR
euro) (in dollar)

17 Technical Deviation, if any NIL NIL NIL

18 Decision on Commercial Responsiveness Responsive Responsive Responsive

RAHUL N.SOMPURA (2905) P a g e |5

 PROFESSIONAL PRACTICE I

Table 6:General Information of Various Bidders

GAMMONS
Sr.No Particulars AFCONS CITIC-BIECO
INDIA
Constitution of Company or Legal Status, place
1 Provided Provided Provided
of Registration, principal place of business
Achieved in at least 2 financial years minimum annual financial turnover at least of value Rs. 840 millions during
2
last five years
1998-99 28383.00 5973.93 25195.21
1999-00 29059.00 3104.45 25957.20
2000-01 31037.00 3827.94 22323.20
2001-02 40685.00 4011.98 17744.13
2002-03 42496.00 4212.59 9326.73
3 Performance as Prime contractor in similar nature in piling, RCC and PSC etc. in one year
Cement concrete (M-30 Grade and above)(cu.m) 12500 56219 67290
Prestressed concrete (M-40)(cu.m) 18000 20500 19070
Piling work 0.90m (Min.)(km) 7500 11436 12754
4 Major items of Contractor's equipment proposed for Contract
Aggregate crushing Plant - 200TPH 1 No. 6 No-100 -200 To be procured
Automatic Concrete batching 2x120 cu.m/hr 2 No. 13 No.30cum/hr To be procured
Transit mixer (5/7 cu.m) 18 No. 24 No - 6 cum 16 No. 6 - 8 cum
4 Nos - 25 cum/hr
Concrete pumps 6 No. 9 No.-25cum/hr
2Nos - 30 cum/hr
Boring Rig 31 No.- 60 m 6 No.
84 No. - 15 to
Cranes, ,hoist, electrical winches 3 No. 4 No.
100T
Prestressing/Grouting equipments 2 No. 113 No. 2 No.
Lab testing equipments 2 No. 12 No. 2 No.
Piling machinery 8 No. 6 No. 4 No.
Qualification and experience of key personnel
5 Provided Provided Provided
for execution of contract - both on site & office
6 Proposal for sub-contracting Not Proposed Not Proposed Not Proposed
Export-Import US$ 15 million
Evidence of access to lines of credit &
Bank of India, of Bank of
7 availability of other financial resources (Rs. 160 Nil
WTC, Mumbai Communication,
million)
INR. 160 million Beijing Branch
8 Information regarding litigation in last five years Provided Provided Provided
9 Misleading information Not Found Not Found Not Found
Proposal Methodology & programme of
10 Provided Provided Provided
construction
11 JV as per format NA Provided NA
12 Additional requirements (Not demanded) NA NA NA
Reports on financial standing - last five year -
13 Provided Provided Provided
Profit & loss statement

lowest substantially responsive bidder. But as the company didn’t turn up to

After checks of all the above points, it is
Hence the Contract was awarded to M/s work, contract was eventually awarded
inferred that M/s CITIC-BIECO JV is the
CITIC-BIECO JV. to M/s Gammon India Ltd.

RAHUL N.SOMPURA (2905) P a g e |6