Definition of 'Request For Proposal - RFP' A type of bidding solicitation in which a company or organization announces that funding is available

for a particular project or program, and companies can place bids for the project's completion. The Request For Proposal (RFP) outlines the bidding process and contract terms, and provides guidance on how the bid should be formatted and presented. A RFP is typically open to a wide range of bidders, creating open competition between companies looking for work. Investopedia explains 'Request For Proposal - RFP' A Request For Proposal for a specific program may require the company to review the bids not only examine their feasibility , but also the health of the bidding company and the ability of the bidder to actually do what is proposed. The RFP may provide detailed information on the project or program, but can leave leeway for the bidder to fill in the blanks with how the project would be completed or program run. What is mobilisation guarantee and advance payment guarantee? In civil construction projects advance is given to the contractor which is known is as Mobilization Advance. It is normally 15% of the total contract value. The prerequisite for the issue of advance is that contractor has to provide a guarantee in the shape of Bank or Insurance equal to the amount being issued to the contractor. Mobilization advance is deducted from the bills of contractor in equal installments covering the project period. On completion of recovery Guarantee provided by the contractor is released. Defects Liability Period Definition Defects Liability Period: the period commencing on the date that the Sub-Contract Works have achieved Practical Completion and expiring on the date twelve (12) months after the date of practical completion of the Works as certified by the Employer's Agent under the Contract. Defects Liability Period A period of usually twelve months following practical completion, during which the employer can require the contractor to return to the site to complete any omissions in the works and to make good any defective work or materials. When all omissions and defects have been made good, the contract administrator or Employer's Agent must issue a certificate or statement of completion of making good defects.

"The National Highways Authority of India was constituted by an act of Parliament, the National Highways Authority of India Act, 1988. It is responsible for the development, maintenance and management of National Highways entrusted to it and for matters connected or incidental thereto. The

Authority was operationalized in NHAI RFQ of Company A RFQ of Company B RFQ of Company C NHAI selects few qualifiers based on their technical qualifications RFP of Company A RFP of Company C Project allotted to the lowest bidder Assuming the GMR wins the bid and gets the project worth Rs. . " http://www. The Structure is as shown below. for the development of road. 1995 with the appointment of full time Chairman and other Members.nhai.1000 Cr.

and cash. Now assume that you receive your water bill in the mail and that it is for $100. The check will literally be "in the mail" for a few days before it is received by the water company and may go several more days before the water company cashes it. The management of working capital involves managing inventories. The goal of working capital management is to ensure that a firm is able to continue its operations and that it has sufficient ability to satisfy both maturing short-term debt and upcoming operational expenses. Your bank register reflects the book value of the checking account.NHAI Rs. accounts receivable and payable. Float is defined as the difference between the book balance and the bank balance of an account.1000 Cr. you could take the $100 and invest it in a savings account at the bank for the five days and then place it back into your checking account "just in time" to cover the $100 check. . The time between the moment you write the check and the time the bank cashes the check there is a difference in your book balance and the balance the bank lists for your checking account. assume that you go to the bank and open a checking account with $500. That difference is float. You receive no interest on the $500 and pay no fee to have the account. SPV (Special Purpose Vehicle) Financial Closure Subcontract ing to other contractors Subcontractin g to GMR-EPC divisions Constructio n of Roads Working capital management involves the relationship between a firm's short-term assets and its shortterm liabilities. If you know that the bank will not learn about your check for five days. At the time you write the $100 check you also record the payment in your bank register. This float can be managed. You write a check for $100 and mail it to the water company. For example.

com/lessons/workcap/ Pdf downloaded http://www.pdf .studyfinance.Time Book Balance Bank Balance Time 0 (make deposit) $500 $500 Time 1 (write $100 check) $400 $500 Time 2 (bank receives $400 $400 check) Float is calculated by subtracting the book balance from the bank Float at Time 0: $500 − $500 = $0 Float at Time 1: $500 − $400 = $100 Float at Time 2: $400 − $400 = $0 http://www.

The construction sector is a major employment driver. especially in the housing and road construction segment. The real estate industry comprising of construction and development of properties has grown from family based entities with focus on single products and having one market presence into corporate entities with multi-city presence having differentiated products. ports. At the same time. The industry has witnessed considerable shift from traditional financing methods and limited debt support to an era of structured finance. Key Points Supply The past few years has seen a substantial increase in the number of contractors and builders. electricity. From a policy perspective. About 250 ancillary industries such as cement.0% by 2012. railways. oil gas pipelines and irrigation . Due to the rapid increase in the number of contractors and construction service providers. timber. steel. This is because of the chain of backward and forward linkages that the sector has with other sectors of the economy. high working capital requirements can create growth problems for companies with weak financial muscle. ports.the PPP based development will be needed wherever feasible. Its share as a percentage of GDP has increased considerably as compared to the last decade. The construction industry has been witness to a strong growth wave powered by large spends on housing. To put things in perspective. which is double of that in the Eleventh five-year plan. estimated to have increased from 5. especially backward and rural areas . transportation and urban development segments. reviewing the factors that constrain private investments would be necessary to encourage and speed up the process. Bargaining power of suppliers Low. water supply. and building material are dependent on the construction industry. it has picked up in the recent past. private equity and public offering.7% of GDP in 2007 to around 8. Given that the resource constraints of the public sector will continue to limit public investment in infrastructure. airports. Demand for quality infrastructure construction is mainly emanating from the housing. margins have been stagnant despite strong growth in volumes. telecommunications. brick. the total investment in infrastructure .which in this case includes roads. A unit increase in expenditure in this sector has a multiplier effect and the capacity to generate income as high as five times. However. rail transport and airport development. The share of private investments is expected to increase to half in the Twelfth five-year plan as compared to the intended 30% for the Eleventh five-year plan. The Planning Commission of India has proposed an investment of around US$ 1 trillion in the Twelfth five-year plan (2012-2017). .Construction Sector Analysis Report India is on the verge of witnessing a sustained growth in infrastructure build up. Barriers to entry Low for road and housing construction. While the construction sector's growth has fallen as compared to the pre-2008 period. being the second largest employer in the country. Demand exceeds supply by a large margin. next only to agriculture. there has been a growing consensus that a private-public partnership is required to remove difficulties concerning the development of infrastructure in the country.

thereby leading financial institutions to take a cautious approach towards funding projects in the sector. Relatively less in airport and port development. rising affordability levels. Towards the end of the year. the total housing shortage in the country stood at about . thereby reducing investments. With the overall GDP growth slowing down. lower foreign investments and poor domestic triggers. The proposed increase in allocation in the twelfth five-year plan (2012-2017) will translate into a healthy business for construction companies. The retail segment however witnessed a mixed year as overcapacities got absorbed. companies from the real estate and construction sector faced issues related to higher interest costs on the back of leveraged balance sheets. Competition Very high across segments like road construction. Financial Year '12 The construction industry witnessed a slowdown in FY12. after the economy showed some resilience in the preceding two years. The trends varied in different markets with some witnessing price correction and other seeing higher volume growth. On an overall basis. a handful of companies announced plans to improve the health of their balance sheets by selling off their stakes in the non-core businesses and improving the cash collection cycles. the Government proposed External Commercial Borrowings (ECB) to part finance rupee debt of existing power projects. Project financing also became difficult on the back of the increasing gestation periods of the projects. The Reserve Bank of India kept the interest rates on the higher side due to concerns over the high inflation levels. The country still lacks adequate infrastructure facilities and citizens have to pay for using public services. favourable demographics. over the long term. the same remained muted. over supply (in certain pockets) and lack of sustained economic activity. Prospects India requires quality infrastructure. availability of financing options as well as fiscal benefits available on availing of home loan are the key drivers supporting the demand for residential construction. In addition. the budget proposed to allow ECB for capital expenditure on the maintenance and operations of toll systems for roads and highways. According to a technical committee set up by the Ministry of Housing & Poverty Alleviation.Bargaining power of customers Low. The 2011-12 budget saw the government double the financing limit of financing infrastructure projects to Rs 600 bn. launching and bidding for projects on a selective basis. amongst others.8% in FY12. For the power and coal sector. housing and urban infrastructure development. demand will remain strong. This simple fact is the long term driver of the construction sector as infrastructure investments are the most important growth driver for construction companies. Demand-supply gap for residential housing. FY12 was a challenging year for the Indian real estate sector marked by declining volumes. the high levels of inflation led the RBI to keep the interest rates high. the growth in the construction industry dipped to 4. As for the residential segment. While short term factors will keep the sentiments subdued. The leasing business witnessed a slowdown on factors such as oversupply. To encourage PPP in road construction projects.

78 m at the start of the twelfth five-year plan. While entry into affordable housing by many players would curb the declining trend of the topline as witnessed during the downturn. the outlook for the short term remains uncertain.equitymaster. http://www. This provides a big investment opportunity. it is likely to put pressurize on margins. While long-term factors are likely to work in favour of the real estate developers.18. the fact that banks have been turning cautious towards rescheduling debt or issuing fresh loans to real estate companies is a dampener for the The commercial segment however is going through a tough phase and is likely to do so in the short to medium term on account of overcapacity. High interest rates and negative consumer sentiments continue to impact business for the real estate players.asp . Also. bricks and steel coupled with the increasing in labour costs. The overall long term risks also include increased prices of the essential raw materials like cement. which together make for almost 75% of overall construction cost. Liquidity is also another factor that will determine overall project execution.

Control Account .  Check for existing contractor/supplier form database. and cash.Working Capital Management WCM involves the relationship between a firm's short-term assets and its short-term liabilities. accounts receivable and payable. Control of Working Capital Internal Control Assets Debtor Inventory Liability Creditor Short term loan At GMR Contract Expenditure To GR/IR GR / IR To Party Creditors Process of getting Creditors inside GMR is done by C&C (Commercial and Contractor) / Procurement department. Illustration For procurement of 100 tons of steel. Debtors The main source of working capital for GMR Infrastructure Limited is Debtors. The management of working capital involves managing inventories. The goal of working capital management is to ensure that a firm is able to continue its operations and that it has sufficient ability to satisfy both maturing short-term debt and upcoming operational expenses.

Company A 49000/ton No transit Insurance Advance payment required Company B 49500/ton Transit Insurance (2000) 10 days credit period Company C 50500/ton Transit Insurance (2000) 30 days credit period In the above example.B and C with respect to cost. benefits and so on. Need to Fill Work Contract . Send RFQ. Make comparative statement and decide whom to give. we are comparing companies A. benefits and payment terms.  Check for new players in market. Example.

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