Why is the Importance of Tender Price Break-up?

Usually an instruction to tenderers has been included in any typical tender forms and subsequently in the conditions that the tenderer shall furnish a break up showing the cost components he considered in arriving at the final quoted tender price. Although the tender price break up is a reflection of basic cost and the mark up over and above the sub contract quoted amount, it essentially means a detail distribution of the cost in terms of materials, labour, plant, site and head office overhead, profit and if possible the risk portion quoted against each lump sum and unit rates. Contractors usually contend that they are commercial secrets and pricing strategies not disclosable to others. It should however be noted that in order to facilitate the evaluation of actual and correct quantities of work, the Contractor is required to submit a detailed breakdown of tendered lump sums and unit rates as required by Instructions to Tenderers. It is the tender price break up that demonstrates the tender pricing level, the maintenance of which is important in evaluating subsequent variations. Further it is important in arriving at a mark up allowable in valuing variations, in deciding the head office overhead component in claims for recovery for unabsorbed overhead in a contract prolongation as well as in evaluating loss on profit. More over, it is important to find out to some extent the costs inserted for the items that are not priced in the bill of quantities but the cost has been included elsewhere within the tender sum. However, such breakdown, though required by the contract is not itself a contract document and will be considered as a guide only. The receipt of the breakdown in no way implies acceptance of figures and the Engineer reserves the right to amend or modify them as and when he deems it necessary. The tender price break-up to be submitted before or after the contract has been let is not, per se, a contract document. Also, it is a danger in making a tender price breakup a part of contract (even when submitted together with the tender) that binds the parties in the administration of contract. It may be used, wholly or partly, as a guide in pricing variations, and remains subservient to the requirements of the contract. This means that errors, omissions, oversights etc within the tender price break-up do not prove particular inclusion or exclusion within the contract sum. The nature of the inclusions within individual tender rates and prices are determined by the conditions of contract, not by contractors subsequent break-up. No Contractor can be permitted to use his lack of compliance with tender requirements to strategically manoeuvre to his own advantage, however.