TENDERING PROCEDURAL FLOWCHARTS ACCORDING TO FIDIC

1- Establishment of Project Strategy 2- Pre-qualification processes 3- Obtaining Tenders 4- Opening of Tenders 5- Evaluation of Tenders 6- Award of Contract

Ahmed Saleh Mokhtar, PMP 1

Establishing procurement Strategy

SECTION

EMPLOYER/ENGINEER

CONTRACTORS

Requirements definition!
1.0 ESTABLISHMENT OF PROJECT STRATEGY

Establish project strategy comprising: Establish project strategy comprising: procurement method procurement method form of tendering //Contracting form of tendering Contracting time schedules time schedules

Ahmed Saleh Mokhtar, PMP 2

Procurement Strategy

Procurement planning is the process of identifying which project needs can be best met by procuring products or services outside the project organization and should be accomplished during the scope definition effort. It involves consideration of whether to procure, how to procure, what to procure, how much to procure, and when to procure.

Whether to procure? make or buy?, Break-even analysis.

Ahmed Saleh Mokhtar, PMP 3

Break - even Analysis

Cost

Break-even Point

Make

Buy

No. of Units
Ahmed Saleh Mokhtar, PMP 4

Procurement Strategy
What, How, When What to procure? Goods (Material and Equipment), Services, combination of them. How much to procure? Work packages (E&M works, Finishing, etc) Phases: Design, Construction, Testing (Design-Build, etc) Project incl. Finance (BOT), When to procure? Master time schedule, long lead items, market conditions (inflation, etc)
Ahmed Saleh Mokhtar, PMP 5

How to procure: Bidding Types

How to procure? Bidding and Contract type selection. Bidding Type:

Tenders: open, restricted and local tenders Negotiations: open, restricted and local negotiations Direct orders: special cases
Ahmed Saleh Mokhtar, PMP 6

How? Broad categories of contracts

Fixed-price or lump-sum contracts: involve a fixed total price for a welldefined product. They may include incentives for meeting or exceeding selected project objectives. Cost-reimbursable contracts: involves payment (reimbursement) to the seller for its actual costs, plus typically a fee representing seller profit. They often include incentives for meeting or exceeding selected project objectives. Re-measured contracts: are a hybrid type of contractual arrangement that contains aspects of both cost-reimbursable and fixed-price-type arrangements. e.g. Fixed unit rates + variable quantities) Incentive contracts: add to other types of contracts

Ahmed Saleh Mokhtar, PMP 7

Fixed Price / Lump sum Contracts

Fixed total price for a well defined product
A dvantages Firmassurance of cost C ontrol of changes / delays M Buyer follow up in. Q uick com pletion incentive D isadvantages M have clear ust requirem ents D elayed solicitation docum ents H bidding costs igh Increased prices to cover Sel ler risks (contingencies)

Ahmed Saleh Mokhtar, PMP 8

Cost Reimbursable Contracts

Payment to the seller for its actual cost (direct and indirect) + fee

Advantages
Max. Flexibility to Buyer Min. Profit to Seller Min. Negotiations Min. Preliminary Specs costs Min. Start time (Early completion) Min. Risk of not qualified Bidders with lowest price

Disadvantages
No assurance of actual cost No financia l incentive Excessive changes in design and (high) specs by Buyer staff = more cost + time Auditing by Buyer required

Ahmed Saleh Mokhtar, PMP 9

Incentive Contracts
Fixed-Price-Incentive-Fee (FPIF) Cost-Plus-Incentive- Fee (CPIF)

Final Price is guaranteed be Seller (loss is possible) If actual cost < Target Cost, savings are shared according to formula. If actual cost > Target Cost, Sellers Target fee is reduced. Point of total assumption

Seller is reimbursed 100% of costs (loss is not possible) BUT a max. and min. fee exists If actual cost < Target Cost, savings are shared according to formula. If actual cost > Target Cost, Sellers target fee is reduced.

Ahmed Saleh Mokhtar, PMP 10

Guaranteed max.-Share savings

Advantages
Firm assurance of cost Control of changes / delays Min. Buyer follow up Quick completion incentive Buyer and Seller share risks Possible cooperation in further projects

Disadvantages
Clear requirements Complete auditing b y Buyer required

Ahmed Saleh Mokhtar, PMP 11

RECOMMENDED PROCEDURE FOR THE ) PRE-QUALIFICATION FOR TENDERERS (1

SECTION EMPLOYER/ENGINEER CONTRACTORS

2- Pre-qualification processes
Prepare pre- qualification Prepare pre- qualification documents comprising: 2.1 documents comprising: PREPARATION OF PRE- letter of invitation letter of invitation
QUALIFICATION DOCUMENTS

information about information about prequalification prequalification procedure procedure project information project information prequalification application prequalification application
Ahmed Saleh Mokhtar, PMP 12

RECOMMENDED PROCEDURE FOR THE PREQUALIFICATION FOR TENDERERS (2)

SECTION EMPLOYER/ENGINEER CONTRACTORS

PREPARE PRE-QUALIFICATION PREPARE PRE-QUALIFICATION ADVERTISEMENT IN PRESS,EMBASSIES ADVERTISEMENT IN PRESS,EMBASSIES ETC. AS APPROPRIATE STATING: ETC. AS APPROPRIATE STATING: employer & Engineer employer & Engineer outline of project (scope, location, outline of project (scope, location, programme, source of finance) INVITATION TO programme, source of finance) PREQUALIFY dates for issue of tender documents dates for issue of tender documents & submission of tenders & submission of tenders instructions for applying for pre-qualification instructions for applying for pre-qualification
2.2

minimum requirements for pre-qualification minimum requirements for pre-qualification submission date for contractors presubmission date for contractors prequalification qualification
Ahmed Saleh Mokhtar, PMP 13

RECOMMENDED PROCEDURE FOR THE PREQUALIFICATION FOR TENDERERS (3)

SECTION EMPLOYER/ENGINEER
Issue prequalification documents & Issue prequalification documents & questionnaires requesting from each questionnaires requesting from each company/joint venture: company/joint venture: organisation & structure organisation & structure experience in the intended type of experience in the intended type of work & the region work & the region resources: resources: - -Managerial Managerial - -Technical Technical - -Labour Labour - -Plant Plant financial statements financial statements current contract commitments current contract commitments litigation history litigation history Acknowledge receipt Acknowledge receipt
Ahmed Saleh Mokhtar, PMP 14

CONTRACTORS

Request Prequalification documents Request Prequalification documents

2.3 ISSUE & SUBMISSION OF PREQUALIFICATION DOCUMENTS

Complete & submit PQ documents Complete & submit PQ documents & questionnaires & questionnaires

RECOMMENDED PROCEDURE FOR THE PRE-QUALIFICATION FOR TENDERERS (4)

SECTION EMPLOYER/ENGINEER CONTRACTORS

2.4 ANALYSIS OF PREQUALIFICATION APPLICATIONS

Analyse Prequalification data: Analyse Prequalification data: --company/joint venture structure company/joint venture structure --experience experience --resources resources --financial capailty financial capailty --general suitablity general suitablity

2.5 SELECTION OF TENDERERS 2.6 NOTIFICATION OF APPLICANTS Notify all selected tenderers Notify all selected tenderers SHORT LIST
Ahmed Saleh Mokhtar, PMP 15

Prepare list of tenderers Prepare list of tenderers

Acknowledge & confirm Acknowledge & confirm intention to submit tender intention to submit tender

RECOMMENDED PROCEDURE FOR OBTAINING TENDERS (1)

SECTION EMPLOYER/ENGINEER TENDERERS

3- Obtaining Tenders
Prepare tender documents: Prepare tender documents: Letter of invitation to tender Letter of invitation to tender
3.1 PREPARATION OF TENDER DOCUMENTS

Instructions to tenderers Instructions to tenderers General and special Conditions General and special Conditions of contract of contract Form of tender Form of tender Drawings and specifications Drawings and specifications Bill of quantities Bill of quantities Additional information Additional information
Ahmed Saleh Mokhtar, PMP 16

Types of Specifications
Design Specs: What is to be done in terms of physical characteristics, Risk on the Buyer. Performance Specs: Measurable capabilities in terms of operational characteristics of the end product, Risk on the Seller. Functional Specs: The Seller describes the end use of the product, Risk on the Seller.
Ahmed Saleh Mokhtar, PMP 17

RECOMMENDED PROCEDURE FOR OBTAINING TENDERS (2)

SECTION EMPLOYER/ENGINEER TENDERERS

3.2 ISSUE OF TENDER DOCUMENTS 3.3 VISIT TO SITE BY TENDERERS

Issue tender documents to Issue tender documents to contractors on list of contractors on list of tenderers tenderers

Acknowledge receipt Acknowledge receipt

Arrange date and time Arrange date and time for visit site for visit site

Apply for visit to site if Apply for visit to site if required required

Visit(s) to site by tenderers accompanied by Visit(s) to site by tenderers accompanied by employer/engineer employer/engineer
To 3.5 To 3.5
Ahmed Saleh Mokhtar, PMP 18

RECOMMENDED PROCEDURE FOR OBTAINING TENDERS (3)

SECTION 3.4 TENDERERS QUERIES A) Correspondence Method B) Tenderers Conference Method EMPLOYER/ENGINEER
FORM 3.2 FORM 3.2

TENDERERS

A) Prepare replies A) Prepare replies

Submit queries in Submit queries in writing by given date writing by given date

B) Inform tenderers present of queries and replies submitted B) Inform tenderers present of queries and replies submitted in writing. Replies to queries raised at conference in writing. Replies to queries raised at conference

3.5 ADDENDA TO TENDER DOCUMENTS

Send minutes to all Send minutes to all tenderers tenderers Issue addenda including Issue addenda including replies to queries to all replies to queries to all tenderers tenderers

Acknowledge Acknowledge receipt receipt Acknowledge Acknowledge receipt receipt

Ahmed Saleh Mokhtar, PMP 19

RECOMMENDED PROCEDURE FOR OBTAINING TENDERS (4)

SECTION EMPLOYER/ENGINEER TENDERERS

3.6 SUBMISSION AND RECEIPT OF TENDERS

Record date and time of Record date and time of receipt receipt

Submit tenders

Acknowledge receipt or Acknowledge receipt or return unopened tenders return unopened tenders received late received late

LIST OF TENDERERS
Ahmed Saleh Mokhtar, PMP 20

RECOMMENDED PROCEDURE FOR THE OPENING OF TENDERS

SECTION EMPLOYER/ENGINEER TENDERERS/CONTRACTOR

4- Opening of Tenders
Tender opening by public or Tender opening by public or restricted opening: restricted opening: announce and record the names of announce and record the names of tenderers and prices, including tenderers and prices, including prices for alternative tenders if prices for alternative tenders if appropriate appropriate announce and record names of announce and record names of tenderers (if any) disqualified due tenderers (if any) disqualified due to late or non-arrival of tenders to late or non-arrival of tenders Attend public/ Attend public/ restricted opening restricted opening if desired if desired

4.1 OPENING OF TENDERS

Ahmed Saleh Mokhtar, PMP 21

RECOMMENDED PROCEDURE FOR THE EVALUATION OF TENDERS (1)

SECTION EMPLOYER/ENGINEER TENDERERS/CONTRACTOR

5- Evaluation of Tenders:
5.1 REVIEW OF TENDERS 5.2 TENDERS CONTAINING DEVIATIONS 5.3 ADJUDICATION OF TENDERS 5.4 REJECTION OF ALL TENDERS

Establish conformity and completeness Establish conformity and completeness of tenders, reject substantially of tenders, reject substantially unresponsive tenders unresponsive tenders Evaluate deviations, seek clarification & Evaluate deviations, seek clarification & rank tenders as evaluated rank tenders as evaluated Assess tenders in accordance with Assess tenders in accordance with evaluation criteria evaluation criteria Raise further points requiring Raise further points requiring clarification, if any clarification, if any complete evaluation complete evaluation check with funding agency check with funding agency Reject non-conforming tenders & Reject non-conforming tenders & advise tenderer(s) concerned advise tenderer(s) concerned Provide clarification Provide clarification

Provide clarification Provide clarification

Ahmed Saleh Mokhtar, PMP 22

Evaluation Criteria

Subjective and Objective Criteria Often part of procurement documents, Why? Sample criteria:
Overall life cycle cost: present value of purchasing, O&M, other costs. Technical and managerial capabilities Past experience Financial capacity

Ahmed Saleh Mokhtar, PMP 23

RECOMMENDED PROCEDURE FOR THE AWARD OF CONTRACT

SECTION EMPLOYER/ENGINEER TENDERERS/CONTRACTOR

6.0 AWARD OF CONTRACT 6.1 ISSUE LETTER OF ACCEPTANCE 6.2 PERFORMANCE SECURITY

Decide on contract Decide on contract award, if necessary after award, if necessary after pre-award discussions pre-award discussions

Attend pre-award Attend pre-award discussions, if discussions, if required required Acknowledge Acknowledge receipt receipt Provide performance Provide performance security security

Issue letter of acceptance Issue letter of acceptance

Obtain performance Obtain performance security from contractor security from contractor

Ahmed Saleh Mokhtar, PMP 24

RECOMMENDED PROCEDURE FOR THE OPENING AND EVALUATION OF TENDERS (3)

SECTION EMPLOYER/ENGINEER TENDERERS/CONTRACTOR

6.3 PREPARATION OF CONTRACT AGREEMENT

Prepare contract documents Prepare contract documents Signing of contract Signing of contract

Signing of contract Signing of contract

6.4 NOTIFICATION OF UNSUCCESSFUL TENDERERS

Advise unsuccessful Advise unsuccessful tenderers and return tender tenderers and return tender security (if provided) security (if provided)

Unsuccessful Unsuccessful tenderers tenderers acknowledge receipt acknowledge receipt

Ahmed Saleh Mokhtar, PMP 25

Contract Definition

A contract is a mutually binding agreement that obligates the seller to provide the specified product and obligates the buyer to pay for it. A contract is a legal relationship subject to remedy in the courts . Contracts may be called, among other names, a contract, an agreement , a subcontract, a purchase order, or a memorandum of understanding.
Ahmed Saleh Mokhtar, PMP 26