Management Of Tender Process And Contracts

Module 03 Assignment

Name :A.A. Tharindu Lankeshwara Perera

Course : GDPSCM 2018

Module 03 : Management Of Tender Process And Contracts

Index no : GDPS11848
 ACKNOWLEDGEMENT

I would like to express my deepest appreciation to our

lecturers who taught us Management of Tender
Process and Contracts Module who provided me the
possibility to complete this report.

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Contents
Executive Summary.......................................................................................................................... 3
Introduction ..................................................................................................................................... 4
Principles of Tendering .................................................................................................................... 6
Main features of the tender ............................................................................................................ 7
Contents of tender document ......................................................................................................... 9
Tendering Process .......................................................................................................................... 10
Methods of Tendering ................................................................................................................... 12
Bidding System............................................................................................................................... 15

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Executive Summary

Through this study I am going to

1) Discuss the Main features of the tender documents and contents of the tender
document.

2) Discuss the tender process of the organization.

3) Discuss methods of calling tender with advantages and disadvantages of each

method.

4) Discuss what is meant by Single-Envelope and Two-Envelope Bidding

5) Discuss key features of Contract & Tender document.

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 Introduction

 What is tender?
A tender is a submission made by a prospective supplier in response to an invitation to tender. It
makes an offer for the supply of goods or services.

 What is tendering?
Tendering is the process of choosing the best and cheapest company to supply goods & services
by asking several companies to make offers for supplying the goods and services.

Tender request documents; also referred to as invitations to tender, Requests for

Tender (RTF), Requests for Proposal (RFP) etc outline what is required, that is, what the
requesting organization’s needs are. These documents also outline the particular
requirements, criteria, and instructions that are to be followed.

Future tenders are generally widely advertised to offer opportunities to a number of suppliers,
encourage competition and provide a greater pool of offers to select from.

Interested suppliers will then prepare a tender; the documents that outline the offer that they
are making, and will include pricing, schedules as well as their eligibility for the project or
procurement. They will outline their advantage over competitors; provide information on
qualifications, competencies and experience. Further they have to demonstrate how their bid
offers the best value for money.

The submitted tenders are then evaluated with regard to defined criteria. In a normal tendering
situation, this process should be conducted fairly and honestly, and in a manner that is free from
bias or favor. The offer that best meets all the requirements outlined in the request and
provides value for money should win the contract.

The tendering process is generally utilized for procurements or contracts involving substantial
amounts of money. Tendering is utilized by:

 Government departments, offices and agencies

 Private sector companies and businesses
 Non-Government Organizations
 Overseas markets and businesses

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What is a contract?

If successful at tendering, you will be required to deliver the goods or services under the terms of
a legally binding contract. A contract is an agreement between two or more parties which is
recognized by law and enforceable through the courts. In general, there is no set form for a
contract; contracts can be written, oral or implied by conduct.

Before submitting a tender, you should carefully check all conditions of the ITT. It may be the case
that by submitting a tender you are agreeing to meet all terms put forward by the purchasing
authority if successful.

Before entering into a contract, you should conduct a thorough risk assessment to ensure that
entry into the contract is in your organization’s best interests and always seek professional legal
advice.

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 Principles of Tendering
The purpose of these principles for Tendering is to provide a framework for the effective,
consistent and efficient management of tendering practices throughout any construction
project. The principles set out in this document can be equally applied to any industry involving
the delivery of a new product or service. Successful projects have generally started with the use
of best practice tendering processes.

These are the basic principles of tendering process,

• All aspects of the tendering process must be conducted with honestly at all levels of the
industry.

• A clear understanding of the rights and obligations of both parties.

• Parties must confirm to all legal obligations.

• Parties must clearly identify ownership.

• Parties must not submit tenders without a firm goal.

• Parties must not engage in any practice which gives improper advantage.

• Condition of tendering must be the same for tender on any particular project.

• Clients must clearly specify their requirements in the tender document and indicate
criteria for evaluation.

• All the information provided in the course of tendering must be protect

Importance of tender
• Formality
• Ethical principles
• Promoting competition
• Time and effort involved
• Equal opportunity
• Transparency

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 Main features of the tender

1. Invitation to tender
An invitation to tender is a formal invitation to make an offer for the supply of goods or services.

What should an invitation to tender include?

An invitation to tender will include information describing the goods or services required in
sufficient detail to enable the tenderer to prepare an accurate tender that is in a prescribed
format so that it is easy to compare with other tenders.

An invitation to tender will include:

What should be considered is how the tenders that are received will be evaluated. It might be
decided to accept the lowest priced tender that meets the requirements, but it is common
practice to define a set of criteria by which the most economically advantageous tender can be
identified.

Responding to an invitation to tender

In response to an invitation to tender, invited tenders will submit their tender, which will include
their price for supplying the goods or services along with proposals for how the clients
requirements will be satisfied.

2. Form of tender

The form of tender is prepared by the client or their consultants and completed and signed by
the tenderer. It is a formal acknowledgement that the tenderer understands and accepts the
terms of conditions of the tender documents and any other requirements that are stipulated.

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Items that might be appear on a form of tender could include:

 Latest return time and date.

 Date, name and address.
 Tender reference number.
 The price for which they are to do the works and any adjustments prices that have been
agreed should the scope of the work or period of time change (or a reference
to documents providing this information).
 The date until which the price remains valid.
 The period of time that is allocated for the works, or an actual completion date if
required.
 Acceptance of terms and conditions.
 Confirmation of the country’s law that will govern the contract.
 References to other documents containing information.
 Any qualifications that apply.
 Who will bear the costs of preparing the tender.
 Any alternative proposals (or a reference to documents providing this information).
 Confirmation of the tender being genuine and bona fide.
 Signature and tenderer details.

Some of these items may be filled out by the client or their consultants in advance, so that the
tenderer only has to agree and sign.

These are the other main features that are common to all tenders

 Tender number
 Mode of tender
 Date & time of issue
 Date & time of closing
 Date and time of opening
 Mode of dispatch
 Business address
 Tender validity period
 Prices - FOB, C&F, CIF etc.

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  Quantity
 Currency
 Power to accept part or whole or reject tender
 Mode of payment
 Delivery
 Non-refundable deposit
 Refundable deposit
 Bid bond
 Agreement
 Default
 Defaulting contractors
 Force Majeure
 Special conditions may include such clauses as the following
 Guarantee
 Specifications and technical schedule
 Financial schedule
 Bill of Quantities
 Inspection and testing
 Arbitration
 Liquidated damages
 Obligations of the contractor

Contents of tender document

1. Cover page
2. Instructions to tenderers
3. List of contents
4. Construction details
5. General conditions of contract
6. Special conditions of contract
7. General cost
8. Special cost
9. Preamble
10. BOQ and log sheets

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Tendering Process

Stage 1: Preparation

 Final completion of drawings, specification, measurement / take-off process.

 Choose conditions of contract.
 Parties involved: architect, engineers, QS, client, project manager

Stage 2: Approval to tender

 Discussion and decision on type of tender to be used.

 Selection of tender:
1. Open
2. Selective
3. Negotiate

 Parties involved: client, consultant, project manager.

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Stage 3: Tender Documentation


Letter of invitation to tender

Letter of acceptance

Bills of quantities

Relevant drawings

Schedule of rates

Stage 4: Invitation

Based on selection of tendering methods

Open / competitive / bid tender – produce tender notice

Selective – shot listed contractors will be invited to tender if they wish

Negotiated – only one contractor is approached- direct entry to project

Stage 5: Processing


1. Received tender submitted by contractor

2. Tender assessment / evaluation
3. Completed tenders are received
4. Arithmetical check
5. Reasonable tender sum
6. Reasonable completion time
7. Capabilities of tenderers under considerations
8. Tender recommendation / report – tender board

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Stage 6: Award contract


1. Pre-award meeting with contractors – validation of lowest complying bid
2. Validate lowest bid - Pre-contract meeting with contractor for contract signing
3. Approval by tender board / treasury (tender exceeds RM10 mill.) – an acceptance of
tender form is issued to tenderer, signed by the authorized officer

Methods of Tendering

The majority builders still obtain much of their work by system of tendering. There are three
principle method of choosing a contractor. They are,

1. Open Tendering

2. Selective Tendering

3. Negotiated Tendering

1. Open Tendering

This usually takes the form of an advertisements in a national or local newspaper inviting
contractors to apply for tendering competition for carrying out the work. The main
characteristic of which are given usually the deposit is required in order to discourage frivolous
applications. The deposit is returnable on submission of a tender. In this method allows any
contractor to submit a tender to an advertised project.


Process:

 Client advertises openly in the press or the trade publications inviting contractors to
apply for the project
 Contractor that is able to undertake the project would request a tender document

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  After receiving the tender from the architect, the contractor may be required to give a
deposit and to ensure a genuine tender. This is done to filter out the contractors who
are not interested in submitting a tender

Advantages

 Keep competition from large number of applicant.

 Possibility to get competitive price.
 No chance for favourism.
 Provide opportunities to new comers, unknown contractors to enter to the market.

Disadvantages

 Time and cost taken to review the large number of applicant.

 The cost of tendering accumulated to the industry and general cost to the industry is
high.
 Difficult to evaluate and select best one from wide range of applicant.

2. Selective Tendering

Contractor apply to be included on an approved list maintain by an employing body often an

architectural practice, local authority or statutory body. These organizations have extensive
knowledge and experience of individual contractors and regularly review contractor performs
and approval list from such list. There are able to select contractors most suited to the contract
the number invited will according to the value of the contract.

Note

 Compile a list of preferred builders for the project.

 Based on builders established skill. Reliability and proven competence for the type of
work given.
 Each contractor is bend ask to provide a tender.

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 Advantages

 Cost of tendering is reduced.

 Time consuming for the tender evaluation is reduced.
 Allow only capable and approved firms are to be tender.
 Provide limited competition and easy to screen and select.

Disadvantages

 Less competition forces high tender sum.

 Opportunities for collusion among competitors and mislead the time.
 Miss opportunities. (new comers)
 Industry complain those who have not short listed.

3. Negotiated Tendering

In this process only well reputed contractors are been negotiated by inviting them to submit
their tenders. Client can contractors determine the perimeters for negotiation before
commencement of the project. The maintenance of positive relationship during the negotiation
process in essential.

Why client want to negotiate?

 Business relationship
 Contractor, finance project (client find difficult to finance then negotiate with the
builders who is willing to finance the project)
 Continuation of contract
 Special circumstances (only one contractor available to work )
 Special expertise of equipment
 Wish to take advantages of the builder’s specialized knowledge at the design stage.
 To have quick start

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Advantages

 Expected quality and functions can be achieve more.

 Speed up the entire project.
 The project objective and definition may be managed. (builders involvement of the
design stage)

Disadvantages

 Non-competition forces for high tender sum.

 Less formality make course more contract administration inquiries.
 Lack accountability.

Bidding System

One envelope and Two Envelope Bidding procedure

One Envelope:
Bidders submit bids in one envelope containing both the financial proposal and technical
proposal.

The envelops are opened in public at the date and time advised in the bidding document. The
bids are evaluated, and following approval by evaluation team, the contract is awarded to the
bidder whose bid has been determined to be the lowest evaluated substantially responsive bid.

Two Envelope:
Bidders submit two sealed envelopes simultaneously, one containing the technical proposal and
the offer the price proposal, enclosed together in an outer single envelope.

Initially, only the technical proposals are opened at the date and time advised in the bidding
document. The price proposals remain sealed and are held in custody by the purchaser. The
Technical proposals are evaluated by the purchaser.

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 This allows the purchaser to evaluate the technical proposals without reference to price. Bids of
bidders who do not conform to the specified requirements may be rejected as deficient bids.

After approval of the technical evaluation, and at a date and time advised by the purchaser, the
price proposals are opened in public. The price proposals are evaluated.

After approval of the price evaluation, the contract is awarded to the bidder whose bid has been
determined to be the lowest evaluated substantially responsive bid.

Important features in tender document

1) DEADLINE FOR SUBMISSION OF TENDER

Tender document duly completed and sealed shall be submitted by mail or hand-delivered to
the procuring entity not later than the date and time mentioned in the Tender Notice. Late
tender shall be rejected and returned unopened to the tenderer.

2) SEALING AND MARKING OF TENDERS

Tender shall be submitted in one sealed outer envelope which contains 2 separate sealed inner
envelopes. First envelope shall be super scribed “Qualification Envelope “. It must 6 contain
Qualification documents as spelt out in the tender document and Tender Declaration.
Second envelope shall contain Form of Tender and Price Schedule. This envelope shall be super
scribed as “Price Envelope”. All prices should be firm and inclusive of out-of-the-pocket
expenses. Three envelopes shall be marked with the name and address of tender, and tender
number.

3) OPERATIONAL LANGUAGE
The tender documents shall be typed or written in English in indelible ink and shall be signed by
a person or persons duly authorized to sign on behalf of the tenderer.

4) TENDER PERIOD

Tender period refers to the time period before the expiry of the contract. Tender period is
generally a few days. Tender period gives members of the contract the flexibility to make
decisions till the time the contract expires.

The parties to the contract have the liberty to change the terms of the contract in the tender
period. Once the tender period is over, they have no other choice but to honour the contract as
specified in the contract.

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 5) TENDER CURRENCY

Prices shall be quoted in written words and figures. In case of discrepancies between prices in
words and figures, the prices in words shall prevail.

6) SOLICITATION DOCUMENT

Solicitation documents include Tender Notice, Tender Description, Particulars of Firm, Form of
Tender, Price Schedule, Tender Declaration and Draft Contract. Intending tenderers are advised
to examine the tender documents upon the receipt of it and satisfy themselves for receiving
correctly all the contents of tender documents. The tender is to be prepared strictly in
compliance with instructions contained in these documents. Failure to furnish all information or
documentation required in the tender documents shall result in the rejection of the tender and
the disqualification of the tenderer.

Important features in contract document

1) EASY LANGUAGE

The Contract should be made in Easy Language that can be easily understood
by someone unfamiliar with the project, such as Banker, Auditors, Arbitrators etc. This
will be particularly important to get the facilities from the external sources and in case
of disputes, its resolution will become easy for the third party like arbitrators, who can
understand well easily to deliver a judgment.

2) OFFER

An expression on willingness to be bound on terms. Terms established by the offeror here – and
only those included at this stage form part of the contract.

3) ACCEPTANCE

The party(s) to whom the offer has been made communicates a full and unconditional
acceptance of the terms of the offer (exceptions exist in unilateral offers and the postal rule).

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4) CONSIDERATION

The bargain element of the contract, also known as ‘the price of a promise’. A simple contract
may be a bad bargain, but it must be a bargain to be enforceable.

5) INTENTION

The parties must intend that the agreement is to establish a legally binding contract rather than
simply a social/domestic arrangement.

6) CERATINITY

The terms of the contract must be sufficiently clear and precise to be enforceable.

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CONCLUSION

We can conclude that tendering process and work with tendering method is a system or
process that should use advisably, intelligently.

If we use tendering method correctly and select a suitable contractor for the project, it will
helps to build the project at the due time, with efficiently, quality and also can save money. For
succeed these hopes of the client, best way is use the tendering to select suitable contractor. In
this presentation and process of making this report, I got more knowledge about tendering. And
also, I tried my best to describe these information as correctly.

Thank you…

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Referances

www.quora.com

www.designingbuildings.co.uk

https://www.wikipedia.org/

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