MODULE 9 (c) Procurement of Infrastructure Contracts

MODULE 9(c) OBJECTIVES

To enable the participants to:

1. understand the scope, standards and outputs of detailed engineering including surveys, plans, specifications, drawings, value engineering, quantity and cost estimates, and PERT/CPM; 2. screen and ascertain the adequacy of detailed engineering outputs as basic inputs for the preparation of BDs. 3. have the skills and knowledge required to manage the procurement process and the resulting contracts for infrastructure projects; and 4. gain basic hands-on skills to apply the principles, rules and procedures in the steps in the procurement of infrastructure contracts from preparation and review of BDs to contract approval and administration.

MODULE 9(c) SCHEDULE

Day 1: Review of Modules 5-7 and Detailed Engineering: Lecture-Discussion and Group Workshop
Day 2: Preliminary Examination and Detailed Evaluation of Bids: Case Studies and Group Workshop Day 3: Post-Qualification and Award: Case Studies and Group Workshop

Day 4: Contract Perfection and Applications of Contract Conditions: Case Studies and Group Workshop
Day 5: Design-Build, Integration and Examination

DAY 1 SESSION 1 OBJECTIVES To enable the participants to:

1. review the principles, procedures and rules in the

procurement of infrastructure contracts (Modules 5-7); and

aspects of detailed engineering from design standards up to preparation of technical specifications and determine the adequacy or suitability of their outputs for use as inputs in preparing the BDs.

2. gain a basic understanding of the scope of the initial

OUTLINE OF SESSION 1 1. Review of Modules 5 to 7 2. Detailed Engineering

2.1 DE as Prerequisite to Bidding 2.2 Scope of DE 2.3 Discussion of DE activities up to Specifications

1-A. REVIEW OF MODULE 5 Module 5: Preparation of Bidding Documents

Purpose of BDs DE as Inputs to BDs Contents of BDs

PREPARATION OF BIDDING DOCUMENTS (BDs) 1/8

Purpose of BDs to define:
Scope of work, approved budget, duration, outputs of the contract Minimum legal, technical and financial requirements to be eligible to bid. Documents and other requirements that bidder must include in his bid. Process and rules for submission and receipt of bids, evaluation of bids, post-qualification, and award of contract. Terms and conditions of contract.

Detailed Engineering (DE) as Pre-Requisite to BDs

Certification that DE has been done per requirements/ standards.

PREPARATION OF BDs 2/8

Summary of Contents of BDs for Infra Projects:

Part I
Sec. I - Invitation to Apply for Eligibility and to Bid (IAEB) Sec. II - Eligibility Requirements (ER)

Part II
Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec.

I - Instructions to Bidders (ITB), incldg Docs comprising bid II - Bid Data Sheet (BDS) III - General Conditions of Contract (GCC) IV - Special Conditions of Contract (SCC) V - Specifications VI - Drawings VII - Bill of Quantities (BOQ) VIII- Forms

PREPARATION OF BDs 3/8

Part I, Sec. I Invitation (IAEB) Part I, Sec. II Eligibility Requirements (ER)
A. Eligibility Criteria B. Prior Registration with Agency with Electronic Registry C. Submission of Letter of Intent (LOI) D. Eligibility Screening/Check

PREPARATION OF BDs 4/8

Part II, Sec. I Instructions to Bidders (ITB)

A. Scope of Bid (ITB 1) B. Pre-Bid Conference (ITB 5) C. Contents of BDs (ITB 6) D. Documents to comprise the Bid (ITB 10) E. Bid prices (ITB 11) F. Bid validity (ITB 13) G. Bid Security (ITB 14) H. Receipt of Bids (ITB 18) I. Modification and Withdrawal of Bids (ITB 20)

PREPARATION OF BDs 5/8

J. Opening and Preliminary Examination of Bids (ITB 21) K. Detailed Evaluation of Bids (ITB 23) L. Post-Qualification of Bidder with LCB (ITB 25) M. Right of Procuring Entity to reject bids (ITB 26) N. Award Criteria (ITB 27) O. Notice of Award (ITB 28) P. Performance Security (ITB 30) Q. Documents comprising the Contract (DPWH-ITB 30) R. Signing and approval of the Contract (ITB 29) S. Notice to Proceed (ITB 31)

PREPARATION OF BDs 6/8

Part II, Sec. II Bid Data Sheet (BDS)

Contract-specific information for ITB: A. Name of Procuring Entity
B. Contract ID and name C. ABC and funding source D. Date, time, and venue of Pre-Bid Conference E. Procuring Entitys address F. Minimum work experience requirements of key personnel G. Minimum equipment requirements H. Validity period of bids I. Validity period of bid security J. Address and deadline for receipt of bids K. Place, date, and time for opening of bids

PREPARATION OF BDs 7/8

Part Part Part Part Part II, II, II, II, II, Sec. Sec. Sec. Sec. Sec. III Gen. Conditions of Contract (GCC) IV Special Conditions of Contract (SCC) V Specifications VI Drawings VII Bill of Quantities (BOQ)
Unit (3) Quantity (4) Unit Price (5) Total Price (6)=(4)x(5)

Pay Item No. (1)

Description (2)

PE shall specify data for Col. (1) to (4) Bidders shall fill in unit and total bid prices in Col. (5) and (6)

Part II, Sec. VIII Forms

PREPARATION OF BDs 8/8

Standard Bidding Documents (SBDs):

Philippine Bidding Documents harmonized between GOP and ODA agencies (ADB, WB, JBIC) for national competitive bidding (NCB) SBDs customized to agency e.g., DPWH SBDs

BDs are for a particular contract, which shall adopt the SBDs but with contract-specific info in:

IAEB BDS SCC

Specs Drawings BOQ

SBDs and BDs should be downloadable at agency website. FIDIC Conditions of Contract for international competitive bidding (ICB)

1-B. REVIEW OF MODULE 6 Module 6: Evaluation of Bids

Eligibility Screening Preliminary Examination of Bids Detailed Evaluation of Bids

RECEIPT OF LOI AND CONDUCT OF ELIGIBILITY CHECK 1/6

Eligibility criteria:

Registered with agency w/ electronic registry (e.g., DPWH) Legal requirements:

Citizenship: Filipino citizens/proprietors, or 75% Filipino owned partnerships/corporations/JV, or CDA-registered coops* PCAB license for allowable range of contract cost, effective 01 July 2009*:

Small A ------ up to P 0.5 M Small B ------ up to P 15.0 M Medium A --- up to P 100.0 M

Medium B --- up to P 200.0 M Large A ------ up to P 300.0 M Large B ------ no limit

Mayors business permit/city or municipal license* BIR tax clearance Non-inclusion in blacklist * Proposed in new IRR

RECEIPT OF LOI AND CONDUCT OF ELIGIBILITY CHECK 2/6

Technical requirements:
Work experience - Completed similar project >= 50% of ABC*

Financial requirements: either:

NFCC must = at least ABC* NFCC = [(current assets current liabilities) K] - value of all outstanding works under on-going and unstarted awarded contracts coinciding with the subject contract, where K = 10 if contract duration is 1 yr or less, 15 if duration is > 1 yr up to 2 yrs, 20 if duration is > 2 yrs Credit line commitment must = at least 10% of ABC* Cash deposit certificate must = at least 10% of ABC

*Proposed in new IRR

RECEIPT OF LOI AND CONDUCT OF ELIGIBILITY CHECK 3/6

Documents needed for eligibility check:

Class A documents

Legal documents: 1. DTI or SEC registration.* 2. Mayors permit/municipal license.* 3. TIN. 4. Bidders statement that it is not blacklisted. 5. Other licenses required by the entity. 6. Tax clearance 7. Tax returns filed and paid thru EFPS 8. Certificate of PhilGEPS registration. Technical documents 1. Bidders statement of on-going, completed and awarded but unstarted contracts with value of work, CPES, etc.* * Proposed in new IRR

RECEIPT OF LOI AND CONDUCT OF ELIGIBILITY CHECK 4/6

Documents needed for eligibility check:
Technical documents (contd) 2. PCAB license for the type and cost of the contract to be bid.* 3. Statement of availability of (a) key personnel and (b) equipment (owned/ leased/under purchase) for construction.
Financial documents:

1. Audited financial statements, received by BIR.* 2. Bidders computation of NFCC or credit line commitment or cash deposit certificate.*

Class B documents 1. Joint venture agreement, in case of JV. Each JV member shall submit required eligibility documents.* 2. Letter authorizing BAC to verify documents.
* Proposed in new IRR

RECEIPT OF LOI AND CONDUCT OF ELIGIBILITY CHECK - 5/6

Submission of LOI for Eligibility

Contractor may download LOI form from agency website, or obtain hard copy from BAC. Contractor submits accomplished LOI (with CRC in the case of DPWH). LOI indicates:
Contractors intention to apply for eligibility If found eligible, commitment to submit a bid and purchase BDs.

Content of LOI:

LOI shall state:

Bidder has key personnel. It has equipment available if awarded the contract. It is not in the government blacklist.

RECEIPT OF LOI AND CONDUCT OF ELIGIBILITY CHECK - 6/6

It is not within relationships prohibited by Sec. 47 of RA 9184. If its NFCC is less than ABC, it is submitting a credit line commitment or cash deposit certificate = 10% of ABC. In the case of DPWH, it has updated its Contractors Info (CI) in the registry of contractors, including status of on-going projects. If necessary, it is nominating sub-contractors for specified parts of the works. In the case of a JV, it is submitting its JV agreement and special JV license from PCAB.

Determination of eligibility

Processing of LOIs/eligibility documents to ascertain eligible/ineligible contractors.

RECEIPT AND OPENING OF TECH. AND FIN. ENVELOPES AND PREL EXAM 1/5
Components of Bid

Technical Proposal Financial Proposal Bid Security* Authority of signing official* Construction schedule and S-curve Construction methods Organizational chart for the contract* Contractors certification on key personnel for the contract (vs. min. experience requirements)*

Contents of Technical Proposal

1. 2. 3. 4. 5. 6.

* Proposed in new IRR

RECEIPT AND OPENING OF TECH. AND FIN. ENVELOPES AND PREL EXAM 2/5
7. Manpower utilization schedule 8. List of equipment pledged to the contract (vs. min. reqts)* 9. Equipment utilization schedule. 10. Affidavit of site inspection. 11. Credit line commitment/cash deposit cert (10% of ABC). 12. Construction safety and health program of contractor. 13. Affidavit of compliance with labor laws and standards.* 14. Affidavit of compliance with contractors responsibilities under IRR Sec. 17.7.1.* 15. Affidavit of compliance w/ Disclosure provision under IRR Sec. 47.* 16. Other requirements specified in ITB.

* Proposed in new IRR

RECEIPT AND OPENING OF TECH. AND FIN. ENVELOPES AND PREL. EXAM 3/5
Contents of Financial Proposal
1. Bid prices in the BOQ.* 2. Detailed estimates.* 3. Cash flow and payments schedule.*

Bid Security

Form Min. amount Cash, certified check, cashiers check, managers check, bank draft, L/C -----------1.0% of ABC Bank guarantee --------------------------------1.5% of ABC Surety bond ------------------------------------2.5% of ABC Foreign government guarantee -------------- 100.0% of ABC
* Proposed in new IRR

RECEIPT AND OPENING OF TECH. AND FIN. ENVELOPES AND PREL. EXAM 4/5
Validity Period for Bids and Bids Security Reasonable period as indicated in the BDs.
Not exceeding 120 days.

Period for Receipt of Bids

ABC P 50 M and below Above P 50 M Max period from 1st day of advt of IAEB to bid opening 36 calendar days 50 calendar days

RECEIPT AND OPENING OF TECH. AND FIN. ENVELOPES AND PREL. EXAM 5/5
Preliminary Examination of Bids

Check Tech. Proposal vs. checklist to determine the presence (pass) or absence (fail) of required documents. If Tech. Proposal passes, check Fin. Proposal vs. checklist to determine the presence or absence of required documents. Only the passing Tech. and Fin. Proposals will proceed to the detailed bids evaluation.

DETAILED EVALUATION OF BIDS 1/2

Purpose of Bid Evaluation
To determine the Lowest Calculated Bid (LCB).

Criteria for Evaluation

Bid must be complete: all required items in the BDs, including pay items in the BOQ, must be priced. Bid shall be corrected for arithmetical errors, inconsistencies, omissions and allowed discounts, to arrive at the calculated bids. Bids are deemed to include all taxes.

DETAILED EVALUATION OF BIDS 2/2

In case of discrepancies:
Bid prices in words shall prevail over figures. Unit prices applied to quantities per item shall prevail over total prices. Actual sum of prices of component items shall prevail over stated total. Unit cost in the BOQ shall prevail over detailed estimates.

Any total calculated bid exceeding ABC shall be disqualified. Rank the total calculated bids from the lowest to the highest. The lowest is the LCB.

POST-QUALIFICATION OF BIDDER WITH LCB

Procedure

Verification and validation of info in the bidders:

Contractors Information (in case of DPWH Registry) Letter of Intent Technical Proposal Financial Proposal

Ascertaining bidders (incl. sub-contractors) compliance with:

Legal requirements incl. licenses, permits, blacklist Technical requirements incl. no slippage of >15% or unsatisfactory performance in any on-going project. Financial requirements incl. any changes in NFCC.

If bidder passes the post-qualification requirements, BAC declares it as the bidder with the LCRB.

AWARD OF CONTRACT
Procedure
BAC issues Resolution of Award to Bidder with LCRB, based on Bid Evaluation Report and Post-Qualification Report. HOPE approves Resolution. BAC prepares Notice of Award (NOA), HOPE signs it, BAC issues NOA to winning bidder and posts it at website.

1-C. REVIEW OF MODULE 7

Module 7: Contract Administration for Works
Finalizing and Approval of Contracts Contract Implementation vs. GCC and SCC

FINALIZING AND APPROVAL OF CONTRACT - 1/3

Contract Documents
A. Contract Proper

1. Contract Agreement (use standard form in SBDs) by PE 2. Documents forming part of the Contract Agreement:
a. Bidding Documents for the Contract by PE (1) GCC (5) IAEB (2) SCC (6) ITB (3) Drawings/Plans (7) BDS (4) Specs (8) Bid Bulletins (Addenda) b. Contractors calculated bid in the Bid form, including Tech and Financial Proposals by PE c. Contractors LOI (and CI from the DPWH Registry) by PE

FINALIZING AND APPROVAL OF CONTRACT - 2/3

d. NOA with the contractors conforme by Contractor e. Performance Security as required - by Contractor f. Credit line or cash deposit certificate at least equal to 10% of the total Contract price - by Contractor g. PERT/CPM diagram and bar chart with S-curve - by Contractor Note: Contractor shall submit docs d to g within 10 days from NOA.

B. Supporting Documents

1. Approved Program of Work 2. Obligation Request 3. Abstract of Bids as Calculated 4. Approved BAC Resolution declaring the LCRB and recommending award

FINALIZING AND APPROVAL OF CONTRACT - 3/3

Performance Security
Cash, certified check, cashiers/ managers check, bank draft ------------ 5% of Contract Price Irrevocable letter of credit ----------------- 5% of Contract Price Bank guarantee ----------------------------- 10% of Contract Price Surety bond---------------------------------- 30% of Contract Price Foreign government guarantee ---------- 100% of Contract Price

Contract Signing

Contract Approval Notice to Proceed

Within 10 days from NOA.

Within 5/15/25 days. Within 2/3/7 days.

CONTRACT ADMINISTRATION - 1/7

GCC Some important provisions

Procuring Entitys obligations (GCC 5)

Deliver ROW and government-furnished materials/equipment/plans Carry out works per contract, including start and completion dates, key personnel, etc.

Contractors obligations (GCC 6) Performance Security (GCC 7)

Guarantee faithful performance of contractors obligations Form and amount of security.

Sub-contracting (GCC 8)

Not more than 50%, by eligible sub-contractors nominated in LOI.

Liquidated damages (GCC 9)

Failure to complete works within contract time, incl. approved extns. Formula based on opportunity cost of uncompleted portions of works.

Procurement Professionalization Project

CONTRACT ADMINISTRATION - 2/7

GCC- Some important provisions
Warranty Security (GCC 12)
Defects Liability Period
Under Performance Security

Warranty Period
Under Warranty Security

Project Completion

1 year

Final Acceptance

2/5/15 years

Contractor assumes full responsibility except those occasioned by force majeure Repair within 90 days.

Contractor shall be responsible for structural defects except those caused by third parties or force majeure. Contractor is required to put up a warranty security, the form of which shall be specified by the BAC.

CONTRACT ADMINISTRATION - 3/7

GCC Some important provisions (contd)

Warranty Security (GCC 12) contd

Cash deposit/cash bond/L/C ----------------- 5% of contract price Bank guarantee -------------------------------- 10% of contract price Surety bond ------------------------------------ 30% of contract price

CARI (GCC 14)

Proportional to accomplished portions of the work.

Termination (GCC 15-18)

Entity may terminate for: contractors default (e.g., 15% slippage), insolvency, unlawful acts, breach of contract. Contractor may terminate for: govts failure to deliver ROW/materials, breach of contract (e.g., non-payment within 84 days), adverse peace and order.

CONTRACT ADMINISTRATION - 4/7

GCC Some important provisions (contd)

Resolution of disputes (GCC 20)

Per RA 9285. Before end of defects liability period. 15% max in lump sum, or upon NTP and upon mobilization, covered by Performance Security, recouped from progress payments.

Correction of defects (GCC 36)

Advance payment (GCC 38)

Monthly statements of work accomplished or progress billings (GCC 40/DPWH-GCC 41)

To cover cumulative value of work accomplished. Certified by entitys rep, net of previous payment, retention, etc.

Monthly certificates & progress payment (GCC 39/DPWH-GCC 42)

CONTRACT ADMINISTRATION - 5/7

GCC Some important provisions (contd)
Retention (GCC 41)

To cover uncorrected defects and third party liabilities. 10% on progress payment. Cumulative VOs not > 10% of original contract price; or another contract HOPE may authorize VO beyond 10%, but not > 20%, with sanctions on designer/official responsible. Entity may suspend for: force majeure, contractors failure to correct bad/unsafe conditions or carry out valid orders, changes in plans. Contractor may suspend for: non-delivery of govt materials, non-payment of contractor within 45 days, adverse peace and order.

Variation orders (VOs) (GCC 42)

Suspension of work (GCC 44)

CONTRACT ADMINISTRATION - 6/7

GCC Some important provisions (contd)
Time extension (GCC 46)

Only when activities fall along the critical path of approved PERT/CPM. Not for unfavorable weather or reasons already factored in the contract duration, or inexcusable failure of contractor to provide eqpt/materials. No contract price adjustment or escalation, except for extraordinary circumstances determined by NEDA and approved by GPPB. Extraordinary circumstances under Civil Code:
a. Ordinary fortuitous events typhoons, flooding, vehicular accidents, etc b. Extraordinary inflation or deflation at least 2 standard deviations. c. Extraordinary fortuitous events fire, war, pestilence, earthquake, etc.

Price Adjustment (GCC 47)

Use of parametric formulae and price indices.

CONTRACT ADMINISTRATION - 6/7

GCC Some important provisions (contd)
Acceptance (DPWH-GCC 49)

At end of defects liability period. Deadline, amount to be withheld for failure to submit by deadline.

As-built drawings (GCC 50)

CONTRACT ADMINISTRATION - 7/7

SCC Some important provisions

Intended completion date (GCC 1.17) Procuring Entity (GCC 1.22) Procuring Entitys Representative (GCC 1.23) Start date (GCC 1.28) Description of the works (GCC 1.31) Dates of delivery of the works (GCC 5.1) Contractors key personnel (GCC 6.5) Site investigation reports (GCC 10.1) Type of structure and warranty period (GCC 12.3) Date of submission of as-built drawings (GCC 50.1) Amt to be w/held for failure to submit as-built drawings (GCC 50.2)

2. DETAILED ENGINEERING 1/15

2.1 Detailed engineering (DE) as prerequisite to bidding and award (Sec. 7 and 17.6 and Annex A of IRR):
Based on feasibility or preliminary engineering study.
Sufficiently carried out and approved in accordance with the standards and specs prescribed by the head of the procuring entity, as certified by engineering/design office. In accordance with provisions in IRR Annex A. Exception is design-build scheme.

TIPS: DETAILED ENGINEERING

Refer to model TOR for DE (e.g., DPWH). Need for certification from design office that DE was done according to standards, including Value Engg and Quality Assurance. Rule-of-thumb: budget for DE is 3-6% of construction cost.

44

2. DETAILED ENGINEERING 2/15

2.2 Scope of detailed engineering
a. Setting of design standards b. Conduct of surveys and investigations. c. Conduct of design analyses and preparation of design plans. d. Preparation of contract plans. e. Preparation of technical specs. f. Preparation of quantity estimates. g. Preparation of cost estimates and ABC. h. Preparation of program of work including PERT/CPM. i. Determination of contract packages.

DETAILED ENGINEERING 3/15

j. Preparation of site/ROW and resettlement action plans and schedule. k. Preparation of utilities relocation plan. l. Preparation of EIS. m. Preparation of min. requirements of safety and health program. n. Preparation of equipment requirements. o. Conduct of value engineering studies. p. Determination of contract time or duration. q. Determination of warranty period. r. Preparation of Bidding Documents.

DETAILED ENGINEERING 4/15

2.3 Discussion of DE Activities a. Setting of design standards

In accordance with appropriate national/intl standards and accepted engineering design practices. E.g., at DPWH, design standards shall be based on:
DPWH Design Guidelines, Criteria and Standards (Orange Book) American Association of State Highway and Transportation Officials (AASHTO) for Highways and Bridges American Concrete Institute (ACI) Standards Technical Standards and Guidelines for Planning and Design of Flood Control, 2002, by Flood Control & Sabo Engg Center (FCSEC), DPWH National Structural Code of the Philippines Other relevant guidelines and standards

DETAILED ENGINEERING 5/15

a. Setting of design standards (contd) For building projects, design shall comply with following laws, regulations and standards:
National Building Code (PD 1096) and its IRR. National Structural Code of the Philippines, Vol I Bldgs, Towers, and other Vertical Structures. Local ordinances and regulations.

DETAILED ENGINEERING 6/15

b. Conduct of field surveys and investigations

May include aerial, hydrographic, topographic, hydrologic, subsurface, monumenting, geological, soils and materials, parcellary and other surveys. In accordance with agency guidelines, criteria, standards - e.g., DPWH Orange Book. Should provide input data for design and production of plans to permit quantity estimates with +/- 5 to 10% accuracy.

c. Design analyses and preparation of design plans and design reports

Conform to national/international design guidelines, criteria, standards adopted by the agency.

RED FLAGS: SURVEY DATA

Baseline field survey data - e.g., ground elevation/ cross-

sections - are manipulated to overstate the quantities in the design especially for earthworks. data.

No quality assurance to verify the integrity of the survey

50

DETAILED ENGINEERING 7/15

d. Preparation of contract plans/drawings

In accordance with agency guidelines and standards.

Incorporate at least the following:

Site development plan. Plans and profile sheets Typical sections and details. Structural plans at appropriate scales with details to set out and complete the structure.

RED FLAGS: PLANS/DRAWINGS

Plans are based on erroneous or manipulated data, thereby padding the quantities.

Major items are deliberately omitted in the design, necessitating variation orders during implementation.

52

DETAILED ENGINEERING 8/15

e. Preparation of technical specifications

Use internationally/nationally accepted specs, e.g., DPWH Standard Specs for Public Works & Highways, 1995/2004 (Blue Book) Description of work Material requirements Construction requirements Measurements and payments

Prepare Supplemental Specs for items not in Standard Specs.

Procurement Professionalization Project

DAY 1 SESSION 2 OBJECTIVES

To enable the participants to:

1. gain a basic understanding of the scope of the other aspects of detailed engineering from quantity estimates to preparation of BDs, including specific guidelines for cost estimates and ABC, and PERT/CPM. 2. determine the adequacy or suitability of their outputs for use in finalizing the BDs.

54

DETAILED ENGINEERING 9/15

f. Preparation of quantity estimates

Estimates with accuracy of +/- 5 to 10% of final quantities. Bill of Quantities (BOQ) is discussed below. Unit prices for work items based on market prices. ABC is discussed below. Include estimates of work items, quantities and costs, and PERT/CPM diagram of project activities*.

g. Preparation of cost estimates and ABC

h. Preparation of program of work

*Refer to power point slides on PERT/CPM.

DETAILED ENGINEERING 10/15

i. Determination of contract packages

Depends on kind and size of the project. Preferably small packages, without impairing tech. integrity. No splitting to circumvent laws and rules.

j. Preparation of ROW and resettlement plans

Based on parcellary and socio-economic surveys. Land Acquisition and Resettlement Action Plans (LARAP) should be prepared in coordination with LGUs/NHA.

RED FLAGS: CONTRACT PACKAGES

Packages are too large vs. norms: limits participation to few big contractors.

Splitting to bring bidding to lower offices, where rigging is deemed easier to arrange.

57

TIPS: ROW AND RESETTLEMENT PLAN

Refer to model LAPRAP document (DPWH) and RA 8794 and its IRR. Check (a) land titles with RD, LRA, BL; (b) land prices vs. BIR zonal values and market prices; and (c) improvement costs vs. replacement costs. Prepare resettlement plan with suitable site, compensation, and action program in coordination with LGUs and NHA. Ensure families are resettled before bidding.
58

DETAILED ENGINEERING 11/15

k. Preparation of utilities relocation plan

Include electric, water, sewerage, telephone, drainage, and other utilities affected by the project. Done for a environmentally critical project or project in an environmentally critical area as defined by DENR.

l. Preparation of EIS

m. Preparation of minimum requirements for construction safety and health program

Conform to standards of DOLE.

RED FLAG: EIS

Project is advertised even without ECC/CNC. This delays contract award/implementation.

60

DETAILED ENGINEERING 12/15

n. Preparation of equipment requirements

Types, numbers and capacities of equipment based on: Nature, volume, timeframe of works to be done. Equipment productivity. Equipment cost (capital and O&M) per unit output. Utilization and operation of equipment for the works to conform with technical specs (e.g., DPWH Blue book).

RED FLAG: EQUIPMENT REQUIREMENTS

Production and efficiency rates for major equipment are substantially understated vs. norms. These result in:

Overstated equipment requirements. Inflated ABC.

62

DETAILED ENGINEERING 13/15

o. Conduct of value engineering (VE) studies*

In DPWH, VE proposed for all projects costing => P50 M.

VE will analyze alternative schemes of achieving project objectives to delete/reduce non-essential features and lessen lifecycle costs of the project, without sacrificing its structural quality and integrity, while attaining its essential function, performance and safety.

*Refer to power point slides on Value Engineering.

RED FLAG: VALUE ENGINEERING

TOR for FS and DE does not include VE. QA check shows VE was not adequately done according to standards, or not done all. Consequently,

Over-designed projects could not be checked. Opportunities for significant savings are missed.

64

DETAILED ENGINEERING 14/15

o. Contract time or duration

Allow for rainy/unworkable days based on PAGASA records. Check if reasonable considering industry experience.

p. Warranty period

2/5/15 years depending on type of project. Included in conditions of contract (GCC and SCC).

q. Preparation on Bidding Documents (BDs)

Discussed in Module 5.

DETAILED ENGINEERING 15/15

r. Design-build*

As provided in Annex G, RA 9184 IRR: Agency sets designconstruction performance specs, and contractor undertakes design and construction. For fast-track projects, advanced technologies, small projects. Advantages: single responsibility, faster, promotes innovation and high quality, less administrative burden, firm costs, less collusion.

*Refer to power point slides on Design-Build.

RED FLAG: CONTRACT DURATION

Contract duration is too long compared to industry practice and experience. This drives up the costs.

67

BILL OF QUANTITIES (BOQ) 1/2

Should be based on plans/drawings and specs, including breakdown into work/pay items. Estimates of quantities with accuracy of +/- 5 to 10%. Typical BOQ:

Parts to be provided by the Procuring Entity: Pay items with corresponding descriptions, units of measurement, and quantities. Parts to be provided by the bidder as its bid: Unit bid prices and total bid prices corresponding to he pay items.

BILL OF QUANTITIES (BOQ) 2/2

BILL OF QUANTITIES - EXAMPLE Part No. ________ Part Description: _________________________________ Columns (5) and (6) are to be filled up by the Bidder Unit Bid Price Total bid Price (Pesos) (Pesos) (5) In words: ___________ ___________________ In figures: __________ In words: ___________ ___________________ In figures: __________ In words: ___________ ___________________ In figures: __________ (6) In words: ___________ ___________________ In figures: __________ In words: ___________ ___________________ In figures: __________ In words: ___________ ___________________ In figures: __________ Columns (1 to (4) are to be filled up by the Procuring Entity Pay Description Qty Unit Item No. (1) (2) (3) (4) 103(2) Bridge excavation above 471 cu. m ordinary water level

404

Reinforcing steel

33,793

kg

405(1)

Structural concrete

242

cu. m

APPROVED BUDGET FOR THE CONTRACT (ABC) 1/4

Factors to be considered in determining the ABC:
a. Adequate DE with estimates within +/- 5 to 10% accuracy. b. Compliance w/ standards and specs (e.g., DPWH Blue Book) c. Use of appropriate construction methods. d. Use of applicable const. industry norms and practices (e.g., production rates for equipment/labor; components of direct/indirect costs) e. Use of feasible sources of construction materials. f. Use of market prices of labor/materials/equipment, as-built costs g. Reasonable risks and contingencies. h. Inclusion of all relevant/legitimate costs of contractor. i. Compliance with agency orders (e.g., DPWH DO 57). j. Rule-of- thumb or benchmark costs (ABC and major items) for similar works k. Use of cost database, monitoring system, automated estimation if feasible. l. Use of trained agency estimators and quantity surveyors.

APPROVED BUDGET FOR THE CONTRACT (ABC) 2/4

Cost elements:
Direct cost (DC)
(1) Cost of materials cost at source, hauling, handling, storage, wastage (2) Cost of labor- salaries/wages, fringe benefits (leaves, SSS,13th month pay, etc.) (3) Cost of equipment bare/operated rental rates (ACEL), mobilization/ demobilization (1) Overhead expenses supervision, transport, office expenses, premiums on Securities/CARI/warranty, cost of money - normally not > 5 to 10% of DC (2) Contingencies - normally not > 0.5 to 2% of DC (3) Miscellaneous - lab tests, etc., normally not > 0.3 to 1% of DC (4) Profit per year - normally not > OCC*[(n+2)/12]*DC (5) VAT = 12%*(DC+IC for (1) to (4))

Indirect cost (IC)

APPROVED BUDGET FOR THE CONTRACT (ABC) 3/4

APPROVED BUDGET FOR THE CONTRACT EXAMPLE Construction of Modified Conventional Type Single Storey School Building 7m x 7 m floor area
Item No. Description Unit Quantity Estimated Direct Cost (EDC) (5) 4,892.50 3,272.50 37,432.50 34,390.15 22,138.90 27,575.80 17,089.00 16,135.00 58,571.54 20,610.00 13,525.00

(1) I II III

IV V VI VII VIII IX X

(2) Earthworks Soil Poisoning Reinforced Concrete a. Concrete b. Reinforcing Steel Bars Masonry Works Fabricated Materials and Hardware Cement Plaster Finish Painting Works Roof Framing Corrugated Metal Roofing Roof Insulation Total

(3) lot sq. m cu. m kg sq. m lot sq. m lot lot lot lot

(4) 1 59.5 9.84 850.57 72.50 1 154.00 1 1 1 1

APPROVED BUDGET FOR THE CONTRACT (ABC) 4/4

RED FLAGS: ESTIMATES AND ABC

ABC (total and unit prices) substantially exceed benchmark prices by 15-30%. If no quality assurance is done, quantities could be bloated using manipulated survey and design data thus padding the ABC. Equipment production/efficiency rates are understated; material sources are too far; wastage is too large; indirect costs are unusually high thus jacking up the prices. Agency has no trained estimators. VAT is double counted, especially for input materials. 74

Modes of Undertaking DE
Performed in-house by procuring/end-user entity if it has the technical capacity to do so. Assigned to specialized government agency (usually through Memo of Agreement) e.g., DPWH if the entity is not capable by itself to do the DE. Outsourced to engineering design consultants, especially for large and complex projects.