The Tender

What is meant by Tender in engineering contracts? Tender is an offer from a contractor to undertake a work in return for a certain sum of money. In civil engineering works, tenders are normally invited for following works :1.Construction work of a project as defined by the drawings and specifications. 2.Supply of requisite materials of specified quality . 3.Supply of labors either unskilled or with desired degree of skill, to complete a specified work.

4. Transport of materials.

Tenders are invited in any one of the following ways:1. Negotiated Tender. 2. Limited competition or selective tendering. 3. Open competition, including international competitive tendering. Negotiated Tender: Price is negotiated with a single contractor. The cost of tender thus negotiated may be higher, but owner may prefer to run this

Invitation of Tenders

risk due to proven track record of the contractor with reference to quality of work and timely completion of projects. The owner may derive the following advantages from this type of tendering: The firm chosen is one in which owner and his engineer may have confidence and it may have proven track record of excellence. The work to be carried out is within special scope and experience of the firm. In certain types of works, there may be only one form which is capable of doing the job and negotiations with it will be the only reasonable

method of obtaining the tender. Procedure adopted in this type of tenders is as below : The engineer, on behalf of the owner, invites the firm to tender and necessary information of the work, tentative dates of commencement and completion etc are supplied to the firm. The firm after careful study of the scope of work submits its offer i.e. priced bills. Rates are examined by the engineer of the owner and compared with the justified or reasonable rates. When the engineer and the contractor reach

an agreement , the agreed schedule of rates is sent to the owner for his approval and assent. Limited Competition :In this method, the owner invites the tenders from a few contractors who are specialized in that type of works and who have excellent proven track record of performance. Open Competition:In this method, tenders are invited by public advertisement. This method in usually adopted in government works to obtain the advantageous terms and competitive rates.

Advantages of the competitive tendering : It safeguards the contractors from being denied tendering opportunities for unjust reasons. It protects the government or local authorities concerned from possible insinuations of favoritism. It provides an opportunity for having the work done at a minimum cost to the public , by securing the benefit of keen bidding competition. Drawbacks of this system : The main drawback is a possibility that the

firm submitting the lowest tender may be unsuitable for carrying out the work, thereby resulting in considerable waste of time and effort. This drawback can be however overcome by adopting the procedure for prequalification of the contractors. Prequalification of Tenders The intending renderers are supplied with prequalification documents and following information is sought from them : Past experience. Major works on hand. Organizational structure and technical staff.

 Financial capacity. Equipments, tools and plants owned by the firm. Details of single largest project completed. Any other relevant information . Sometimes when the cost of work is very large or nature of work is complicated, there will be only few contractors who may qualify. To overcome this difficulty, and ensure healthy competition, option is given to the contractors to strengthen their hands by forming joint ventures of two or maximum three firms. The lead contractors heads the joint venture.

Criteria for Pre-qualification Applications received for prequalification are scrutinized by allotting points or marks out of 100-135. To prequalify the applicant must score , generally , at least 60 % on each of the first four categories listed below and 70 % of the total points :1.Financial strength. 2.Past five or six years experience. 3.Technical personnel engaged. 4.Construction, plant and equipment. 5.Other considerations such as quality control standards, ISO certifications etc.

The first four points carry nearly 90 % and the last generally 10 %. After evaluation, those contractors found qualified would be allowed to submit tenders in response to the advertisement Advertisement for Tenders Purpose of advertisement is to give wide publicity to the tender and to create interest for the proposed work amongst a considerable number of potential bidders so as to secure the benefits of ken competition. Advertisement is normally given in the news papers of largest circulation local area and

and nearby area. Ad is published sufficiently often-either successively for a few days or at regular intervals. In order to attract the attention of readers of a particular group, the advertisements are generally given under the caption Tender Notice. Advertisements should appear well in advance in order to afford prospective bidders a reasonable time to study the documents and site conditions.

Pre-tender Conference Pretender conference of all the intending bidders is called for following reasons: To clarify the special features of the project as well as unusual & peculiar conditions and specifications of the project. To clarify the doubts and queries of the bidders. Contents of Tender Notice Tender Notice must be short and concise, but it must give adequate information on the nature and scope of the proposed work. Mode of submitting tender:- In sealed cover.

 Form in which tender has to be submitted:It is advisable to get all the offers in same type of form for sake of uniformity, scrutiny and ease of evaluation. Name of the inviting authority. Nature of the work and its location. Estimated cost of work. Time limit. The availability of data and forms. EMD required along with the work. Security Deposit. Information regarding plans and drawings. Information regarding permission to import equipment not available in India.

 Whether successful foreign contractor would be permitted to engage any approved local sub-contractor or to enter into a joint venture with Indian contracting firms. The last date, the place and the time of receipt of sealed tenders. The date, time , place and procedure of opening of tenders. Reservation of right to reject bids. Award of the contract. Whom to contact for further information. The ad should carry a date and should e signed by the proper person whose name and

or designation should also appear therein. Extension of time limit for submission of completed tenders The last date and time of receiving the tender forms, complete in all respects, must be necessarily be extended under the following circumstances:1.If the period available to the contractors is inadequate to study and prepare for the tenders- a fact brought to the notice of inviting authority by the intending tenders. 2.If the response to the tender notice is poor. 3.If some important changes in the tender

are considered since the issuing of the tender notice. The exte4nded date and time of issuing & accepting the tenders must be brought to the notice of all the concerned. A corrigendum to the earlier tender notice is published in the newspapers and trade journals. Corrigendum No. In partial modification of the tender notice issued under this office No.-------- of ----/----/-----, it is hereby notified that the dates of issue and receipt of the tenders for the work of ----------------------------, have been extended

up to --------- & -------- respectively. All other conditions remain unchanged. Place: Signature & name Date: of authority. Methods of preparing for a tender by contractor 1.Careful study of the contract document. 2. Visit to site of work. 3.Time of completion. 4.Un-remunerative works. 5.Scope of subcontractor. 6.Cost of site establishment. 7.Final estimate for tendering.

Preparation for Lump-sum Tender by contractor Estimation of quantities involved and computation of their probable costs. Estimation of cost of labor. Estimation of cost of tools, plant and machinery. Estimation of overheads. Estimation of taxes, octroi etc. Estimation of any special expenses, if any. Estimation of profits. Estimation of final amount for tendering.

Preparation of unit price or item rate tender Preparation for item rate tender is same as that for lump sum tender except following : Contractor need not be careful in estimating the quantities. The unit price for each item is worked out separately by distributing the on-costs and profits in suitable propositions over the various items.

Preparation of build-operate-and transfer [BOT] tender The cost of work is worked out as usual. Cost of finance and its recovery is calculated. Recovery is from collection of toll tax from the users of the work. The cost of maintenance of the work is also added to the basic cost. The number of years required to recover the cost is generally called concession period. The concession period worked out by each tenderer will depend upon the cost of construction worked out by each tenderer and also the rate of interest considered for financing the project and expected profit. The tenderer who quotes

minimum period of concession is generally awarded the contract. Submission of tenders Tenders are submitted as per the procedure prescribed in the tender. Single envelope system. Two envelope system. Three envelope system. Three Envelope System Envelope-1 : Registration details. Information regarding pre-qualification requirements.

 Details of joint venture, if any. EMD. Bank guarantee, if applicable. ITCC. The list machinery owned by the firm. The organizational structure of the firm. Details of works completed of similar nature and magnitude. List of works on hand and tendered for. Envelope -2 : Covering letter for the offer. Special features, if any, that the contractor may feel worth mentioning about his offer.

 Assumptions, conditions, deviations and so on put forth by the contractor. Tenderers own design where so allowed. Envelope -3 : This envelope will contain main tender document mentioning the rates /amounts offered by the tenderer. All above envelopes are put in to one common cover and sealed. The cover is provided with following information: The title of project. The last date of submission and opening of

the tender. Full name and address of the tenderer. The name of addressee. Name of the authorized agent delivering the tender. If the tender is submitted by post, the sealed cover containing the three envelopes mentioned above , and also marked as above , should be sent by registered post with acknowledge due, so as to reach the competent authority before the expiry of the time limit.

Opening of the tenders In case of public bodies, tenders are usually opened in presence of the representatives of the intending tenderer and rates are read aloud at the stated hour and day notified in the tender notice. Opening of tenders submitted in three covers Envelope marked with WITHDRAWAL is generally opened first. After a tender is submitted and before it is opened, if any tenderer has withdrawn his offer and if the notice of withdrawal is found in order, the

envelopes of such a tenderer will be removed and not opened. Envelope 1 :- First envelope No.1 is opened tio verify the contents. If the documents are not as per the requirements, a ccomment is recorded accordingly and other envelopes will not be opened. Envelope 2 :If the contents of envelope are in order, envelope No.2 is immediately opened. If the contents are in order, all assumptions, conditions etc are evaluated. If found in order,

then all the intending renderers are made aware of the same and the effect of such conditions/assumption on the tender price is also evaluated If design by contractor is allowed, his design shall be scrutinized by the engineer for technical feasibility and acceptability of the design. In case of doubts, the tenderer will have to clarify the same to the engineer. If the design is found unsuitable or unacceptable to the engineer, the quotations in envelope 3 will not be opened and considered. Envelope No.3 :- If the contents of envelope 2

are found in order, the envelope 3 will be opened in presence of the tenderers whose bids are under consideration. Consideration and scrutiny of tenders before acceptance Comparative statement is prepared to ascertain the real value of the quotations. All conditions/assumptions are evaluated and effect thereof is accounted in the final price of the tender.

Special conditions offered by the contractor in his tender Generally conditional tender are rejected. But for large projects, the contractors may quote some conditions pertaining to following aspects: The payment of mobilization advance by the employer. The payment of security deposit by way of BG. Provision of escalation clause. A reasonable limit on variation in quantities. An arbitration clause.

Acceptance of the modified conditions by the other party must be in writing , mere silence or inaction does not amount to acceptance. The acceptance letter should be made pat of the contract agreement. It is worth to note that if the conditions are accepted either tacitly or explicitly, they should take precedence over the original conditions. Preference for domestic contractors When tenders for public works are invited in international competition, a condition is inserted giving preference to the domestic contractors. Domestic contractors are those

contractors registered in India, have majority ownership by Indian national and who agree not to sublet more than 50 % of the works in terms of value to foreign contractors. The preference is given by adding predetermined percentage say 7.50 % of the evaluated tender price to all tenders other than domestic tenders and then determining the order of merit. If a joint venture with a foreign company is allowed to be classified as a domestic tenderer, in addition to performance security, domestic preference security is to be obtained to ensure that the profit and loss distribution and work sharing arrangements

are not changed subsequent to acceptance of tender. Acceptance of tender Acceptance is issued after ensuring that the successful contractors tender is in order and his resources, equipments, experience and sureties are genuine and satisfactory. After issue of acceptance letter, contract agreement is executed between both the parties at the specified date and time.

Rejecting of the lowest tender A tender will be liable to be rejected outright , if while submitting it, the following cont8ingencies occur:1.The tenderer proposes any alteration to the scope of work or time limit or imposes such a condition which is not acceptable to the owner. 2.Any of the pages of the tender are removed or replaced. 3.The tenderer or in case of a partnership firm , each partner thereof does not sign or the signature/s is/are not attested by a witness in the space provided for the

purpose. In case of tender submitted by a company, it should be signed in the legal name of the company, by the person authorized to bind it in the matter. 4.The tender makes some erasures in the tender document. 5.If all corrections and additions or pasted slips are not signed by the tenderer. Lowest tender can be rejected in following circumstances :Improper offer :- If the offer is not proper , it can be rejected.

 Inadequate finance:-The lowest tenderer may not have sufficient finance to execute the job. Lack of experience in a particular type of work :- The tenderer may not have sufficient experience to execute the kind of work specified. Unsatisfactory reputation :-In the opinion of the engineer, the contractor may have unsatisfactory reputation. Inadequate staff and equipment:- If the lowest tenderer lacks the special type of equipment and the trained staff required for the satisfactory completion of the work, accepting the trouble would result in troubles for all the concerned.

While rejecting the lowest tender, the engineer has to be very careful and ensure that his action is correct and can be defended. Rejecting all tenders All the tenders received may be rejected if : There exists a well-grounded suspicion between tenderers or some other form of fraud has been detected. Radical changes in design are found necessary during the interval preceding the opening of the tenders. The lowest tenderer has quoted a figure , which is higher than the funds available for the execution of the work.

Sickness, financial reverse or an unforeseen incident has occurred , which makes it inadvisable for the owner to proceed in accordance with his original intentions; and The minimum number of tenders to assure adequate competition has not been received. Re-advertisement When all tenders have been rejected, readvertisement becomes essential , unless it is proposed to abandon or postpone the project.