Assesment of Tender Evaluation System For Public Building Project Works in Ethiopia PDF

Assessment of Tender Evaluation System for Public Building Project Works in Ethiopia
Assessment of Tender Evaluation System for Public Building Project

Works in Ethiopia
By
MERON DEMESEW WUBE
A thesis submitted to
The Department of Architecture and Civil Engineering for the Partial Fulfillment
of the Requirements for the Degree of Master of Science in Construction
Technology and Management
ADDIS ABABA SCIENCE AND TECHNOLOGY UNIVERSITY
MAY 2019
Declaration
I hereby declare that this dissertation entitled “Assessment of Tender Evaluation System for
Public Building Project Works in Ethiopia” was composed by myself, with the guidance of
my advisor, that the work contained herein is my own except where explicitly stated otherwise
in the text, and that this work has not been submitted, in whole or in part, for any other degree or
processional qualification.
Name: Meron Demesew Signature, Date: ______________May, 2019
Addis Ababa Science and Technology University i

Approval page/Certificate
This is to certify that the thesis prepared by Meron DemesewWube entitled “Assessment of
Tender Evaluation System for Public Building Project Works in Ethiopia” and submitted in
fulfillment of the requirements for the Degree of Master of Science complies with the regulations
of the University and meets the accepted standards with respect to originality and quality.
Date of Defense: June 13, 2019 G.C

Principal Advisor
1. Dr.Habtamu Hailu ___________________ ________________
Members of Examining board:
1. Dr. ____________________ ____________________ ________________
External Examiner
2. Dr. ___________________ __________________ ___________________

Internal Examiner
3. Dr. Melaku Sisay ___________________ ________________

ERA PG, Programme Coordinator Signature Date
4. Mr. Alemayhu Feyissa ___________________ ________________

Head, Civil Eng’g Department Signature Date
5. Dr. Brook Abate ____________________ _______________

Dean, College of Architecture Signature Date
And Civil Engineering
Addis Ababa Science and Technology University ii

Abstract
Tender evaluation methods selected for a specific contract have effect on the final outcome of
the construction project. The aim of this study was to make an assessment of tender evaluation
method in federal public building projects in Ethiopia. The approach used in this assessment was
review of the national and international practices, methods and issues. The study examined on
25 federal public mega building projects which were awarded in public sector in the last five
years. Survey on these projects was made using questionnaire distributed for different groups
that are role players in the public construction industry. The data were then analyzed using mean
scores. The findings of the study revealed that the evaluation method used in federal public
building projects is majorly competitive lowest evaluated. A total 15 out of 25 assessed projects
were awarded under this method. The remaining 10 projects were awarded based on weighted
average method. However, performance of projects which passed through lowest bid evaluation
method was not found satisfactory. All projects were found to delay with a range between
34.8%-400% of time slippage, 5.71%-21.64% variation works, and 1 project was terminated.
Apart from this, 74.5% of the respondents were not satisfied with this method while the
remaining 25.5% suggested modification to the method. On the contrary, weighted average
method was relatively found satisfactory. It was observed that less than half of the project
showed a delay with a range between 11.3%-48.9% time slippage, 0.25%-11.78% of variation
works. Moreover 55.8% of the respondents were found satisfied with this method. From
International experience, the average bid method is observed to be more commonly adopted
especially in many countries in Europe. Although the average bid method is not practiced in
Ethiopia, 78.31% of the respondents agreed on adopting this method as an alternative method.
Therefore, it is recommended that Public Procurement and Property Administration Agency
should look back and review the policy regarding the current evaluation methods as they have
the authority to initiate amendments on laws and implementation system improvements and try
to adopt other methods such as average bid method and if possible develop other method which
will go in parallel with the country construction law to achieve a true value of money and
minimize underside performance issues.
Keywords: bid, tender evaluation, public building
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Acknowledgments
First of all, I would like to thank almighty God who helped me in all aspects of my life including
this work.
The next appreciation goes to my advisor Dr. Habtamu Hailu; for guiding me through every
steps of my work. Also I would like to thank Ethiopian Roads Authority for giving me this
sponsorship for postgraduate program. I would like to appreciate different construction and
public sector companies for their participation and their willingness to co-operate and give me
there time during the execution of this thesis. The last but not least I would give my gratitude to
my family for supporting me in every step of my life thanks you.
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Table of Contents
Declaration ................................................................................................................................................ i
Approval page/Certificate ...................................................................................................................... ii
Abstract ................................................................................................................................................... iii

Acknowledgments................................................................................................................................... iv
Table of Contents .................................................................................................................................... v
List of Table .......................................................................................................................................... viii
List of Figure .......................................................................................................................................... ix
List of Abbreviations............................................................................................................................... x
1. INTRODUCTION ............................................................................................................................... 1
1.1 Background of the study ................................................................................................................... 1
1.2 Statement of the Problem ................................................................................................................. 3
1.3 Objective of the study ....................................................................................................................... 4
1.3.1 General Objective........................................................................................................................... 4
1.3.2 Specific Objectives.......................................................................................................................... 4

1.4 Research Questions ........................................................................................................................... 4
1.5 Significance of the Study................................................................................................................... 5
1.6 Scope and Limitation ........................................................................................................................ 5

2. LITERATURE REVIEW ................................................................................................................... 7
2.1 General ............................................................................................................................................... 7

2.2 Factors influencing the selection of procurement Method .......................................................... 10
2.3 Alternative Evaluation Method...................................................................................................... 12

2.3.1 Average Bid Evaluation Methods ............................................................................................... 13
2.3.2 Multi-Parameter Bid Evaluation Method (Based on price and “other” factors) ................... 16
2.4 Tender Evaluation in Ethiopia ....................................................................................................... 17

2.4.1 Principles of Public Procurement ............................................................................................... 18
2.4.2 Application of Procurement Rules .............................................................................................. 19
2.4.3 Methods of Public Procurement ................................................................................................. 21

2.5 Stakeholders in FDRE Public Procurement ................................................................................. 26
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2.6 Procurement Plan............................................................................................................................ 26
2.7 Challenges of Public Procurement ................................................................................................. 28

2.8 Procurement Procedure .................................................................................................................. 29
2.8.1 Bid Document Preparation .......................................................................................................... 30

2.8.2 Bid Advertisement ........................................................................................................................ 30
2.8.3 Evaluation of Bids ........................................................................................................................ 31
2.8.4 Announcing and Awarding of Successful Bidder ...................................................................... 35
3. MATERIALS AND METHOD .................................................................................................... 36
3.1 Description of the Study Area ........................................................................................................ 36
3.2 Data Collection........................................................................................................................... 36

3.2.1 The Questionnaire ........................................................................................................................ 36
3.2.2 Case Study..................................................................................................................................... 37

3.2.3 Interview ....................................................................................................................................... 37
3.3 Data analysis .................................................................................................................................... 37
4. RESULTS AND DISCUSSION .................................................................................................... 39

4.1 Profiles of Respondents ................................................................................................................... 39
4.2 Existence and extent of the problem in procurement stage ......................................................... 42

4.2.1 Problems of contactors at procurement stage............................................................................ 44
4.2.2 Problems of client at procurement stage .................................................................................... 47
4.2.3 Problems of consultants at procurement stage .......................................................................... 50
4.3 Existence and extent of the problem during construction stage ................................................. 52
4.3.1 Problems of Client at construction stage .................................................................................... 54
4.3.2 Problems of Contractor at construction stage ........................................................................... 56
4.3.3 Problems of Consultant at construction stage ........................................................................... 59
4.4 Current procurement method and tender evaluation.................................................................. 63
4.5 Comparison of common bid types ................................................................................................. 66

4.5.1 Competitive lowest responsive bidding ...................................................................................... 67
4.5.2 Competitive weighted average bidding ...................................................................................... 69

4.6 Summary of Findings in Case Studies ........................................................................................... 71
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5. CONCLUSIONS AND RECOMMENDATIONS .......................................................................... 75
5.1 Conclusions ...................................................................................................................................... 75

5.2 Recommendations ........................................................................................................................... 77
REFERENCE ........................................................................................................................................ 79
Appendix-1 ............................................................................................................................................. 82
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List of Table
Table 2.1 Example on mechanism of the average bid method…………………………. 14
Table 2.2 Example 2 on mechanism of the average bid method……………………….. 14
Table 2.5 Public Procurement Operations and Practices Challenges…………………... 29
Table 4.1 Response rate of the structured questionnaire……………………………….. 39
Table 4.2 List of Identified typical tender problems in procurement process………….. 42
Table 4.3 List of causes of poor performance in public building at construction stage… 53
Table 4.4 Relation of significant problems in procurement stage and construction stage 62
…………………………………………………………………….
Table 4.5 Analysis comparison of competitive average and lowest bidding system…… 66
Table 4.6 Summary of projects progress……………………………………………….. 73
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List of Figure
Fig 4.1 Respondents organization classification…………………………………….. 40
Fig 4.2 Qualification of respondents…………………………………………………. 40
Fig 4.3 Position of respondents in the organization…………………………………. 41
Fig 4.4 Experience of respondents…………………………………………………… 42
Fig 4.5 Problems of contractors during procurement stage…………………………. 45
Fig 4.6 Problems of owner during procurement stage……………………………… 48
Fig 4.7 Problems of consultant during procurement stage………………………….. 51
Fig 4.8 Cause of poor performance during construction period, client side………… 54
Fig 4.9 Cause of poor performance during construction period, contractor side…… 57
Fig 4.10 Cause of poor performance during construction period, consultant side…… 60
Fig 4.11 Evaluation method in public tendering …………………………………….. 63
Fig 4.12 Procurement method in public tendering…………………………………… 64
Fig 4.13 Issues, concerns and advantage in lowest responsive bidding……………… 68
Fig 4.14 Issues, concerns and advantage in weighted average bidding……………… 70
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List of Abbreviations
OECD Organization for Economic Cooperation and Development
UNCITRAL United Nations Commission on International Trade law
PPA Public Procurement Agency
SBD Standard Bidding Documents
FPPD Federal Public Procurement Directive
GDP Gross Domestic Product
MOFED Ministry of Finance and Economic Development (formerly MEDAC)
FDRE Federal Democratic Republic of Ethiopia
USD United Stated Dollar
FIDIC International Federation of Consulting Engineers
MDB Multilateral Development Bank
MEDAC Ministry of Economic Development and Cooperation (until year 2001)
FPPD Federal Public Procurement Directive
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1. INTRODUCTION
1.1 Background of the study
The construction industry is one of the most significant industries which plays a major role for
economy of a nation. It’s even more important in developing countries such as Ethiopia as it’s
among the key sectors which accommodates substantial work force. The country is still on the
path to development where different infrastructures such as buildings, transportations like
roadways and railways, dams and water works are under construction. With many more
development expected to come many years ahead the sector holds high promises for the country
if it is managed properly.
The industry is among many sectors which has significant amount of percentage distribution of
GDP by economic activity in Ethiopia. According to MoFED, (2016), report construction covers
5.9 percent of GDP which puts the sector among the highest percentage contribution recorded
for the year. The percentage contribution of the sector has still showed continuous growth from
year to year. Moreover, according to Gezahegne, (2011), public construction projects consume
an average annual rate of nearly 60% or ¾ of the Governments capital budget.
Construction industry involves many activities from beginning to end. It’s a systematic process
with many inputs and outputs and through this process Procurement or tendering process is
amongst the prime important elements. The Procurement process has been an issue in the
construction world among many others as it is directly or indirectly related to the usual time and
cost overruns associated with construction projects Laychiluh, (2012).
«Procurement » mean obtaining goods, works, consultancy or other services through purchasing,
hiring or obtaining by any other contractual means; «Works» mean all work associated with the
construction, reconstruction, up grading, demolition, repair or renovation of a building road, or
structure, as well as services incidental to works, if the value of those services does not exceed
that of the works themselves and includes build own-operate, build- own-operate-transfer and
build-operate-transfer contracts. Public procurement is the process of the acquisition, usually by
means of a contractual arrangement after public competition, of goods, services, works and other
supplies by the public body using public fund. «Public Body » mean any public body, which is
partly or wholly financed by the Federal Government budget, higher education institutions and
public institutions of like nature; and «Public Fund » mean any monetary resource appropriated
to a public body from the Federal Government treasury or aid grants and credits put at the
Addis Ababa Science and Technology University Page | 1

disposal of the public bodies by foreign donors through the Federal Government or internal
revenue of the public body. (FPPA, Proclamation 649/2009).
The public procurement process spans the whole life cycle from initial conception and definition
of the needs to through to the end of the useful life of an asset or the end of a contract.
Procurement is a broad concept, which goes beyond purchasing activity, whose purpose is to
give the public body best value for money. Value implies right price, right quality, right time,
right place, and right quantity. Moreover, lowest initial price may not equate to lowest cost over
the operating life of the item procured. But the basic point is the same: the ultimate purpose of
sound procurement is to obtain maximum value for money. (Public Procurement Agency, 2011).
Public sector have a multitude of reasons for existence, and considerably more complex
relationships with a wider range of stakeholders than the business enterprise (Giddens 1998;
Donnelly 1999) quoted in Jhon, (2007). Hence, creating value in the public sector domain is not
as easily assessed as returning improved value to shareholders Moore, (1995) quoted in Jhon,
(2007).
Public procurement in Ethiopia dates back to 1940s. According to a report prepared by the
Ethiopian Procurement and Property Administration Agency quoted in Tesfahun, (2011), public
procurement was started in 1940 EC. Furthermore, according to Admasu, (2008) quoted in
Tesfahun, (2011), it was established to procure military equipment’s and supplies for soldiers.
According to the report, the improved procurement services were started in 1942 EC. During the
time, other public organizations didn’t like to be subordinated to the Ministry and they felt
dominated. In addition, the ministry didn’t have skilled and qualified man power that it couldn’t
perform its function efficiently and effectively as expected. Then an independent agency
(Ministry of Public Property Organization and Distribution) were established in 1950. Under
proclamation _ 19/1950, this independent agency was responsible to procure and distribute
materials such as military uniforms, equipment’s and supplies; public vehicles, capital
equipment’s and stationeries; materials which are crucial for development and industrialization;
air, water and inland transportation equipment’s and spare parts. The current Ethiopian
government, to ensure that public property, in which a significant amount of public money is
invested, is utilized in such a manner as to enable the government device maximum benefit
therefrom and modernize the administration thereof, has established the Public Procurement and

Property Administration Agency under Proclamation _ 649/2009. Further, a new public

procurement directive and manual has been issued.
Good governance in public procurement sector plays a significant role in the success of the
public expenditure management as about 53 percent of the Government of Ethiopia’s annual
budget is expended through procurement. This represents an annual expenditure of about
USD$3.5 billion. Rajesh Dr, (2018), Expenditures are on goods, works and services to deliver
public needs. Among this the construction work sector is one of them. To achieve best value for
money for the taxpayers and satisfy the funding organizations also for the improvement of
economy, effectively managed procurement with the right tender evaluation method is important
to select a contractor with the ability to carry out a given project with good performance instead
of focusing only on the best price. According to a Journal of Scientific & Engineering Research
in jimma, Volume 7, (2016), In Ethiopia the major purchaser of construction is the federal
government. And the most common procurement method is the competitive low-bid procedure
in which contracts are awarded to a responsive contractor who offers the least price, which has
inherent flaws of high competition and minimum performance. These incompetent practices
pose a serious risk and problems. It is therefore, important to assess the impact of tender
evaluation system on performance of public work projects in Ethiopia construction industry.
This study was conducted to assess the current tender practice, different evaluation methods and
the performance of the contractors selected under different tender evaluation methods on public
Building Projects.
1.2 Statement of the Problem

FDRE House of Peoples' Representatives approves two types of budget for different public
bodies every year. These are recurrent budget and capital budget. Budget approval for
construction of buildings and road projects is categorized under capital budget. According to
Proclamation 649/2009 this budget shall disburse through a tendering process, hence since
significant amount of money is budgeted on different type of projects. High attention is given on
the type of tender and method of evaluation selected in order to ensure that government funds
are used in the most efficient and economical way so that the best value of money is attained
through quality goods and services which are delivered timely and without delay. The most
common tender evaluation method in Ethiopia is the competitive low bid awarding system in
which contracts are awarded to a responsive contractor who offers the least price. This method

of awarding system ensures the least cost for completing a project. Though lowest-bidder
ensures the least cost, a system based strictly on the lowest price provides contractors to
concentrate on cutting bid prices to the maximum extent possible instead of concentrating on
quality measures. As a result, the low-bid system may not result in the best value for money
expended or the best performance during and after construction.
1.3 Objective of the study

1.3.1 General Objective
• To assess the tender evaluation system on performance of selected public building
projects.
1.3.2 Specific Objectives

• To assess the existence of problems in the tendering system of federal public
procurement and construction stage
• To analyze the existing bidder selection and awarding system and provide a comparative
study of the alternative bidding systems in Ethiopia.
• To evaluate the performance effectiveness of the contractors selected under different

evaluation system on public Building Projects.
• To suggest the best alternative method to ensure better project performance of building
projects based on analysis and results of this study.
1.4 Research Questions

• What kind of alternative tender evaluation practices are performed on public sector
building project works?
• What are the problems associated in tendering processes and construction stage in public
sector building projects?
• How is the performance of contractors selected under different tender evaluation

methods on public sector building project works?
• What measurements should be taken to solve the problem when they occur?

1.5 Significance of the Study

The study aims on assessing the current status of tender evaluation system in the construction
industry of Ethiopia.
 In Ethiopia tender evaluation methods such as competitive low bid awarding system are
used broadly. Though, many researchers conducted around this method have showed its
flaws on procurement process also in the long run affect project performance and
suggested to use other alternatives the method is still very popular in the construction
industry of Ethiopia especially public building project works.
 Also it is noticed that there are a number of problems in the public construction industry
of Ethiopia caused by wrong selection of procurement method and evaluation, no
measures are being taken and the condition seems to getting worse. Construction projects
are frequently delay, high risk for the client, over budget and conflict is increasing.
 Understanding the factors that are influencing the performance of project at the
procurement stage (evaluation methods used) and construction stage will make it possible
to handle the procurement problems much better and minimize the emerging effect
during the construction period
It is therefore, important to analyze the impact of this alternative awarding system on the
performance of major public building projects. The study will try to forward recommendations
and suggestions for implementing the more advantageous practice to both client and contractor
also to enable the Public Procurement and Property Administration Agency look into the
existing attitudes on selection practice, which will eventually translate to a better decision
making and increase project performances.
1.6 Scope and Limitation

This study was narrowed to public building projects under the Federal Government of Ethiopia
particularly Addis Ababa on selected public organizations and on the methods used for
evaluating the contractors. Since the study is about assessing the current tender evaluation and
performance the samples were taken from the multiple projects which the selected public
organizations have been involved with in the last 5yrs (2005-2010) in order to get recent data.
The groups of respondents that were targeted for this research work are those who have been

involved in the tender evaluation practices of building projects and those involved in public
building construction projects. They are mainly construction professionals and staff, who have
played the key roles in procurement process and construction works in general.
Limitations encountered in this research include:-
 This study is concerned with major procurement evaluation methods practiced for
construction works only, and will not take into account the other procurement methods for
goods and consultancy services.
 Due to time and budget limitation the study was conducted around Addis Ababa on public
building projects constructed by GC-1 contractors only.
 The data, to be collected, for this study covers only the last five years.

2. LITERATURE REVIEW
2.1 General
Tender means a request drawn by a procuring entity for offers or quotations to be made by
suppliers, service providers, contractors or asset buyers. Or offer, quotation or technical proposal
made by a supplier service provider, contractor or asset buyer in response to a request by
procuring entity Athumani, (2012).
In most contract documents the word "Tender" used integer changeably with the word "Bid" and
according to FIDIC MDB 2010 article 1.2 quoted in Damtachew, (2015), states that the word
“Tender” is synonymous with “bid”. According to ISO 6707-2:2014 tender is US word for bid
and it further describes the word tender as written offer to execute at a stated price or rate an
order for the supply of goods or services, or the execution of works under given conditions.
Bid type has a significant contribution to the success of projects in the construction industry, it
should be the process of inviting and evaluation depends on the type of project and financial
capability. Selection of the most appropriate bidder for a project is a crucial challenge faced by
the construction industry Laychluh, (2012).It is more important to identify and use a suitable bid
evaluation method that considers contractors‟ performance to ensure successful completion of
projects that will have the best performance during and after construction.
According to Smith et al. (2008) quoted in Agerberg, (2012), the level of risk increases in the
beginning of a project and reaches its highest level during the tendering process where the
project uncertainty is at its peak. When the production starts, risks are either actualized or
expired and the level of risk will decrease as the project progresses. As a result, risk
management becomes most vital in the tendering process. Also (Elkington and Smallman, 2002)
quoted in Agerberg, (2012), claim that there is a strong relation between an early risk
management and the success of a project. The volume of resources spent in risk
management activities is a fundamental factor to project success. An early involvement of
risk management will create better conditions for the contractor, in both the tendering
process and in the execution phase.
Cost estimation is the phase of the tendering process where the contractor specifies a
price on their commitment to the client. Kim et al. (2008) quoted in Agerberg, (2012), say
that the cost estimate has to be low enough to win a project but high enough to get the
required rate of return. Therefore the estimate is a consideration of the two extremes and it will

become crucial to the existence of the company. A major part of the cost estimation is performed
in the tendering process where risks are assessed and added to the tender price.
According to studies by (Kim et al., 2008; Potts, 2008) quoted in Agerberg, (2012), showing
that risks have historically either not been managed at all or assessed as a stipulated
percentage of the contract sum. Also study by Fayek et al. (1998) quoted in Jhone, (2012),
shows that more than 50% of the contractors still do not use any formal techniques to
assess risks in the tendering process. Because participating contractors fail to use structured
risk management and lack of understanding on the importance of risk management in the
tendering, they compile incorrect estimations. While the construction industry is becoming more
complex, structured risk management systems can be the difference between failure and success.
Now a days from the different tender evaluation methods selecting contractor based on least cost
is being used extensively. While the low-bid procurement system has a long-standing legal
precedence and has promoted open competition and a fair playing field, a long-standing concern
expressed by owners and some of their industry partners is that a system based strictly on the
lowest price provides contractors with an incentive to concentrate on cutting bid prices to the
maximum extent possible (instead of concentrating on quality enhancing measures), even when
a higher cost product would be in the owner’s best interest, which makes it less likely that
contracts will be awarded to the best performing contractors who will deliver the highest quality
projects. As a result, the low-bid system may not result in the best value for money expended or
the best performance during and after construction Laychluh, (2012).
In this era of globalization and increasing competitive environment, the need for evaluating
contractors‟ performance becomes more crucial. This is because the technological complexity of
construction projects generates enormous risks, and selecting a capable contractor is one of the
most important tasks faced by a construction client or his representative who wishes to achieve
successful project outcome (Fong and Choi, 2000) quoted in Victoria, (2012).In the public sector
the public body adverts the tender then interested bidders will submit their technical documents
along with their financial offer. To award the construction projects contractors will undergo
through procurement process and must fulfill set of qualification criteria set by the public body
and be evaluated based on this criteria. During this process tender evaluation method is an
important aspect to select qualified contractor. Without a suitable and precise method for
selecting the best contractor, the completion of a project will likely be affected.

Contractors rank among the most essential and important stakeholders needed in the delivery of
construction projects. The contractor is the building expert and as such must be capable of
delivering a project without a risk being placed on the client who is saddled with the ownership
and occupation risks (Scientific Research Publishing, 2017). However, most capital projects fail
and are abandoned in different stages of their development, while others that were delivered
performed poorly in delivering intended services. Frequent cases of failed and abandoned public
sector projects are consistently causing serious nightmare to all the stakeholders within the
construction industry (Olapade and Anthony, 2012; Amade, 2014) quoted on, Scientific
Research Publishing, (2017). According to Journal of Scientific & Engineering Research,
Volume 7, (2016), Continuous problems of inferior quality of constructing facilities, high
incidence of claims and litigation, frequent cost overruns and use of poor quality of materials
have become the main features of Ethiopian’s public construction work contract. causes of poor
performance of contractors were won projects with lowest price
Currently, the public sector procurement of construction tender evaluation method is largely
based on the lowest bid award system. The customary practice of awarding contracts to a lowest
bidder was established to ensure the lowest cost for completing a project. In public construction
works, this practice is almost universally accepted since it not only ensures a low price but also
provides a way to avoid fraud and corruption Ahmed, (1993). The tender evaluation method is
critical for any type of construction work as it affects the cost, quality and time of the project
once the tendering process is done and the awarded contractor starts building the project. Also, it
has been postulated that even the rules of competitive bidding can at times be short-circuited, for
instance, the setting of a particular brief timeframe, insufficient publication, and biased
design/specification. But according to Samwel, (2009) quoted in Athumani, (2012) Competitive
tendering fosters honest competition in obtaining the best work and suppliers at the lowest
possible price because taxpayers‟ money is being used. It is done so in order to avoid favoritism,
extravagance, fraud and corruption in the public sector. A taxpayer, who funds public
expenditure, demand high quality public services and thus a public procurement entity, should
create good condition for tendering process in order to deliver the most effective to the
taxpayers.

2.2 Factors influencing the selection of procurement Method

The selection of any project delivery method is dependent upon the owner's needs, types and size
of the projects. But selecting only right delivery method for a certain project does not secure the
right candidate to execute the project so along with the delivery method outlining a good
procurement strategy and selecting the right tender evaluation method is necessary. However,
many factors affect the decision making in selecting the right procurement method.
Procurement systems govern the delivery processes of a construction project in many ways and
are the key in determining the success or failure of any particular project. Procurement systems
have received well deserved attention in countries such as Australia, United Kingdom, United
States of America, Japan and New Zealand, but this has never been the case locally as well as in
many other African countries. With a plethora of different procurement systems from which to
choose to deliver diverse construction projects. There is currently no systematic and no realistic
approach applied or used to select the appropriate procurement system, Mathonsi and Thwala,
(2011)
A study by Russell et al. (1988) quoted in Jakrapong, (2002) explained some of the factors which
affect the decision making by interpreting the interaction amongst three components, namely:-
 The decision-maker or owner

 The contractor
 The Decision
The decision-maker or owner. The characteristics of the owner affects the decision strategy
used and the criteria selected. Various criteria and sub-criteria describing the owner include:
Type of owner: Private and public owners select different criteria. That is, when selecting
criteria for prequalification, the private owner is more elastic. Whereas, the public owner
performs that selection of criteria under certain regulations no matter what the type of project.
Owner's objectives: The objectives and their weights of relative importance affect the criteria
selected. In addition, many objectives within each type of owner are involved in prequalification.
Amongst these objectives, the project objectives, varying between projects and owners, are
dominant. These objectives include minimizing cost, minimizing time, improving quality and
improving safety.

Scope of work: The scope of work diagnoses both the types of construction and the relative
sizes of the project. The types of construction considered are money demanded, labor or material
concentrate, quality and type of equipment demanded specialized trades or subcontractors
implicated, the technology being executed and construction technology applicable. The relative
sizes of projects influence the degree of detail in the prequalification process.
Resource demand: Resource plans are made before a project launches. Different resources are
demanded for different projects. Therefore, different criteria are applied to different projects.
The criteria securing a project consist of financial affairs, equipment, materials and man power.
Constraints on the implementation of the project: Before a procurement strategy is selected,

the sub-criteria affecting the implementation of the project are contemplated including
government regulations (eg, cannot obtain a planning permit), resource availability (eg, labor,
construction financing), geographic location of the project (eg, mobilization) and public issues
(eg, environmental impacts).
Procurement strategy: The different procurement strategies influencing the characteristics of

the owner are, for example, lump sum, reimbursable cost, design and build, construction
management, time and material and unit price.
The contractor: - According to Jakrapong, (2002) By asking several questions such as

experience, balance sheet, project at hand and other information’s the weaknesses and strengths
of the contractor can be assessed. However, if the above references are biased and if the list of
references is limited to the advantage of the contractor, careful consideration must be taken.
Other sources include:
The decision. A decision is made based somewhat on currently used techniques and on the bias
of the decision-maker as follows Jakrapong, (2002),
Decision bias: Many biased items influence the final decision in the prequalification process.
The explanation of the causes and effects of such bias makes the practical prequalification
decision-making understandable. The causes of the bias come from either inside or outside the
owner's organization as follows:
Owner's preference: The previous working relationship between the owner and a contractor
guide the preference of the owner. That is, if the contractor understands the owner's needs and

how the owner performs work, trust or distrust between the two parties may develop. This trust
or distrust possibly leads to bias in qualifying contractors.
Owner's risk attitude: The risk attitude of management influences the prequalification process
performed and the rigor of the criteria employed.
Organization infrastructure: The more complex the organization, the more the bias tends to
occur. This may be because many individuals are involved reflecting many conflicting
objectives.
Resource constraints: The lack of either financial capability or personnel expertise of the
owners leads to bias in prequalification.
Owner's personnel: If the owner's personnel or representatives have not enough capability,
assessment of contractor's ability maybe improper perhaps resulting in an incorrect decision. On
the other hand, if the contractor's personnel form good relationships with the owner's personnel
or representatives, this contractor tends to succeed in prequalification.
Construction technology: The owner tends to prefer the contractor who uses technology that
the owner trusts.
Economic condition: The details of the prequalification process and the rigor of the criteria
employed vary with market conditions.
Government regulations: Failure to comply with government regulations makes the contractor
unsuccessful in prequalification Jakrapong, (2002)
2.3 Alternative Evaluation Method
The tender evaluation method worldwide has evolved in different spectrum different
organizations around are adopting to different evaluation mechanisms. According to Shrestha,
(2014), In Florida, USA competitive, negotiated bidding is in practice. Under this provision,
minimum of three contractors are selected based strictly on their qualifications, and then
negotiates a guaranteed maximum price or lump sum (depending on the project) with the highest
rated team. The, EU introduced legislation to allow public sector clients the option of awarding a
construction project using Economically Most Advantageous Tender (EMAT). It enables the
contracting authority to take account of criteria that reflect qualitative, technical and sustainable

aspects of the tender submission as well as price when reaching an award decision. It is similar
to Quality and Cost Based System (QCBS) where certain weightage for Technical and Financial
parameters are given and contractor with best contract value is awarded the contract. Some
organizations award contract to second lowest bid and the median bid. Several countries, such as
Italy and Taiwan, have developed variations of the average bid method. According to Shrestha,
(2014), one of the alternative evaluation methods which are based on the Average bid method is
briefly explained with example as follows.
2.3.1 Average Bid Evaluation Methods
According to Shrestha, (2014), the basic philosophy behind the average bidding procedure is that
the best bid is the one closest to some average, not the lowest, not the highest. These competitive
price-based average bidding methods are used mainly to ensure that the contractor is responsible,
to avoid contractor-failure, and to reduce disputes and claims. The underlying principle is that
the contractors should get a reasonable and realistic price for their work. It is assumed that with a
fair price they would conform to quality requirements of the project, would complete on time,
and would not have adversarial relationships with the consultant of the employer.
In average-bid method, contract is awarded to the contractor whose price is closest to the average
of all bids submitted. In general, the winner based on the average bid method is the contractor
whose bid satisfies a certain relationship with the average of all bid prices. Different average bid
methods use different procedures for calculating the average, or use different criteria for
determining the winning bid. For example, some use an arithmetic average or a weighted
average, while others use the average of the remaining bids after all bids that differ more than a
certain percentage from the average of all other bids are eliminated. Similarly, the winner might
be the contractor whose price is closest to the average, or the contractor whose bid is closest to,
but less than the average. The former, for example, is used in Taiwan while the latter is used in
Italy. To illustrate the mechanism of the average bid method, consider the example below which
shows seven contractors that have submitted the bids Shrestha, (2014).

Table 2.1 Example 1 on mechanism of the average bid method
Contractor A B C D E F G
Bid amount/ price 78 85 96 102 105 108 125
d/f from average -21.86 -14.86 -3.86 2.14 5.14 8.14 25.14
% d/f from average -21.9% 14.9% -3.9% 2.1% 5.2% 5.2% 5.2%
Average is 99.86
As per Low bid criteria, contractor A on table 2.1 above with 78 is to be awarded the contract.
The average bid price is 99.86. According to Taiwanese method the bid of contractor D i.e. 102
is closest to the average and thus wins the project and according to Italian method the bid of
Contractor C i.e. 96 is closest to and lower than average will get the contract. This standard
mechanism is generally used when there are a small number of bidders. Insinuations involving
larger numbers of bidders, additional rules may be used such as excluding high and low bids
from consideration as an attempt to further eliminate outliers. This mechanism is implemented in
Switzerland. In above example Contractor A and G are excluded from competition and new
average becomes 99.2.
Contractor B C D E F
Bid amount/ price 85 96 102 105 108
d/f from average -14.86 -3.86 2.14 5.14 8.14
Average is 99.2
Closest bidder D is awarded from the above table 2.2.
There are other sorts of exclusions sometimes used such as in Peru and in the State of New York
where the elimination criterion is based on the difference between bids and the average bid. Bids
that lie 10 percent below or above the average will be thrown out, as stated in the Peruvian

regulations for bidding and contracting for public works (Albano, Bianchi, and Spagnolo, 2006)
quoted in (Kumar). In the given example, A, B and G are excluded and average of remaining bid
becomes 102.75.
Contractor C D E F
Bid amount/ price 96 102 105 108
d/f from average -3.86 2.14 5.14 8.14
Average is 102.75
Closest bidder D is awarded from the above table 2.3.
Similarly, a formula to decide a reasonable offer from several competitive bids was developed in
Europe, known as “Danish” system, wherein the lowest and highest offers are rejected out right
away and the rest of the offers are only considered Irtishad, (1993) quoted in Shrestha, (2014).
This formula stands as:
NA = (NL + 4A +NH)/6…………………………………………………………………….. (2.1)
In above example, A and G are rejected;
NL = new low is 85;
NH = new high is 108;
A = average of all offers is 99.86
Hence, NA i.e. new average = (85 + 4x99.86 +108)/6 = 98.74

Contractor B C D E F
Bid amount/ price 85 96 102 105 108
d/f from average 13.74 -2.74 3.26 6.26 6.26
Average is 102.75
The bid which is first above this new average i.e. D is then treated as realistic and acceptable.
The main advantage of this method is that it safeguards an owner against signing a construction
contract for an unrealistically low bid price that almost certainly will lead to adversarial
relationships during construction. Although it has been argued that average bidding method
results in significantly higher profits for the contractors that won projects and it has the potential
to improve relationships between the owner and the contractor. The basic drawback of the
average-bid method is that it does not necessarily promote price competition that leads to higher
costs for the owner and there is not enough evidence to conclude that incidence of claims is less
in European countries that practice average bid method. (Ioannou et al. 1993) quoted in
Quantson, (2014)
2.3.2 Multi-Parameter Bid Evaluation Method (Based on price and “other” factors)
(Herbs man and Ellis, 1992) quoted in Quantson, (2014) proposed the multi-parameter bidding
procedure; a model of competitive bidding that is based not only on cost but also on other
parameters. They suggest that the major parameters should be cost, time and quality. Given that
the amount of time a contractor proposes to complete a project may have a major impact on
costs. By factoring this cost saving into the bid process, a more accurate reflection of total costs
can be calculated. Similarly the impact of quality can also be included in the award-decision.
The long-term costs of maintenance and repair are directly related to the quality of the
constructed facility being built. In the Multi-Parameter Bid evaluation Method, estimates of
quality may be measured by the type of materials proposed to be used, the previous
experience/past performance of the general contractor and the proposed subcontractors. Under

the Multi-Parameter Bid Method, time and quality concerns are each assigned a maximum
attainable number of points.
The bids are then reviewed and ranked based upon these factors, as well as upon the contract
cost. The total combined costs of all the bidders are then compared to select the best bid. Under
this method factors other than price are considered before award decisions are made. This is
done in a more rigorous fashion than the customary practice of prequalification procedure.
Technical merit, and time and quality-related factors in a bid proposal are being given more
emphasis Quantson, (2014). This method may be attractive because it evaluation focuses more
on time and quality but a contractor proposing to execute a project within a certain period of
time doesn’t guarantee project completion with in that time just as contractors offering the least
bid does not end on schedule.
2.4 Tender Evaluation in Ethiopia

The Ethiopian Public Procurement and Property Administration Agency has been established
under proclamation № 649/2009. The Agency, which is directly responsible to the Ministry of
Finance and Economic Development (MoFED) have the following duties and responsibilities
according to proclamation (article 15(2)):-
 Advising the Federal Government on all public procurement and property administration
policies, principles and implementation;
 Monitoring and reporting to the Minister the performance of the public procurement and
property administration systems in the Federal Government; initiate amendments on laws
and implementation system improvements
 Prepare, update and issue authorized versions of the standard bidding documents,
procedural forms and any other attendant documents pertaining to procurement and
property administration;
 Review and decide on complaints submitted by public bodies on the conduct of bidders
or suppliers, and send copies of such decision to the concerned organs;
 Conducting audit to ensure that procurement and property administration activities of

public bodies are in accordance with the Proclamation… are few among the many others.

The Ethiopian Public Procurement and Property Administration Agency, further, has four main
departments among which is the Complaints Review and Resolution Department. The Agency
has a committee to receive complaints from candidates or bidders. According to CPAR report
(2010), it is difficult for the committee to act independently as far as it is dependent on MoFED.
First, members of the Committee are selected by government in such a way that the Ministry of
Finance and Economic Development will be the chair and Public Procurement and Property
Administration Agency, Public Enterprises, Public Bodies, the Ethiopian Chamber of Commerce
and Sector Associations (ECCSA) all serving as members of the Committee. But according to
Tesfahun, (2011), in different countries, the committee is selected from independent outsiders
like lawyers, judges, university professors, etc. For example in Canada, where the Ethiopian
procurement system is modeled from, the complaint review committee members are all selected
from outside of the procuring agency. In addition, the committee reviews compliant cases in a
court like setting where the compliant and the defender are present with lots of other people
attending the event.
2.4.1 Principles of Public Procurement

The principal hallmarks of proficient public procurement are: Economy: Procurement is a
purchasing activity whose purpose is to give the purchaser best value for money. For complex
purchases, value may imply more than just price, for example, since quality issues also need to
be addressed. Moreover, lowest initial price may not equate to lowest cost over the operating life
of the item procured. But the basic point is the same: the ultimate purpose of sound procurement
is to obtain maximum value for money. (Thai, 2009) quoted in Tesfahun, (2011),
According to Federal Public Procurement Directive of 2010 the principles of any authority and
execution of Procurement must comply with the following Principles:-
a) Achieve maximum value for money in procurement. I.e. insure economy, efficiency
and effectiveness.
b) No Candidate shall be discriminated or excluded from participating in public
procurement on the ground of nationality or other reasons which are not related to the
evaluation criteria except in accordance with the rule of preference provided in the
proclamation.

c) Support the country’s economic development by ensuring economy, efficiency and

effectiveness in the execution of public procurement.
d) Any criteria applied in making procurement decisions and decisions taken on each
procurement must be made transparent to all concerned parties.
e) Ensure accountability for decisions made and measures taken in the execution of
public procurement.
f) Encourage local producers, companies and small and micro-enterprises which support
the national economy through the application of preferential treatment granted by the
Proclamation and this Directive.
2.4.2 Application of Procurement Rules
The Tender evaluation procedure and rules followed by government and private clients/owners
in Ethiopia is somewhat different. Even the procedure followed between public sectors and
public enterprises is different, for instance the tender process on public sectors is strictly under
rules and regulations while on public enterprises and private clients the rules are flexible and if
needed will be adjusted based on the clients interest. However, all this groups have common
goals which are to find a candidate/contractor that will deliver a given task in accordance with
schedule, quality and budget.
2.4.2.1 Government owned public sector
The tender process and evaluation method on public sectors is regulated by Ethiopian Federal
Government Procurement and Property Administration Proclamation by the power vested in
proclamation no. 649/2001 and all government body shall obey the directive and procedures. So
any tender floated by public body is restricted to these regulations. The two principal legal
instruments to deal with the Federal Governments public procurement are the Public
Procurement Proclamation 2009 and Public Procurement directives 2010. The tender document
for the procurement of works for public bodies in the federal government is the Standard
Bidding Document (SBD) for Procurement of Works for National Competitive Biddings (NCB)
Public Procurement Agency (PPA) version 1 August 2011, Addis Ababa. And hence, the tender
document to be referred in the research is this document.

Public sector procurement in Ethiopia is directed by the Standard Bidding Documents (SBD)
prepared by public procurement agency (PPA) according to Proclamation no. 649/2009 which
are categorized into five divisions (Pharmacy, Consultancy, Non-Consultancy, Goods and
Works) each has two separate SBD for International Competitive Bidding (ICB) and for
National Competitive Bidding (NCB) in both Amharic and English languages and shall be
used by all public bodies. This act provides a legal framework for carrying out procurement
using public funds in a transparent, efficient and fair manner also the tender evaluation is based
on competitive least bidding were a threshold to pass technical qualifications will be set then
contract will be awarded to the candidate who proposed the lowest bid price.
2.4.2.2 Government owned public enterprise
According to "Public Enterprises Supervising Authority and the Industrial Development Fund
Establishment Proclamation No.277/2002" "Public enterprise" means an enterprise as defined
under Article2"(1) of the Public Enterprises Proclamation No.25/1992,or a wholly state owned
share company, but excluding those enterprises for which specific supervising authorities are
designated by other laws or decisions of the government; "Share company" means a share
company partially owned by the state, but excluding those share companies in which the state
owns shares through public enterprises. Commercial Bank of Ethiopia, Ethiopian Airlines, Tele
and Ethiopian Electric Power Corporation are among some that are categorized under public
enterprise.
The tender process on public enterprise and is partially similar as the public sectors in some
cases they adopt the procedure set out by PPA but other times FIDIC is also followed. Since
public enterprise are managed by their own budget they are not bound to rules set on the
Amended Federal Government Procurement Directives, So the criteria set for contractors
evaluation are not governed or limited to the amended directives they are prepared based on the
clients interest and can be adjusted whenever needed also the evaluation methods selected are
not always list bidder but sometimes can be weighted average, direct negotiation or other
methods are adopted. The criteria requested to be fulfilled by the participant on the Technical
Proposal such as specific and general experience are sometimes beyond the capacity of local
contractors which is why most public enterprise mega projects are handed to foreign contractors
in which case it raises complaint by local contractors. However, despite the increase in number
of private contractors in Ethiopia according to MEDAC, (2002) survey suggests the capacity of

private sector to undertake big and complex construction projects is limited. Such type of
complex construction projects is therefore contracted out to foreign-based construction
contractors.
According to the draft CPAR report, 2010, quoted in Tesfahun, (2011) it is a fundamental
principle of sound public procurement that the procurement rules apply to all spending of public
funds or spending of funds controlled by the public. The rationale behind this principle being
that if the public ultimately funds or carries the risk of an activity, that activity should be
controlled by the public. This principle is supported by the UNCITRAL Model Law on Public
Procurement, which is a major deviation from international best practice for Ethiopian public
procurement.
In Ethiopia, the current legal framework for public procurement exempts procurement carried
out by publicly owned enterprises, based on the argument that these enterprises are not spending
public funds, since they have income and budgets of their own, and are controlled by
independent boards. However, this is against the widely accepted principle in the procurement
legislation.
2.4.3 Methods of Public Procurement
A procurement method is the technique that public body uses to acquire goods, works and
services. The method selected depends on a number of factors including the type of goods or
service being procured, the value of the good or service being procured, the potential interest of
foreign bidders and even the cost of the procurement process itself. According to 2010 CPAR
report stated: quoted in Tesfahun, (2011) “the CPAR mission was left with the impression that
the choice of procurement method was left at the discretion of the procuring entities which, due
to poor control and enforcement, often choose the convenient method, rather than the most
competitive method.”
The Ethiopian Federal Government procurement and property administration proclamation no

649/2009 article 33 (1) states six methods of procurement for public goods and services, these
methods cover:-
 Restricted Bidding Method

 Direct Procurement Method

 Two-Stage Bidding Method

 Request for Quotations Method
 Open bidding
 Request for proposal (RFP).
The selection of any procurement method other than Open Bidding should be recorded in the
Records of procurement, stating the reasons and justification for the method selected, in
compliance with the conditions specified in the relevant Proclamation and Directive. According
to (PPA,2011), The Open Bidding Method is the preferred method of procurement of goods,
works and services (Consultancy and Non Consultancy), unless the threshold levels or
circumstances relating to a specific requirement make it more appropriate for one of the other
procurement methods stated above to be used.
2.4.3.1 Open Bidding Method
All interested firms bidders are given adequate notification of contract requirements and all
eligible bidders are given an equal opportunity to submit a tender. The public body must give
sufficient public notification of bidding opportunities to potential bidders to determine their
interest and prepare bid documents. The Open Bidding Method is the preferred method of
procurement of goods, works and services (Consultancy and Non Consultancy), unless the
threshold levels or circumstances relating to a specific requirement make it more appropriate for
one of the other procurement methods to be used. (PPA 2011)
According to Kovacs (2008:254) quoted in Damtachew, (2015), open tendering procedures and
restricted tendering are the two normal tendering methods further states that open tendering
procedures happen when theoretically all potential bidders from the four corners of the world are
allowed to submit a bid. Open tendering is shorthand for competitive bidding. It allows
companies to bid on goods in an open competition or open solicitation manner. Arguably, the
open tendering method of procurement encourages effective competition to obtain goods with an
emphasis on the value for money. However, the process for awarding construction contract is
typically based on low bid method meaning the construction firm submitting the lowest bid price
will receive the project which is a downside as many imply on their study because low price

only does not secure god contractors and it makes it less likely for contractors with good
performance to win the project which is why they loss interest.
2.4.3.2 Restricted Bidding
The restricted bidding procedure is a two-stage procedure where bidders express their interest
following publication of a procurement notice, but only those invited by the public body may
submit bids after a screening process. Thus the restricted procedure consists of two distinct
stages - selection of suitable bidders and evaluation of bids. At the first stage, the only criteria
which may be used to select prospective bidders are economic and financial standing or
technical knowledge or capability of carrying out a specific assignment. The restricted procedure
works best where the public body is clear at the start of the process as to what it wants to
procure, in terms of pricing and other award criteria.
This type is allowed only when the required object of procurement is available only with limited
suppliers and the cost of the procurement does not exceed the limit in the directive issued by the
Ministry; or where a repeated advertisement of the invitation to bid fails to attract bidders in
respect of a procurement subject to the directive to be issued by the Ministry (article 49). Unlike
open tendering restricted tendering only places a limit on the amount of request for tenders that
can be sent by a supplier or service provider. Because of this selective process, restricted
tendering is also sometimes referred to as selective tendering. Like open tendering, restricted
tendering is considered a competitive procurement method; however, the competition is limited
to agencies that are invited by the procuring team.
2.4.3.3 Direct Procurement
Direct procurement happens when the public body, for some justified reasons, procures goods,
works or services from only one source. A public body may use Direct Procurement Method for
procuring goods and related services, works and physical services and intellectual and
professional services directly from one single source without going through all the requirements
of a full bidding process. However, this method shall under no circumstances be used as a means
of avoiding competition or for favoring any one particular Bidder/Consultant or for creating any
scope of discrimination among Bidders/Consultants. The conditions for use of direct
procurement may be summarized as: i) small value contract, ii) availability of only one single

source, iii) extension of existing contract; iv) for compatibility reasons; v) and emergency
situations; Or when there is a need of similar service or repetition of works from one supplier
and when the total contract value is not exceeding the limit stipulated in the directives (article
51).
Also known as Single source procurement is a non-competitive method that should only be used
under specific circumstances. Single source procurement occurs when the procuring entity
intends to acquire goods or services from a sole provider. This method should undergo a strict
approval process from management before being used. However, since the owner will be dealing
or negotiating with one entity it’s highly likely that exposition for corruption may occur and the
owner may loss the chance to evaluate other competition.
2.4.3.4 Request for Proposal (RFP)
A Request for Proposals (RFP) shall be used by public bodies for procurement of consultancy
services. Consultancy services mean a service of an intellectual and advisory nature provided by
consultants using their professional skills to study, design, and organize specific projects, advice
clients, conduct training and transfer knowledge. Public bodies shall use the standard documents
prepared and issued by the PPA for the Request for Expressions of Interest and the Request for
Proposal (RFP).
The RFP shall state that the evaluation of the proposal shall be carried out in two stages. First of
all, the quality of the proposal shall be evaluated by an examination of the technical proposal.
Upon completion of the technical evaluation, the technical evaluation report shall be submitted
for approval to the head of a public body or an officer authorized by him/her, indicating the
ranking and corresponding technical points for each submitted proposal. Evaluators of technical
proposals shall not have access to the financial proposals until the technical evaluation has been
approved. Financial proposals of technically responsive proposals shall be opened in presence of
Consultants or their representatives. The proposal with the best fit qualifications and best price
will be selected. If a lesser qualified (yet still qualified) selection has a lesser price, no contract
should be negotiated. The most qualified and appropriate proposal, regardless of price, should be
selected.

2.4.3.5 Request for Quotation
Sometimes referred to as shopping, request for quotations method is used to buy items of low
value. A public body may undertake procurement by means of a Request for Quotations (RFQ)
in accordance with the requirements set out in Proclamation and Directive for the purchase of
readily available, standard off the shelf goods or for procurement of works or services for which
there is an established market, so long as the estimated value of such procurement shall not
exceed the prescribed threshold stated in the procurement directives issued by the Ministry
(article 55).
This procurement method is used for small-valued goods or services. Request for quotation is by
far the least complex procurement method available. If you have the option, use this method to
ensure a fast procurement process and not a lot of paperwork. There is no formal proposal
drafted from either party in this method. Essentially, the procurement entity selects a minimum
of three suppliers or service providers that they wish to get quotes from. A comparison of quotes
is analyzed and the best selection determined by requirement compliance is chosen.
2.4.3.6 Two Stage Bidding
A two-stage bidding method is used when the procurement process is split into two phases. The
first phase identifies suitable candidates, who are then invited in the second phase to submit their
firm bids. A public body may use the Two-Stage Bidding Method in accordance with the
requirements set out in Proclamation Article, 57 and 58 and Article 19 of the Directive in the
case of large or complex contracts of goods and related services and/or works and physical
services, such as turnkey contracts for manufacturing process plants, e.g. the design,
construction, installation of equipment and commissioning of a new factory, industrial plants or
the procurement of major computer and communications systems or construction and
commissioning of a public institution. Under this method, the bidding have to follow two-stages,
First-Stage and Second- Stage. Two stages bidding on the other hand is allowed when it is not
feasible for the public body to formulate detailed specifications for the goods or works such as,
contract for the purpose of research, experiment, study or development etc. (article 57).
Since each one of the procedures has a two stage process it can be disadvantageous for some
procurement teams if there is a time limit on securing a contract. In the same manner, this option
is more flexible for both parties, allowing more room for discussion to meet mutual needs. The

combined score of both the technical proposal and the financial proposal are the grounds on
which a bidder is contracted.
In the end, the type of procurement method you choose to use is highly relative to the conditions
of the procurement effort and the type of good or service being acquired. All procurement
methods follow tight legal frameworks to ensure all standards are being met and quality in the
selection process exists. Generally, alternative procurement procedures other than the open
bidding cannot be applicable for most public body construction contracts as most public body
construction contracts are more than the limits specified in the maximum limit provided in the
directive. In addition, the conditions set forth for the use of other alternatives are not usually
fulfilled for construction work contracts except in rare cases.
2.5 Stakeholders in FDRE Public Procurement
According to FDRE proclamation 649/2009 considered as stockholders in public tender

processes; Board, Heads of Public Bodies, Procurement and Property Administration Unit,
Procurement Endorsing Committee, Ad-hoc Evaluation Committees.
The Board reviewing complaints and public procurement and property Administration enter in
action when there is complaints in any party and consists of appoint five persons appointed by
the minister and shall be draw from; the ministry of finance and economic development as
chairperson, from the chamber of commences, public bodies, public enterprises and Public
Procurement and Property Administration Agency as member. Each board member has three
years of term of service. The board shall have technical assistance from the Public procurement
and Administration Authority.
2.6 Procurement Plan
According to the procurement directives in Ethiopia, Any Public Body and other entities
accountable to such Public Body shall be required to prepare a procurement plan supported by
action plan enabling them to execute in due time, the procurement necessary to implement their
work program. Also public bodies have to organize their procurement needs in packages based
on procurement needs data collected from end users and market price survey.

Preparation
The procurement plan shall be prepared in such a way as to enable the attainment of the
following objectives:-
a) To ensure compliance with principles of public procurement stated in article 5 of the

Proclamation.
b) To achieve the work program of the Public Body.

c) To ensure economy and efficiency in the operation of the Public Body by discouraging
piecemeal purchase.
d) Exercise prudence and make the necessary preparation to forestall problems that might
be encountered in the execution of procurement.
Packaging of procurements
In determining its annual procurement needs arising from its various departments, a Public Body
has to adhere to the following procedures:-
a) Require end users in the Public Body to submit their annual procurement needs.
b) Identify the need submitted by end users by type of procurement, quantity, quality and
source.
c) Identify goods, works and or services to which the Public Body gives priority and special
attention.
d) ascertain that there are adequate suppliers for the needs

e) Determine the cost estimate for each type of procurement by reference to survey
conducted by the Public Body or price information obtained from other sources.
Setting time table for procurement
A Public Body has to fix the time table for the main activities to be performed in the
procurement process, using the formats developed by the agency to facilitate the preparation of
procurement plan by public bodies. In doing so, public bodies have to take into consideration the
following and other matters which are relevant to the type of procurement.

a) That the time fixed for the execution of that procurement is in harmony with the work
program of the Public Body
b) That the schedule takes into consideration when the supply is widely available in the
market.
c) That the schedule is in keeping with the minimum floating period of bids prescribed in
Annex 3 of this Directive and allows as far as possible, additional time for bidders to
prepare bid documents in order to create conducive environment for wide competition.
d) In particular, public bodies have to ensure that adequate time is given for preparation,
evaluation and approval of bid documents in respect of complex and large procurements.
2.7 Challenges of Public Procurement
Public purchasers, public procurement practitioners are constantly facing with different
challenges. Even though the Ethiopia has adopted a UNCITRAL Public Procurement Model
Law, it is not being implemented appropriately on ground. The Federal Public Procurement
Agency has undertaken an assessment to ascertain if the Federal Governments public
procurement practices are based on the rules and regulations. As we can see from table 2.5, there
are major flaws in the procurement practices especially with regard to procurement planning and
usage of the SBD. This is due to a poor enforcement mechanism. As to an assessment by the
OECD, worldwide, 56% of countries have weak public procurement enforcement mechanisms
(Tesfahun, 2011).
FPPD 2010 states “Any Public Body and other entities accountable to such Public Body shall be
required to prepare a procurement plan supported by action plan enabling them to execute in
due time, the procurement necessary to implement their work program”. According to an
assessment report prepared on 2009/10 by PPA showing Public Procurement Operations and
Practices Challenges quoted in (Tesfahun, 2011) a total of 54 federal government ministries,
agencies, universities and other institutions were assessed by the PPA. From these institutions 46
organizations (or 80.7%) do not use the SBD prepared by the Agency. In addition, 36
organizations (or 63.16%) haven’t prepared procurement plan (See table 2.5).

Table 2.5 Public Procurement Operations and Practices Challenges

Number % out
of Cases of Total
Type of Challenges Encountered
No procurement plan 36 63.16
Not using SBD 46 80.7
Using direct procurement unjustly 34 59.65
Fractioning procurements 17 29.82
Procurement without the organization managers approval 24 42.11
Improper application of request for quotation 24 42.11
Advance payments more than 30% of the value of the contract 12 21.05
Advertisement not in accordance with the proclamation 9 15.79
Absence of bid opening procedures minute 20 35.09
Failing to announce bid losers 35 61.4
Quick entrance into contractual agreements without waiting for

complements 9 15.79
Failure to open tenders on due date 13 22.81
Procurement without contractual agreement 5 8.77
Source: PPA Public procurement performance audit 2009/10
2.8 Procurement Procedure
The customary trend followed on public procurement system of Ethiopia is open bidding method
or competitive bidding. It is believed that it allows companies to bid on goods in an open
competition encourages effective competition to obtain goods with an emphasis on the value for
money.

2.8.1 Bid Document Preparation
It is essential that the bidding documents provide all the information necessary for bidders to
prepare responsive bids. The public body will establish the required criteria on qualification of
competing contractors based on the Amended Federal Government Procurement Directives
which was enforced as of December 04 2008 E.C. then standard bid document (SBD) will be
prepared. The SBD generally include the following: invitation for bids, instructions to bidders,
bidding forms, conditions of contract both general and special, technical specifications, bill of
quantities and drawings and schedule of prices. The public body prepares bid document using
the appropriate Standard Bidding Documents (SBDs) issued by PPA with minimum changes,
acceptable to PPA, as necessary to address project specific conditions. Any such changes will be
introduced only through bid or bid data sheets, or through special conditions of contract, and not
by introducing changes in the standard wording of PPA„s SBDs. (PPA Guidelines, 2011)
2.8.2 Bid Advertisement
Under open biding method, all interested firms bidders are given adequate notification of
contract requirements and all eligible bidders are given an equal opportunity to submit a tender.
The public body must give sufficient public notification of bidding opportunities to potential
bidders to determine their interest and prepare bid documents. In order to attract a reasonable
number of applicants and to alert all candidates who may be interested in the bid, public bodies
are required to advertise the bid. A public body shall be responsible for advertising directly all
Invitations to Bid (ITB). Invitations shall be advertised in at least one newspaper that has
nationwide circulation. In order to attract a large number of bidders, the bid advertisement may
also be posted on the website of the procuring public body. In addition to one national
newspaper which has a wide daily circulation in the Federal Democratic Republic of Ethiopia,
public bodies based outside Addis Ababa may publish the advertisements in a maximum of two
(2) widely circulated local or regional daily newspapers. Interested bidders on the announcement
will submit sealed technical and financial documents for evaluation.

2.8.3 Evaluation of Bids
The most important consideration in the selection of a successful Contractor in the procurement
of construction works shall be given to the quality of a Contractor technical proposal. The cost
of the services shall be considered judiciously because, services, quality is the primary concern
(Public Procurement Agency, 2011). The Public Body evaluates the Bids on the basis of their
responsiveness to the Schedule of Requirements, applying the evaluation criteria, sub-criteria,
and point system specified in the SBD Section 3. No other criteria or methodology shall be
acceptable. Each responsive Bid will be given a technical score. A Bid shall be rejected at this
stage if it does not respond to important aspects of the Bidding Documents and particularly the
Schedule of Requirements or if it fails to achieve the minimum technical score indicated in the
Section 3 (clause 38(38.2)). The technical score can be given in different arrangement such as
point rate, must meet or both. After this the bidder whose technical document is substantially
responsive will be forwarded for financial evaluation. Depending on the nature and complexity
of assignments, different evaluation methods may be selected. Under section 3, evaluation
methodology & criteria of PPA 2011 on sub section B, Evaluation of bids, determining the
successful bid is stated. According to the methodology defined in the Public Procurement
Proclamation and Directive the Public Body shall select the successful Bid by applying the
following method:-
a. Competitive Low Bid Method (Price Based)

b. Weighted Average Method (Quality and Price Based) depending on the project
complexity and the client.
a. Competitive Low Bid Method (Price Based)

Low Bid Method in the procurement process, a standard practice for many organizations who are
interested in using the competitive nature of bidding is to keep procurement costs low. The
competitive bidding process for awarding construction contracts is typically based on the low
bid method. According to this method, the construction firm submitting the lowest bid receives
the right to the construction contract, i.e. the contract is awarded to the substantially responsive
bidder that offered to fulfill the terms of the contract for the lowest bid price. The financial
proposal will be opened on the specified date and time on the BDS with both client and
participating bidders present then the successful bid will be awarded. The proclamation states the

successful bid as follows: The Public Body shall award the Contract to the Bidder whose Bid has
been determined to be the lowest evaluated Bid and is substantially responsive to the Bidding
Documents, provided further that the Bidder is determined to be qualified to perform the
Contract satisfactorily (article 43(43.1)).
Procedures
i. The Bid with the Lowest Price

• The bids shall be examined to confirm that all documentary evidence establishing the
Bidders' qualifications requested in ITB Clause 22 have been provided.
• After confirming the bids comprise all mandatory documentary evidence establishing the
Bidder's qualification the Public Body will rule on the legal, technical, professional, and
financial admissibility of each bid, classifying it as compliant or non-compliant with
qualification requirements set forth in the Bidding Document.
• The Public Body will then analyze the bids' technical conformity in relation to the
technical specifications, classifying them technically compliant or non-compliant.
• The Public Body shall examine all Bids to ascertain whether there are any arithmetic
errors in computation and summation. The Public Body shall notify Bidders on adjusted
calculation errors and request bidders to confirm that they accept the correction of the
calculation error within the time limit of three days from the receiving of the notification.
• The Public Body shall award the contract to the Bidder whose Bid has been determined
to be substantially responsive to the Bidding Documents and with the lowest price.
b. Weighted Average Method (Quality and Price Based)

This method involves assessment of attributes and price in varying proportions, to come up with
a preferred bidder that optimizes price and quality factors. The attributes and the price are all
weighted. Responses should, as above, be received in two envelopes so that assessment of
attributes and prices can be shown to be undertaken independently. While the weightings of the
attributes and the price are entirely at the preference of the procurement personnel acting for the
client, the down side with using weighted attributes is that there is little transparency on the

trade-offs between price and non-price components of the scoring. Weighting of the criteria is
performed by distributing different maximum scores to different criteria. The higher the
maximum score, the higher the weights of relative importance. The distribution of the maximum
scores varies significantly from one project to another. For example, if the project is rather
complex, experience receives a higher maximum score than that of the project with less
complexity.
ii. Determining the Lowest Evaluated Bid Offering the Best Economic Advantage
Procedures
Evaluation of the Technical Proposal
• Provided all mandatory legal, professional, technical, and financial requirements have
been met all technically compliant Bids shall be evaluated and scored using the two-stage
bid evaluation and scoring method.
• Individual weighted scores for all technical evaluation criteria shall be weighted
according to the set proportional weighting factors. The weighted result shall be
calculated by multiplying the score by the proportional weighting point of the individual
criterion.
• Bidders getting score less than percent in the technical evaluation shall be rejected.
Evaluation and Comparison of Bid Price
• In the financial evaluation, the highest point shall be given to the lowest priced Bid, and
conversely, the lowest point shall be given to the highest priced Bid; among technically
qualified Bids. The points given to other Bidders shall be determined depending on their
price offers.
• From the total merit points to be given for proposals submitted by Bidders in a bid for
procurement of Works, the share of Technical Proposal shall be percent and the
remaining percent shall be the share of the Bid Price.
• The formula for determining the financial score is the following:

 LFP 
FS =  100 ………………………………………………………………. (2.2)
 CFP 
Where:
FS = the Bid Price Score;
LFP = the lowest Bid Price;
CFP = The Bid Price under consideration
• The Public Body shall then add the technical score to the Bid Price score to determine the
aggregated (total) Bid score and final ranking of Bids by applying the following method:
 For each Technical Proposal its technical evaluation score shall be normalized
according to the highest evaluated technical score that will get 100 points according to
which other scores of technical criteria shall be proportionally ranked. Normalization is
the transformation that is applied equally to every element in the group of data so that
the group has a specific statistical characteristic.
 The Public Body shall apply the following formula for the normalization of values of
the technical evaluation results:
 CTP 
TSN =  100 …………………………………………………………… (2.3)
 HTP 
Where:
TSN = Normalized Bid Technical Proposal Score;
CTP = the technical evaluation score for the Bid under consideration
HTP = the highest evaluated Technical Proposal score
• The Public Body shall award the contract to the Bid that has the highest point in the total
sum of results of the technical and Bid Price evaluation.

• Where two Bidders get equal merit points in the evaluation, preference shall be given to
local Bidders.
2.8.4 Announcing and Awarding of Successful Bidder
Prior to expiry of the period of Bid validity, the Public Body shall notify in writing the result of a
Bid evaluation to all Bidders alike at the same time. The letter of notification to be disclosed to
the unsuccessful bidders on the technical evaluation shall state the reason why they did not
succeed in their Bid and the identity of the successful Bidder. A letter of award to be sent by the
Public Body to a successful Bidder shall not constitute a contract between him and the Public
Body. A contract shall be deemed to have been concluded between the Public Body and the
successful Bidder only where a contract containing detailed provisions governing the execution
of the procurement in issue is signed (ITB Clause 45 sub clause 45.1upto 45.3).

3. MATERIALS AND METHOD

3.1 Description of the Study Area
The study was conducted around public bodies under Federal Government in Addis Ababa,
Ethiopia. It focused on government building projects which have been constructed and are still
under construction and that passed through tender evaluation process in between the years
20052010 by Grade 1 contractors. The use of both primary and secondary data were adopted to
collect data through files and written questionnaire in this research. The primary data for the
study was obtained through case study on targeted public building projects in Addis Ababa and
distribution of questionnaires from professionals involved in public building construction
projects from three types of respondent’s contractors, consultants, clients. Secondary sources of
data were obtained from relevant literature that covered research and publication on the subject
matter.
The study adopted purposive sampling technique to select the contractors, consultants, clients
and other civil engineer professionals. This was preferred because purposive sampling allows the
researcher to select respondents who have good knowledge about the subject in question. The
study seeks to gather information from a section of the population of contractors, consultants,
clients and other professionals who have experience in tender preparation, examination and
professionals on public building construction to assess the productivity and performance of the
contractors.
3.2 Data Collection

3.2.1 The Questionnaire
Based on the information acquired from literature reviews and desk study input from various
local experts, questionnaires were developed for survey exercise to understand expert opinion on
the issue but the case study is given more priority for this assessment to get more concrete actual
data. The questionnaire was distributed to subject matter experts in the fields of construction
work procurement experts who have been involved in tender preparation and evaluation and
professionals in construction from various departments that are involved on public projects. It
employed the five point type Likert ordinal scale to measure the level of ranking by responding
firms from “Strongly Disagree” to “Strongly Agree” that is, 1= Strongly Disagree, 2= Disagree,
3= Neutral, 4= Agree, 5= Strongly Agree.

3.2.2 Case Study

Case study focused on two types of projects which are projects awarded through competitive low
bid and weighted average bid. Information regarding federal owned construction projects was
collected through data sheets from public clients and consultants administering public projects.
Since the assessment focused on tender evaluation of public building projects data was primarily
gathered from public supervisor such as Ethiopian Construction Design & Supervision Works
Corporation Building & Urban Design & Supervision Works Sector; it’s amongst the major
shareholders in the Ethiopian construction industry and its primary when it comes to supervising
public owned construction projects also other private supervisors involved on public building
supervision were included. Data were collected by referring monthly progress reports,
interviewing professionals involved in the projects. Collected data include statuses of the
projects and major difficulties encountered during the construction process were identified.
Finally, evaluation of contractor’s performance in respect to quality of works, quality of

materials and their progress as per the schedule were determined.
3.2.3 Interview
Interview is one of the primary data collection methods which is flexible and adaptive way of
investigating underlying motives of a subject in a way that self-administered questionnaires
cannot. The interview undertaken for this thesis was based on semi structured style were a list of
questions and topics that need to be covered during the interview are used. It allows respondents
the freedom to express their views in their own terms. This is beneficial as it helps the researcher
to observe other point of views. The interview for this research was made with five professionals
of the sector. From these interviewed professionals, two of them are from contractor side, the
two are from consultant sides and the remaining one is from a client side.
3.3 Data analysis

Data collected from the case study and questionnaires were analyzed using the methods of
descriptive statistics. These include Frequency Analysis; Mean/average Index Score was
conducted for the questionnaires and results were generated using statistical packages for social
sciences (SPSS20) also case study on selected construction projects was studied through
descriptive analysis. Responses were presented in tables, means, percentages and charts and
discussed.

Rating of questions was conducted based on Likert scale. Rating scale typically requires the
respondents to select their answer from a range of verbal statements or numbers. Scales that use
verbal statement include semantic differential scales and. An example of likert response scale is
as follows: Strongly Disagree, Disagree, Neutral, Agree, and Strongly Agree. This particular
example is a 5 point likert scale utilizing verbal response descriptors. Also the scale uses
numerical descriptors were the respondent scales an appropriate number to denote there level of
agreement such as 1= Strongly Disagree, 2= Disagree, 3= Neutral, 4= Agree, 5= Strongly Agree.
The range of possible scores can vary and 5- or 7-point formats are the most common (Dawes,
2008). For this research verbal statements are scaled based on the 5-point likert scale multiple
bar charts were used in order to compare the responses of the significance of the criteria used in
the public organizations.

4. RESULTS AND DISCUSSION

The purpose of this section is to screen the problems identified in procurement and construction
period. Data obtained from field survey through the respondents on procurement process and
causes of poor performance are ranked by professionals who are working for the client,
consultants and contractors involved in public building project also selected public building
projects are studied. Subsequently interpreted, analyzed and discussed in detail to justify the
existence of the problem and suggestions. Data are presented with table and charts followed by
descriptive interpretations.
After analysis and ranking of the identified problems in their order of significance, the objective
was to give recommendations on how to improve procurement process to substantially minimize
the impacts of those identified factors. This section addresses mitigation measures following the
outcome of the study and findings, with a view of avoiding or minimizing the top ranked
influencing factors and their effects.
4.1 Profiles of Respondents

The respondents were categorized mainly into three groups, namely contractors, consultants and
clients which are implementing agencies and financiers. Also public sectors and other agencies
that have relation in administering public projects were also targeted. Accordingly 60
questionnaires were distributed out of which 20 were distributed for Employers staff, 20 for
consultants and 20 for contractors which are involved in Federal public construction projects.
Out of the distributed 60 questionnaire, 43 professionals responded to the survey which is 71.6
%. The table 4.1 below indicate that the response rate for the questionnaire survey for
contractors, consultants and owner or clients are 85%, 65% and 65%, respectively.
Table 4.1 Response rate of the structured questionnaire
Respondents Questionnaires Percentage
Category Distributed Returned
Client 20 17 85%
Consultant 20 13 65%
Contractor 20 13 65%
Total 60 43 71.6%
.

Concerning organizations‟ classification of sector of respondents, the majorities were

governmental public sectors (48.8%), state/public enterprise (7%) and private (44.2%). The
question was asked to gather characteristics of the respondents' organization and the organization
classification is shown on fig 4.1 below.
60.00%
48.80%
50.00% 44.20%
40.00%
30.00%
20.00%
10.00% 7%
0.00%
Public sectors Private Public enterprise
Fig 4.1 Respondents organization classification
The academic qualifications of the respondents were assessed. Accordingly, out of 43

participants the academic qualifications include Adv. Diploma/ first degree (65.1%), Master’s
Degree (25.6%), Phd (2.3%) and certificate 7%. The education qualifications of the respondents
shown on fig 4.2 below suggest sufficient educational qualification to make the information
acquired reliable.
70.00% 65.10%
60.00%
50.00%
40.00%
30.00% 25.60%
20.00%
10.00% 7%
2.30%
0.00%
Adv. Diploma/ Master’s Degree certificate Phd
first degree
Fig 4.2 Qualification of respondents

 Position of respondents in the organization

Considering the current positions in their construction industry, 25.6% were Civil engineers,
11.6% Contract administrator, 32.6% Senior civil engineers, 2.3% Ass professor, 2.3% Director,
11.6% Procurement technical support engineers, and 14.0% Tender department engineers. The
high representation of senior civil engineers, Procurement technical support, Tender department
engineers and contract administrators shown on fig 4.3 below was inevitable as these are the
very key professionals usually engaged in the construction industry.
35.00% 32.60%
30.00%
25.60%
25.00%
20.00%
14.00%
15.00%
11.60% 11.60%
10.00%
5.00% 2.30% 2.30%
0.00%
Senior civil Civil Tender Contract Procurement Ass professor Director
engineers engineers department administrator technical
engineers support
engineers
Fig 4.3 Position of respondents in the organization
 Experience of respondents
Regarding the work experience of the respondents surveyed, the majority of the respondents
about 62.80% had worked in the construction industry between 5-10 years, 27.9% with less than
5 years and 9.30% greater than 10 years. The profile and experience of the respondents suggest
sufficient exposure to make the information acquired reliable. Also according data gathered the
knowledge and understanding of respondents on the assessment area shown on fig 4.4 below is
sufficient and reliable since the data collected revealed that 72.1% of the respondents have been
involved in tender evaluation and document preparation, while 27.1% have never evaluated or
prepared tender document.

70.00%
62.80%
60.00%
50.00%
40.00%
30.00% 27.90%
20.00%
9.30%
10.00%
0.00%
Between 5-10 years Less than 5 years Greater than 10 years
Fig 4.4 Experience of respondents
4.2 Existence and extent of the problem in procurement stage
The first step in this research was to check whether there exist problem on the current tender
practice in federal procurement system in public building construction industry which is one of
the specific objectives of the research. Based on the literature, interview and case study typical
Tender Document Preparation and tender process related causes of poor performance during the
procurement process were identified. The statistical analysis employed in this situation was the
Mean index score. Accordingly, the thirty eight variables are grouped in to three depending on
different parties‟ involved in the construction procurement process. List of variables are
indicated in Table 4.2 below.
Table 4.2: List of Identified typical tender problems in procurement process

No Description
1. Contractors’ Problems
1 Incomplete Bids
2 Not all requested documents have been provided.
Not all requested prices have been submitted, e.g. separate, itemized, unit or alternate
3 prices missing or not properly filled out.
4 Front Loading of price or abnormal pricing on some items of works
5 Bid Bond missing from bid, Surety’s Consent missing from bid.
6 Receipt of Addenda not acknowledged or not referred properly

7 Lack of understanding the scope of work

8 Flawed Bids – Bid not signed or sealed properly.
9 Mathematical/ Arithmetic errors in bid.
10 Biased submission of bid/ Bid rigging
11 Cutting bid price to secure a project
12 Pursuing bid with multiple projects on hand
13 Failing to use structured risk management during cost estimation
2. Owners’ Problems
1 Insufficient Number of Bids submitted
2 Long Bid evaluation and awarding process
3 Failing to describe project scope clearly
Lack of research and understanding of specific project before the tender document
4 preparation & floating of tender invitation
Poor communication with consultant during tender document preparation/ b/n & among
5 procuring entities
6 Lack of professionals on the owner side
Criteria are requested beyond the scope of local contractors on the case of ICB
7 (international competitive Bid)
Owner wants to exercise privilege clause to award in accordance with non-disclosed
8 criteria.
9 Favoring contractors that already have project with the client
Owner wants to open a late bid either because too few bids received or owner
10 knows/prefers bidder.
Compromising Criteria that are clearly specified as non-compliant or automatic
rejection on the bid document (E.g.:- Error on Bid Security, submitting of original audit
11 report etc...)
12 Right of way problems
13 Challenge in procurement planning & implementing plan
3. Consultants Problems
1 Unit prices not properly specified or evaluated.
2 Incomplete Drawings
3 Biased/slanted specifications (Unrealistic or excess quantity of work on BOQ or
inserting item of work that does not exist actually), using hidden criteria
4 Criteria for determining compliance & consequences of non-compliance are not clearly
specified.
5 Methods of remedying informalities in the bid are not clearly specified.
6 Criteria are requested beyond the scope of local contractors on ICB

7 Lack of research and understanding of specific project before the tender document
preparation & floating of tender invitation
8 An addenda is issued late, e.g. too close to submission deadline
10 Favoring local contractor
11 Favoring Foreign contractor
12 Unjustified exclusion of qualified bidder (rejecting contractors with minor reasons
which do not affect the project directly or indirectly)
4.2.1 Problems of contactors at procurement stage
Based on the results of survey, the most well-known problems identified and highly occurred
problem in public procurement of construction works on contractor side are: - Cutting bid price
to secure a project (with mean=4.32), Front Loading of price or abnormal pricing on some items
of works (4.23), Pursuing bid with multiple projects on hand (4.18), Mathematical/ Arithmetic
errors in bid (3.76). Generally, the findings from the questionnaire survey indicates which causes
of problems of contactors most respondents agreed on, particularly the variables which are above
the average mean value (3.57) are significant problems of contractors that indirectly affect the
performance of project later in the actual construction execution period. The fig 4.5 below shows
result from data collection and analysis the significant problems in procurement stage on public
building construction procurement are presented using there mean score.

FAILING TO USE STRUCTURED RISK MANAGEMENT

3.4651
DURING COST ESTIMATION
PURSUING BID WITH MULTIPLE PROJECTS ON HAND 4.1860
CUTING BID PRICE TO SECURE A PROJECT 4.3256
BIASED SUBMISSION OF BID/ BID RIGGING 3.7442
MATHEMATICAL/ ARTHIMETIC ERRORS IN BID. 3.7674
FLAWED BIDS – BID NOT SIGNED OR SEALED PROPERLY. 3.3953
LACK OF UNDERSTANDING THE SCOPE OF WORK 3.1395
RECEIPT OF ADDENDA NOT ACKNOWLEDGED OR NOT

2.8372
REFFERED PROPERLY
BID BOND MISSING FROM BID, SURETY’S CONSENT
3.3953
MISSING FROM BID.
FRONT LOADING OF PRICE OR ABNORMAL PRICING ON
4.2326
SOME ITEMS OF WORKS
NOT ALL REQUESTED PRICES HAVE BEEN SUBMITTED,
3.4912
E.G. SEPARATE, ITEMIZED, UNIT OR ALTERNATE PRICES…
NOT ALL REQUESTED DOCUMENTS HAVE BEEN
3.1628
PROVIDED.
INCOMPLETE BIDS 3.2791
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00
Mean Score
Fig 4.5 Problems of contractors during procurement stage
Critical factors are screened out from the above fig 4.5 and presented for discussion.
Accordingly it is found that the most critical factors in the procurement process which result on
poor performance of project implementation during procurement stage are from contractor side
are:-
Contractor side
1. Cutting bid price to secure a project
2. Front Loading of price or abnormal pricing on some items of works
3. Pursuing bid with multiple projects on hand
4. Mathematical/ Arithmetic errors in bid
5. Biased submission of bid/ Bid rigging

Based on responses of questions and document analysis the following discussion and mitigation
measures are indicated for the above critical factors.
1. Cutting bid price to secure a project

The respondents agrees that in the procurement of public projects most contractors cut bid price
in order to secure a project and the major evaluation system being based on the lowest evaluated
bid many contractors are tempted for this action in hope of gaining the loss after securing the
bid. As a result many projects face quality problems during construction period and delays will
occur later leading to the extreme stage which is project termination. Hence, most procuring
agencies shall reconsider the evaluation method.
2. Front Loading of price or abnormal pricing on some items of works

Front loading of specific prices on BOQ is also observed on many contractors. This act is done
by filling or proposing high prices on parts of the work that are performed during the first phase
of the project which are usually earth work and concrete work in doing so the contractor will
generate lots of money during this phase by performing quickly with more efficiency. But after
generating the money so early in the project phase the rest of work will be executed not with the
same rate as the first phase resulting in poor performance and project delay.
3. Pursuing bid with multiple projects on hand

Pursing bid with multiple projects on hand is one of the most common acts of contractors. Many
projects incur delay because the contractor have too much on their plate so they will not manage
the project with due attention it deserves so difficulties encountered on project site will not be
solved on due time leading again to poor performance and delay of project. Though the SBD
requires contractors to show their current commitments the evaluation committee does not
conduct further information on the bidder’s current commitment. So bidders will purposely
exclude some projects from the list
4. Mathematical/ Arithmetic errors in bid

Mathematical error on financial document is inevitable it is the degree of occurrence that is a
problem. If the degree is high the proposed price should be rejected. But mostly on public
procurement this problem is neglected in order to avoid re advertising of procurement to

minimize cost incurred on tender flotation and other factor. If he contractor agrees to execute the
project the contact is usually awarded. Though finance is save by avoiding another tender
flotation extreme amount of loss will occur in the future which is what we observe on different
projects.
5. Biased submission of bid/ Bid rigging

This agreement may be accomplished by one or more bidders agreeing to refrain from
submitting bids, or by the bidders agreeing on a low bidder and then bidding above that firm's
intended (and inflated) price. Even though, the tendering process is designed to promote fairness
and competition, bid rigging disrupts this competitive process. Bid rigging is observed on public
projects especially on high level contractors. It is a trick on the public body since nothing is
observed in front and difficult to discover. This problem will disrupt the entire principle of the
federal procurement system which is why attention shall be given.
4.2.2 Problems of client at procurement stage
problem in public procurement of construction works on client side are: - Long Bid evaluation
and awarding process (with mean=4.27), Right of way problems (4.23), Insufficient Number of
Bids submitted (3.90), Lack of research and understanding of specific project before the tender
document preparation & floating of tender invitation (3.55), Challenge in procurement planning
& implementing plan (3.53). Generally, the findings from the questionnaire survey indicates
which causes of problems of client most respondents agreed on, particularly the variables which
are above the average mean value (3.30) are significant problems of client that indirectly affect
the performance of project later in the actual construction execution period. The fig 4.6 below
shows result from data collection and analysis the significant problems in procurement stage on
public building construction procurement are presented using there mean score.

CHALLENGE IN PROCUREMENT PLANNING &

3.5349
IMPLEMENTING PLAN
RIGHT OF WAY PROBLEMS 4.2326
COMPROMIZING CRITERIAS THAT ARE CLEARLY SPECIFIED

3.2093
AS NON COMPLIANT OR AUTOMATIC REJECTION ON THE…
OWNER WANTS TO OPEN A LATE BID EITHER BECAUSE
2.2791
TOO FEW BIDS RECEIVED OR OWNER KNOWS/PREFERS…
FAVORING CONTRACTORS THAT ALREDY HAVE PROJECT
3.0465
WITH THE CLIENT
"OWNER WANTS TO EXERCISE PRIVILEGE CLAUSE TO
2.7674
AWARD IN ACCORDANCE WITH NON-DISCLOSED CRITERIA.
CRITERIAS ARE REQUESTED BEYOND THE SCOP OF LOCAL
3.1628
CONTRACTORS ON THE CASE OF ICB (INTERNATIONAL …
LACK OF PROFFETIONALS ON THE OWNER SIDE 2.9070
POOR COMMUNICATION WITH CONSULTANT DRURING

3.0465
TENDER DOCUMENT PREPARATION/ B/N & AMONG…
LACK OF RESEARCH AND UNDERSTANDING OF SPECIFIC
3.5581
PROJECT BEFORE THE TENDER DOCUMENT…
FAILING TO DESCRIBE PROJECT SCOP CLEARLY 3.0930
LONG BID EVALUATION AND AWARDING PROCESS 4.2791
INSUFFICIENT NUMBER OF BIDS SUBMITTED 3.9070
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50
Mean Score
Fig 4.6 Problems of client during procurement stage
Accordingly, the most critical factors in the procurement process which result on poor
performance from client side are screened out from the above fig 4.6 and presented for
discussion.
Client side
1. Long Bid evaluation and awarding process
2. Right of way problems
3. Insufficient Number of Bids submitted
4. Lack of research and understanding of specific project before the tender document
5. Challenge in procurement planning & implementing plan

1. Long Bid evaluation and awarding process
Long bid evaluation period is one of the main problems of public procurement. The respondents
also agreed on this part though many reasons are laid on why there is delay. In some cases
evaluation process up to a year may occur due to complaints from participants other factors such
as lack of expertise in the committee, bulk bid documents are of the many reasons for evaluation
delay. But the core effect is the longer the evaluation period different factors may arise during
that period among many is price inflation. Here if bid evaluation takes more time the price filled
during the tendering period will not be of value since many changes on the market may occur
during this evaluation period which is why most items of work will pass through price
adjustment process if the bid documents permits price adjustment otherwise disputes will occur
between contracting parties and delay may also occur
2. Right of way problems

Right of way is also common problem after contract award this issue is highly observed on road
projects but it occurs in building projects as well. Client’s defect in securing land before floating
tender is the main problem. Many projects will be delayed on commencing project site until this
problems are solved which will increase project delay occurrence.
3. Insufficient Number of Bids submitted

Insufficient number of bids occur for different reasons but the most common is due to bidders
losing interest in participating on the bid or advertisement of the tender was not announced or
the method used to announce was not effective. Insufficient number of bids occurring on a
certain tender is a critical problem for evaluation. In competitive bidding the aim of the public
body is to evaluate multiple bidders in expectation of finding the responsive and qualified bidder
among many this will help the evaluator to analyses the pros and cons of each participant leading
to the qualified bidder. This being the principle of the public body if there are insufficient
participants the chances of the evaluator to select unqualified bidder is high. Though in some
public clients projects are awarded even with this issue in order to minimize cost and if the
procured project is needed in a short period of time. In this case the outcome of the project
performance is poor. Sufficient amount of participants is necessary in tender evaluation no
matter what the cost because the outcome of the project success depends on it.

4. Lack of research and understanding of specific project before the tender document
Lack of research is a problem as many projects have variation works on them. This is because
projects are constructed from budget acquired from the government and in order to use this
funds the client has to get approval from the financer on the feasibility of the project so they will
try to get design and specification for the proposed project from consultants within a short period
of time even by adopting similar projects. This will result on multiple variation orders during
actual project execution period.
5. Challenge in procurement planning & implementing plan

The respondents agrees that ineffective contract packaging and poor estimation of the project
time and cost as one of the major causes of poor performance. Besides, improper scope
definition and scheduling of the project by the client is also pointed out to be a problem.
Assessment report prepared on 2009/10 by PPA, 36 organizations (63.16%) haven’t prepared
procurement plan. This is the key stage to consider how to meet the identified need, define the
processes and procedures and identify procurement risks. Hence, procurement planning starting
from the identification of project is important.
4.2.3 Problems of consultants at procurement stage
problem in public procurement of construction works on consultant side are: - Incomplete
drawings (with mean=4.25), Biased/slanted specifications (Unrealistic or excess quantity of
work on BOQ or inserting item of work that does not exist actually), using hidden criteria (4.16),
Unit prices not properly specified or evaluated. (3.51), Criteria are requested beyond the scope
of local contractors on ICB (3.1), an addenda is issued late, e.g. too close to submission deadline
(3.25) are significant problems of consultant that indirectly affect the performance of project
later in the actual construction execution period. The fig 4.7 below shows result from data
collection and analysis the significant problems in procurement stage on public building
construction procurement are presented using there mean score.

UNJUSTIFIED EXCLUSION OF QUALIFIED BIDDER

2.8140
(REJUCTING CONTRACTORS WITH MINNOR REASONS …
FAVOURING FOREIGN CONTRACTOR 2.8372
FAVOURING LOCAL CONTRACTOR 2.4651
RIGHT OF WAY PROBLEMS 2.4419
AN ADDENDA IS ISSUED LATE, E.G. TOO CLOSE TO

3.2558
SUBMISSION DEADLINE
LACK OF RESEARCH AND UNDERSTANDING OF SPECIFIC
3.0698
PROJECT BEFORE THE TENDER DOCUMENT…
CRITERIAS ARE REQUESTED BEYOND THE SCOP OF LOCAL
3.1860
CONTRACTORS ON ICB
"METHODS OF REMEDYING INFORMALITIES IN THE BID
2.7674
ARE NOT CLEARLY SPECIFIED.
"CRITERIA FOR DETERMINING COMPLIANCE &
3.0930
CONSEQUENCES OF NON-COMPLIANCE ARE NOT…
BIASED/SLANTED SPECIFICATIONS (UNREALISTIC OR
4.1628
EXSESS QUANTITY OF WORK ON BOQ OR INSERTING…
INCOMPLETE DRAWINGS 4.2558
"UNIT PRICES NOT PROPERLY SPECIFIED OR EVALUATED. 3.5116
0.00 1.00 2.00 3.00 4.00 5.00

Mean Score
Fig 4.7 Problems of consultant during procurement stage
Accordingly, the most critical factors in the procurement process which result on poor
performance from client side are screened out from the above fig 4.7 and presented for
discussion.
Consultant side
1. Incomplete drawings
2. Biased/slanted specifications (Unrealistic or excess quantity of work on BOQ or inserting
item of work that does not exist actually), using hidden criteria

1. Incomplete drawings
Incomplete drawings will occur due to lack of experience, pressure from client to float tender or
the clients uncertainty on various matters that might affect the overall scope of the project which
can delay time to finalize the design after contract award and in to construction period.
Incomplete drawing can lead to request for information and change order when the work starts
on site leading to frequent submittal of shop drawing and material approvals of the engineer.
Also drawings do not coordinate with on another particularly when they are prepared by
different team to avoid this problem the design team should regularly review all up to date work
drawings to insure they coordinate accurately and the designer have to check the drawing before
construction starts to avoid such problems. Also the respondents agreed to existence of this
problem on consultant side
2. Biased/slanted specifications (Unrealistic or excess quantity of work on BOQ or

inserting item of work that does not exist actually), using hidden criteria
Most of the respondent’s agreed to existence of problem specially contractors. This

biased/slanted specification can occur purposely or accidentally but no matter what it can lead to
unforeseen cost. They can occur because of different reasons such as inadequacy of design and
inaccurate information transition, biased specifications this are mostly accidentally occurring.
However, the consultant having favoritism towards a certain bid participants can lead to
biased/slanted specification. Here in order for the bidder to pass the consultant will adjust the
specification even by adding non existing works or by increasing quantity of work for the item
then tip the bidder on which item to be aware off. This way other participants will go along with
filling the price without notice and assuming item exists.
4.3 Existence and extent of the problem during construction stage

Problems that arise during the procurement stage will affect performance of construction in the
future so some of the defects observed during procurement process are indirectly related to the
defects observed during construction period. Based on the literature, interview and case study
typical possible causes of poor performance which are related to flaws in tendering process
during procurement stage were identified. Here also statistical analysis employed was the Mean
index score. Accordingly, the twenty two variables are grouped in to three depending on

different parties‟ involved in the construction stage. List of variables are indicated in Table 4.3
below.
Table 4.3: List of causes of poor performance in public building at construction stage
No Description
1. Client
1 Financial shortage of client
2 Lack of initiative between staffs
3 Unfair or poor estimation of project contract period
4 Missed or change of project scope & requesting supplementary works
5 Lack or shortage of cooperation from client
6 Selecting an unqualified bidder
7 Poor communication
8 Insufficient advance payment release
9 Late advance payment release
2. Contractor
1 poor coordination and site management problem
2 Using of poor quality of material
3 Delay on facilitating imported materials on to site
4 Failing to facilitate proposed manpower on site
5 Failing to deploy proposed machinery on site
6 Not using advance payment particularly for the intended project
7 Poor communication habit (on verbal or without written)
8 Cash flow shortage
3. Consultant
1 Variance between bill of quantity and design
2 Frequency of varied works
4 Late approvals on work
5 Unfair supervision, influence on site

4.3.1 Problems of Client at construction stage

Based on the results of survey, the most well problem in construction period of public project
works on client side are: - Selecting an unqualified bidder (with mean=3.81), Missed or change
of project scope & requesting supplementary works (3.65), Financial shortage of client (3.62),
Unfair or poor estimation of project contract period (3.62). Generally, the findings from the
questionnaire survey indicates which causes of problems of client most respondents agreed on,
particularly the variables which are above the average mean value (3.34) are significant
problems of clients that are causes of poor performance of project in construction execution
period.
LATE ADVANCE PAYMENT RELEASE 3.2431
INSUFFISHENT ADVANCE PAYMENT RELEASE 2.9070
POOR COMUNICATION 3.1163
SELECTING AN UNQUALIFIED BIDDER 3.8140
LACK OR SHORTAGE OF COOPERATION FROM CLIENT 3.0698
MISSED OR CHANGE OF PROJECT SCOPE & REQUESTING

3.6512
SUPPLEMENTARY WORKS
UNFAIR OR POOR ESTIMATION OF PROJECT CONTRACT

3.6279
PERIOD
LACK OF INITIATIVE BETWEEN STAFFS 3.0233
FINANCIAL SHORTAGE OF CLIENT 3.6279
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50
Mean Score
Fig 4.8 Cause of poor performance during construction period, client side
Hence, the above Fig 4.8 shows result from data collection and analysis and significant factors
causing poor performance of projects on public building construction projects are screened out

and presented for discussion. Accordingly it is found that the most critical factors in the
construction process which result on poor performance of project execution during construction
period from client side are:-
Client side
1. Selecting an unqualified bidder

2. Missed or change of project scope & requesting supplementary works
3. Financial shortage of client
4. Unfair or poor estimation of project contract period
1. Selecting an unqualified bidder

Seeing from the analysis the evaluation method used on public sectors is primarily based on
lowest price. The evaluation method itself makes the selection of qualified bidder to be less
likely. During this evaluation contractors with good quality of work will be excluded at the
financial evaluation stage because price offered for execution are very low to the maximum
extent were it makes it difficult to understand hoe the contractor is going to finish the project
with profit this reason on its own should be a warning to the evaluator. Survey from interview
with consultants reviled that sometimes bid offers which are lower than the engineering estimate
are awarded to the contractor if he agrees to work for the sake of avoiding the process of rebid.
So the evaluation method has made it easy and tempting for bidders to cut bid price in hope of
gaining lose from variation and supplementary works. The effect of this starts during project
execution several problems arise regarding poor performance and delay leading contractors to
request time extension; here the client will have no choice but to grant the extension in order to
avoid worst case scenario which is termination the project and rebid. So the contractor will
request extension from time to time were some projects exceed its original duration and the
delay will be almost twice the original duration. During the case study progress of projects
extended up to 400%.

2. Missed or change of project scope & requesting supplementary works

Response rate shows that Lack of research and understanding of specific project before the
tender document preparation & floating of tender invitation leading to insufficient presentation
of project scope results in missed or change of project scope & requesting supplementary works.
Supplementary works and change of scope may benefit the contractor if the new work is
profitable but carful observation needs to be taken during project estimation. Changing project
scope should be avoided as much as possible by conducting extensive survey on proposed
project before floating tender in order to avoid delay and cost overrun. But if the change in
scope is unavoidable a carefully outlined process for change orders should be formed in order to
effectively put boundaries around project requirement.
3. Financial shortage of client

Financial shortage from client may affect the project’s cash flow and lead to delay of site
possession which consequently causes delays to the project as whole. This shortage occurs due
to financial resource issues such as: - allocation of government budget not in place and
difficulties in getting loan from financiers. The greater the cash flow problem the greater the
extent of delays in construction industry.
4. Unfair or poor estimation of project contract period

While many of a project’s clients are eager to get the project’s building started, faulty schedules
and budgets to begin with project is headed for an overrun from day one. Poor Estimates may
occur from wrongful expectations of the scope of work and lack of understanding. Being
accurate and realistic about project deadlines and costs from architects and contractors in the
preconstruction planning phase is needed.
4.3.2 Problems of Contractor at construction stage

works on contractor side are: - Not using advance payment particularly for the intended project
(with mean=3.91), Using of poor quality of material (3.88), poor coordination and site
management problem (3.81), Failing to facilitate proposed manpower on site (3.56), Failing to
deploy proposed machinery on site (3.56). Cash flow problem (3.69). Generally, the findings
from the questionnaire survey indicates which causes of problems of contactors most

respondents agreed on were in this case almost all variables are primary causes, particularly the
variables which are above the average mean value (3.57) are significant problems of contractor
that are causes of poor performance of project in construction execution period.
CASHFLOW SHORTAGE 3.8140
POOR COMMUNICATION HABIT (ON VERBAL OR

2.9070
WITHOUT WRITTEN)
"NOT USING ADVANCE PAYMENT PARTICULARLY FOR

3.9070
THE INTENDED PROJECT
FAILING TO DEPLOY PROPOSED MACHINERY ON SITE 3.5581
FAILING TO FACILITATE PROPOSED MANPOWER ON SITE 3.5581
DELAY ON FACILITATING IMPORTED MATERIALS ON TO

3.1400
SITE
USING OF POOR QUALITY OF MATERIAL 3.8837
POOR COORDINATION AND SITE MANAGEMENT

3.8140
PROBLEM
1.0000 2.0000 3.0000 4.0000

Mean Score
Fig 4.9 Cause of poor performance during construction period, contractor side
The above Fig 4.9 shows significant factors causing poor performance of projects on public
building construction projects. Accordingly, the most critical factors in the construction period
which result on poor performance from contractor side are:-
Contractor Side
1. Not using advance payment particularly for the intended project

2. Using of poor quality of material
3. poor coordination and site management problem
4. Failing to facilitate proposed manpower on site
5. Cash flow problem

1. Not using advance payment particularly for the intended project

Not using advance payment for the intended purpose or projects is one of major issue raised by
many also the response rate for this particular reason shows agreement on the problem. Causes
of using advance payment other than its purpose is contractors managing too much projects at
once, failing to use structured risk management during cost estimation leading to cash flow
problem so to solve cash flow problem the use advance payment of once project for another
project; and even more they will participate on bid for a new project and try to secure another
advance to solve such cash problems. However once project advance payment may solve their
immediate problem for now but will jeopardize the performance of the project and even the
construction company in the long run. Generally contractors need to work on their cash follow
management and implement structured risk analysis before cost estimation.
2. Using of poor quality of material

Using poor quality material on project site is one of the main reasons of rework. Finding from
the case study reviled that most of the projects quality is rated as Good but respondent don’t
agree when it comes to quality of work so the supervisors on site should revise their method
used to express degree of measuring quality as the actual sites have quality problems which is
one of the reasons why many projects are not finally handed over as most of the defects will
start to arise when the project is in use. Cutting bid price at procurement stage lead most
contractors to compromise quality of work, Lack of proper contractor supervision of the work,
not using structure quality check list, not following quality procedures; procedures provide a
way of making sure all details of construction work fall into place so documentation of
procedures help contractor to refer and identify problems.
3. poor coordination and site management problem

Poor coordination and site management is also main problem in public building constructions
and response from questions confirms the problem. As stated above multiple project on hand is
problem for poor performance so due to fluctuation of work load site management is poor other
causes are construction information not detail enough, work program sequence not practical,
works handled by subs not completed accurately, team members on project not having defined
responsibilities and accountability are observed. All this causes minimize the efficiency of work
that could be done every day.

4. Failing to facilitate proposed manpower on site

Failing to facilitate proposed manpower, machinery and material shortages were among the
major problems for project performance to slack and most of this problems are not resolved
quickly especially material shortage even though they are requested by supervisors reputedly
most site will spend days without any execution leading to delay. Supervisors on site claim that
machinery proposed at procurement stage and actual on site do not match either on capacity,
quantity or quality also experience of manpower is low compared to the proposed manpower at
procurement stage
5. Cash flow problem

Cash flow shortages were observed on projects under case study especially least bidder
contractors. Bidders cutting bid price at the beginning, lack of experience and poor project cost
estimation and late payment release are some of the causes of shortage. In construction projects
the client enters into an agreement with one part which is the contractor but the contractor enters
into multiple agreements with material suppliers, machinery rentals and sub-contractors. As a
result the contractor will have a lot of cash tied up in between so efficiency of project depends
on the cash flow management of the contractor. Cash flow impacts all aspects of the
construction project. Shortage can lead to project failure in which case most of the projects on
the case study incurred cash shortage and because of that the progress of the project was
delayed. The most important aspect of cash flow management is to avoid extended cash
shortages which are caused by having too great a gap between cash inflows and outflows. Thus,
a well-managed cash flow is important to enable the delivery of a successful project by
performing a cash flow analysis on a regular basis to identify cash flow problems
4.3.3 Problems of Consultant at construction stage

works on consultant side are: - Variance between bill of quantity and design (with mean=4.58),
Frequency of varied works (4.53), Late approvals on work (3.74). Generally, the findings from
the questionnaire survey indicates which causes of problems of consultants most respondents
agreed on, particularly the variables which are above the average mean value (3.74) are
significant problems of consultant that are causes of poor performance of project in construction
execution period.

UNFAIR SUPERVISION, INFLUENCE ON SITE 2.8605
LATE APPROVALS ON WORK 3.7442
COMMUNICATION HABIT ON VERBAL (WITHOUT

3.0000
WRITTEN)
FREQUENCY OF VARIED WORKS 4.5349
VARIANCE BETWEEN BILL OF QUANTITY AND DESIGN 4.5814
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00
Mean Score
Fig 4.10 Cause of poor performance during construction period, consultant side
The above Fig 4.10 shows significant factors causing poor performance of projects on public
building construction projects. Accordingly, the most critical factors in the construction period
which result on poor performance from consultant side are:-
Consultant side
1. Variance between bill of quantity and design

2. Frequency of varied works
3. Late approvals on work
1. Variance between bill of quantity and design

Variance between BOQ and design is also a cause which has a relation with both consultant and
client. This problem usually arises due to adaptation of other similar works of design and BOQ
due to time constraint reason. Most of the respondents agreed to this case, if the client doesn’t
give sufficient time for works on design and procurement planning is implemented well with
sufficient time period problems can be minimized.

2. Frequency of varied works

Incomplete drawings at the procurement stage will lead to frequency of varied works if the
design is not revised before the construction of the project starts. A constant variation order will
lead the contractor to request time extension. Even the approval on the price for varied works is
time consuming and disputes may arise due to valuing the variation and can cost a substantial
amount of money, time during the courses of the contract. Almost all responses towards this
were agreed. So if not solved at procurement stage or before construction starts problems will
arise also such problems were observed on the case study swell. Problem with frequency of
varied work is also related to the client so both should parties should give attention and work to
minimize varied works by including complete drawing in tendering stage. Though some
variations are an avoidable minimizing potential variations by ensuring uncertainties are
eliminated before contract award is necessary by properly investigating site, ensuring designs
are coordinated before tender
3. Late approvals on work

Late approvals of work have severe impact upon the progress of work. The decision can vary
from choice of material and equipment to the whole function of the project. Here also the client
is one participant on the decision. So if approval is delayed the whole performance of the project
will be affected especially when the item of work which needs approval can’t be done side by
side with other activities or requires the contractor to order material ahead. Such cases were
observed during the case study on some projects also the respondents agreed it’s a major
holdback.
Generally, there is relation of significant problems in procurement stage and construction stage.
The problems that occur at the procurement stage will indirectly affect the project performance
in the future during project execution period. For example: -
Failing to use structured risk management during cost estimation will result in Cash
flow problem/ shortage then to not using advance payment particularly for the intended
project. If a contractor doesn’t use structured risk management at cost estimation they might end
up under estimating or offering incorrect price for a certain project due to this the contractor will
be faced for additional cost during execution and cash shortage will occur leading the contractor

to find any means to overcome the problem such as using other projects advance payment for the
current project. Some relation between problems in procurement stage and construction stage are
shown below at table 4.4
Table 4.4 Relation of significant problems in procurement stage and construction stage
Using of poor quality of material
Delay on facilitating imported materials on to site
Cutting bid price to secure a project
Not using advance payment particularly for the
intended project
Failing to use structured risk management during cost
Cash flow shortage estimation
Using of poor quality of material
Failing to facilitate proposed manpower on site
Pursuing bid with multiple projects on Failing to deploy proposed machinery on site
hand Not using advance payment particularly for the
intended project
Cash flow shortage
Failing to use structured risk
Not using advance payment particularly for the
management during cost estimation
intended project
Right of way problems
Selecting an unqualified bidder
Lack of initiative between staffs
Unfair/ poor estimation of project contract period
Missed or change of project scope & requesting
Challenge in procurement planning &
supplementary works
implementing plan
Lack of research and understanding of specific project
before the tender document preparation & floating of
tender invitation
Long Bid evaluation and awarding process
Insufficient Number of Bids submitted
Incomplete Drawings Frequency of varied works
Variance between bill of quantity and Unit prices not properly specified or evaluated.
design Incomplete Drawings
Biased/slanted specifications
(Unrealistic or excess quantity of work
on BOQ or
inserting item of work that does not Unfair supervision, influence on site
exist actually), using hidden criteria

4.4 Current procurement method and tender evaluation

The mostly adopted method of tender evaluation method on public construction building projects
is based on the lowest evaluated bid which is 81.40% according to the respondents and followed
by 11.63% based on weighted average and the rest are categorized under 6.98% are other. The
data shows that almost all evaluation system is lowest evaluated bid. Also major procurement
method adopted is open bidding method with 54.76% followed by two stage bidding 28.5%
response rate.
Fig 4.11 Evaluation method in public tendering

Fig 4.12 Procurement method in public tendering
For the succeeding questions for Figures not shown the number of responses and analysis
were provided as follows:-
• Is the tender evaluation system on public projects fair & free from bias or corrupt working
condition? For this question, 17 (39.5%) answered Yes and 5 (11.6%) answered No and the
remaining 18 (41.9) replayed with sometimes.
• Do you think there is a fair and experienced team member in public tender evaluation? For
this question, 15 (34.9%) answered Yes and 7 (16.3%) answered No and the remaining 21
(48.8) replayed with sometimes.
• How long does the evaluation process take? For this question, 26 (60.5%) answered more
than 1 month, 5 (11.6%) answered other, 4 (9.3%) answered less than a week and 1 month
and the remaining 2 (4.7) replayed b/n 1 or 2 week.
• Is there delay on tender evaluation? If yes, please specify some of the causes for delay. For
this question, 26 (67.5%) answered yes, 7 (16.3%) answered no and the remaining did not

replay. Accordingly some of the causes of delay the respondents give on the blank space
were as follows:-
 Decision making (late decisions on different factors)

 Poor document presentation of bidders
 Claimant bidders
 Personnel shortage in procurement evaluation department, lack of professionals
or experts in the field, poor performing tender committee
 When appeal comes from bidder
 Bulk tender documents
 Improper procurement plan (E.g. floating tender before acquiring land or
budget)
 checking document from regulatory bodies are amongst
• Do you believe currently the public procurement system is improving just as the project
delivery system and with the same rate as the construction technology? For this question,
29 (67.4%) replayed No and 9 (20.9%) answered Yes respectively.
• Do you think PPA directives restricting bid evaluation to lowest bid is one major factor
for many public building projects to inure d/f flaws? For this question, 23 (60.5%)
replayed Yes, 4(9.3) replayed No and 13 (30.2%) answered sometimes respectively.
• Why do you think that contractors swap advance payment other than its intended
purpose? (64%) replayed multiple project on hand and the remaining (36%) answered
cash flow problem/ shortage.
• Do you believe increasing percentage of the advance payment or paying the maximum
limited percentage helps to improve the performance of contractor? For this question, 5
(11.6%) replayed Yes and 22 (51.2%) answered No and the remaining 12 (27.9%)
replayed with sometimes.
• Are you satisfied with Competitive lowest bidding evaluation system? For this question,
(7.0%) replayed yes and (74.5%) answered No and the remaining (18.5%) replayed with
sometimes also 78.31% suggested average bid as an alternative. Out of the above

percentage (25.5%) suggested modification to the method as they believed that it has the
advantage of guaranteeing best value of money to the client if implemented properly
4.5 Comparison of common bid types

Different issues and concerns arise on the current tender evaluation process of Ethiopia
procurement system and many experts indicated these issues and advantages of evaluation
methods. Also during the past years no developments have been observed around this method.
The main concern is on competitive lowest bid and then weighted average as they are the primary
adopted evaluation methods in the current tender practice. Problems that arise during the
evaluation stage will affect performance of construction in the future but aside with the problems
the advantages have attracted clients to apply this method frequently though many issues arise
with the benefit. So the concerns, advantages and issues raised during procurement evaluation
process are indirectly related to the defects observed during construction period. Based on the
literature, interview and case study major concerns on evaluation stage were identified. Here also
statistical analysis employed was the Mean index score. Accordingly, the thirteen variables are
grouped in to two depending on current evaluation method. List of variables are indicated in
Table 4.5 below.
Table 4.5: Analysis comparison of competitive average and lowest bidding system
Type
A. Competitive B. Competitive
No Description lowest bid weighted
evaluation system average bid
evaluation
1 Responsive/ winner price is closer to a reasonable
price and helps in better performance.
2 Encourages/prompts open competition and fair
playing field
3 Help for client to finish the project with good
quality
4 Project cost of bids which are evaluated through
the above method is under reasonable price
5 Doesn't result in best value of money for the client
6 Doesn't help client finish the project within given
schedule

7 Both client and contractor are not benefitting as

planned.
8 Mostly the delay is twice of the given contract time
or incur delay problems in general.
9 Projects have always disputed between contractor
and any of the parties
10 Projects incur claim issues and termination during
project construction period
11 Most unqualified bidders may attend
12 Makes it less likely that contracts will be awarded
to the best performing contractor
13 The final project cost after execution is higher
(incur cost overrun)
4.5.1 Competitive lowest responsive bidding

Based on the results of survey, the most well-known problems identified and highly concerning
issues and advantages in lowest responsive evaluation methods which are currently used on
public procurement of works are shown on the fig 4.13 below.
Issues and concerns
For lowest responsive evaluation the respondents agreed on the following variables:-
Both client and contractor are not benefitting as planned (with mean=3.86), Most unqualified
bidders may attend (3.86), Projects incur dispute, claim and termination during project
construction period (3.76), Makes it less likely that contracts will be awarded to the best
performing contractor (3.74), Doesn't result in best value of money for the client (3.72), The final
project cost after execution is higher (incur cost overrun) (3.72), Mostly the delay is twice of the
given contract time or incur delay problems in general (3.72), Doesn't help client finish the
project within given contract time (3.68).
For lowest responsive evaluation the respondents strongly disagreed and disagreed on the
following variables:-
Help for client to finish the project with good quality (1.76), Winner price is closer to a
reasonable price and helps in better performance (2.18), Project cost of bids which are evaluated

through the above method is under reasonable price (2.18).Respondents were neutral on the
variables; Encourages/prompts open competition and fair playing field (3.20)
Generally, the finding from the questionnaire survey indicates almost all variables are issues and
concerns the respondents agreed on and seeing from the result that this method is highly adopted
in public construction procurement of Ethiopia with negative response on its efficiency it’s an
implication that the method needs to be revised or adjusted in some way.
THE FINAL PROJECT COST AFTER EXCUTION IS HIGHER

3.7209
(INCURE COST OVERRUN)
MAKES IT LESS LIKELY THAT CONTRACTS WILL BE
3.7442
AWARDED TO THE BEST PERFORMING CONTRACTOR
MOST UNQUALIFIED BIDDERS MAY ATTEND 3.8605
PROJECTS INCUR CLAIM ISSUES AND TERMINATION

3.7674
DURING PROJECT CONSTRUCTION PERIOD
PROJECTS HAVE ALWAYS DISPUTED BETWEEN
3.7209
CONTRACTOR AND ANY OF THE PARTIES
MOSTLY THE DELAY IS TWICE OF THE GIVEN CONTRACT
3.3721
TIME OR INCURE DELAY PROBLEMS IN GENERAL.
BOTH CLIENT AND CONTRACTOR ARE NOT BENEFITTING
3.8605
AS PLANNED.
DOESN'T HELP CLIENT FINISH THE PROJECT WITHIN
3.6980
GIVEN SCHEDULE
DOESN'T RESULT IN BEST VALUE OF MONEY FOR THE
3.7209
CLIENT
PROJECT COST OF BIDS WHICH ARE EVALUATED
2.1860
THROUGH THE ABOVE METHOD IS UNDER REASONABLE…
HELP FOR CLIENT TO FINISH THE PROJECT WITH GOOD
1.7674
QUALITY
ENCOURAGES/PROMPTS OPEN COMPITITION AND FAIR
3.2093
PLAYING FIELD
RESPONSIVE/ WINNER PRICE IS CLOSER TO A
2.1860
REASONABLE PRICE AND HELPS IN BETTER…
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50
Mean Score
Fig 4.13 Issues, concerns and advantage in lowest responsive bidding

4.5.2 Competitive weighted average bidding

Based on the results of survey, the most well-known problems identified and highly concerning
issues and advantages in weighted average evaluation methods which are currently used on
public procurement of works are shown on the fig 4.14 below.
Advantages
For weighted average evaluation the respondents agreed on the following variables:-
Winner price is closer to a reasonable price and helps in better performance (with mean=4.02),
Project cost of bids which are evaluated through the above method is under reasonable price
(3.90), Help for client to finish the project with good quality (3.69), Doesn't result in best value of
money for the client (3.71 disagreed), both client and contractor are not benefitting as planned
(3.86 disagreed), Projects incur dispute, claim and termination during project construction period
(3.76), Most unqualified bidders may attend (3.86), Makes it less likely that contracts will be
awarded to the best performing contractor (3.74).
Respondents neutral on the following variables:-
Encourages/prompts open competition and fair playing field (3.37), doesn’t help client finish the
project within given contract time (2.67), Mostly the delay is twice of the given contract time or
incur delay problems in general. (2.44), Projects have always disputed between contractor and
any of the parties (3.16).
Generally the respondents were in favor of using competitive weighted average evaluation
method to improve project performance since it comprises both quality and price during
evaluation and has better performance compared to the lowest evaluated bid.

THE FINAL PROJECT COST AFTER EXCUTION IS HIGHER

2.6512
(INCURE COST OVERRUN)
MAKES IT LESS LIKELY THAT CONTRACTS WILL BE
2.2558
AWARDED TO THE BEST PERFORMING CONTRACTOR
MOST UNQUALIFIED BIDDERS MAY ATTEND 2.1163
PROJECTS INCUR CLAIM ISSUES AND TERMINATION
2.5116
DURING PROJECT CONSTRUCTION PERIOD
PROJECTS HAVE ALWAYS DISPUTED BETWEEN
3.1628
CONTRACTOR AND ANY OF THE PARTIES
MOSTLY THE DELAY IS TWICE OF THE GIVEN CONTRACT
2.4419
TIME OR INCURE DELAY PROBLEMS IN GENERAL.
BOTH CLIENT AND CONTRACTOR ARE NOT BENEFITTING
2.4884
AS PLANNED.
DOESN'T HELP CLIENT FINISH THE PROJECT WITHIN GIVEN
2.6744
SCHEDULE
DOESN'T RESULT IN BEST VALUE OF MONEY FOR THE
2.5349
CLIENT
PROJECT COST OF BIDS WHICH ARE EVALUATED
3.9070
THROUGH THE ABOVE METHOD IS UNDER REASONABLE …
HELP FOR CLIENT TO FINISH THE PROJECT WITH GOOD
3.6977
QUALITY
ENCOURAGES/PROMPTS OPEN COMPITITION AND FAIR
3.3721
PLAYING FIELD
RESPONSIVE/ WINNER PRICE IS CLOSER TO A REASONABLE
4.0233
PRICE AND HELPS IN BETTER PERFORMANCE.
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50
Mean Score
Fig 4.14 Issues, concerns and advantage in weighted average bidding
From the above Fig 4.13 and 4.14, there are 13 variables used to compare both competitive
lowest bidding systems and weighted average systems concerning with improvement to the
performance of responsive contractors. Mean ratings on the identified variables were calculated
based on a scale of 1-5 (from “Strongly disagree” to “Strongly agree”) on the average. According
to those responses results indicated above the better tender evaluation method is competitive
weighted average method it is believed that the combination of quality, capacity and price gives a
better result to achieve best value of money also findings from case study also revealed its
efficiency.

4.6 Summary of Findings in Case Studies

Analysis on the type of bid evaluation methods used in public procurement of building
construction works shows that 81.40% used competitive lowest evaluated bid and the method of
procurement is open bidding which is 54.76%. Since the majority of public procurement
evaluation method is lowest bid evaluation; consultant which administer majority of public
building project around Addis Ababa were targeted for the case study in this respect Ethiopian
Construction Design & Supervision Works Corporation Building & Urban Design & Supervision
Works Sector was the first choice and other private supervisors were included. Here 25 building
projects which are under construction and under provisional acceptance with construction cost
above 100 million from past 5 years were assessed on their performance. It was found that out of
25 projects 15 projects (60%) were evaluated with competitive low bid method and 10 projects
(40%) with competitive weighted average method. The results collected using the format used by
the supervisors and main figures are showed below on the table 4.5.
Major difficulties on Competitive low bid evaluated contractors performance
Based on the results of case study on major problems on project performance of contractors
selected under competitive low bid are material shortage which is (80%), manpower shortage
(60%), and equipment shortage (40%) and cash flow shortage (60%), variation exceeding 20%
was also observed. One project was terminated then rebid but the new contractor also delayed on
the project, the contractor neglected the site, no professionals found during working hour and
complaint on the project not profitable to the contractor was also raised up and high
communication issues were the main problem also the contract was lump sum. Another project is
still unresolved and with significant percentage of delay (400%).
Contractor’s performance in respect to quality of works, quality of materials and progress as per
the schedule were identified for the projects under the study. The results show that the quality of
works for least evaluated were most projects (73%) is good and (27%) is fair. However, analysis
from questioners the respondents show that quality of works is poor with mean score of 3.88 also
based on interview with the supervisors at the office that are involved in follow-up of the project
quality is poor. This shows there is gap in preparing project report. Progress of projects is (80%)
poor with time slippage between (34%-400%).

Major difficulties on Competitive weighted average evaluated contractors performance
However, case studies on projects evaluated through competitive weighted average were better
with material shortage (40%), manpower shortage (40%), and equipment shortage (20%) and
cash flow shortage (10%). Variation and supplementary works occurred between (0.25%-
11.78%). Project termination or significant dispute issues were not observed. Qualities of works
were (80%) is good and (20%) is fair. The progress of projects (80%) is discovered good with
time slippage between (0.25%-11.78%).
Generally, findings from the case study shown below on table 4.5 revealed contractors selected
through weighted average evaluation method have better performance compared to contractors
selected through lowest evaluated method.

Table 4.6 summary of projects progress
Time % of total Performance

project variation &
elapsed supplementary as per Major Difficulties Encountered Quality Remark
in % agreement schedule
Material Equipment Manpower

Other
shortage shortage shortage
A Competitive lowest evaluated method
1 50% 20.05 Poor Yes No Yes Cash shortage Good
weather, Cash
2 292% 17.35
Poor No Yes No shortage Good
3 381% 21.24 Poor No Yes No Cash shortage Good
4 266% 11.83 Poor Yes Yes No Cash shortage Good
5 400% 12.92 Poor No No No Cash shortage Fair Unresolved
6 43% 5.71 Fair Yes No No Good
7 56% 10.93 Poor Yes No Yes Good
8 82% 8.35 Poor Yes No Yes Good
9 122% 21.3 Poor Yes No Yes Cash shortage Good
10 34% Fair Yes No No Good
11 365% 15.43 Poor Yes Yes Yes Cash shortage Good
12 292% 15.15 Poor Yes No Yes Cash shortage Fair
13 292% 21.64 Poor Yes Yes Yes Fair Terminated
14 73% 18.96 Fair Yes No Yes Good
15 56% 10.71 Poor Yes Yes Yes Cash shortage Fair
B Competitive weighted average method
1 19.60% 2.67 Good Yes No Yes Good
2 27.31% 3.95 Good Yes No Yes Good
3 0.25 Good No Yes No Good
4 0.41 Good No No No Good
5 34.50% 6.81 Fair Yes No No Fair
6 Good No No Yes Good
7 48% 11.78 Fair Yes No Yes Cash shortage Fair
8 Good No No No V.Good
9 Good No No No Good
10 11.30% 1.32 Good No Yes No Good

Other observed problems on the projects under case study are as follows:-
 poor coordination and site management problem

 price adjustment request on some items of work
 Negligence of contactor
 Delay on delivery of imported material
 Disputes occur on construction site (right of way problems, disputes leading to court
decision)
 Late decision and approvals on works

 Poor communication between parties were amongst
 Strong cash flow shortage
 Shortage of skilled manpower on site
 Activities hammered owing to financial reasons demand for additional work
 Delay on issuance of work order to contractor
 Negligence of contractors experience and solution proposal on certain issues on site
 Request for building construction permit not solved
 Variance on material type used at tendering and during construction causing problem on
contractor on giving order of material production

5. CONCLUSIONS AND RECOMMENDATIONS

5.1 Conclusions
The following conclusions are drawn based on findings of the literature review and the
assessment made on public tender evaluation of construction works and performance of different
projects.
Current evaluation methods used:-

 Two types of evaluation methods are well adopted in the procurement system of Federal
public projects which are lowest evaluated bid and weighted average method.
 It was found that majority of bid evaluation method is still on competitive lowest bid.
15(60%) out of 25 assessed projects were awarded under this method.
 The threshold for use of restricted tendering provided under the Amended Directive of
2008 E.C of procured construction works is 6,000,000 Birr which is very low compare to
the current scope, complexity and budget of public building projects that are under
construction in Addis Ababa and around other states in Ethiopia.
 Being that Ethiopia is developing country money is a sensitive issue. When it comes to
consuming this budget for any approved activity. As a result government institute will try
to use their budget with minimum cost possible and this insight only on saving money
have guarded them to see crucial effect its creating in the construction industry.
Major existing issues and performance problems were:-
 Problems on project performance of contractors selected under competitive low bid are
material, manpower, equipment shortage & cash flow problem/shortage, significant
amount of variation orders. Project termination, contractor negligence on site, lack of
professionals found during working hour were observed as the main problem.
Unresolved issues between client and contractor with significant percentage of delay also
quality problems was observed under contractors evaluated through the lowest bid
method than weighted average method.
 It was also observed that evaluation of contractors performance in terms of qualities of

materials and qualities of works was just generalized as good when in actual most of the
projects under case study (lowest evaluated contractors) were not finally handed over due
to multiple remarks and quality problems.

 The triggers for poor performance of public building projects start at procurement stage
moving on to construction stage and they were identified from all three parties which
were:-
 Inadequate procurement planning leading to Selecting an unqualified bidder, Unfair
or poor estimation of project contract period, Long Bid evaluation and awarding
process, Insufficient Number of Bids submitted, Right of way problems, Lack of
research and understanding of specific project before the tender document
preparation & floating of tender invitation leading to missed or change of project
scope & requesting supplementary works.
 Failing to use structured risk management during cost estimation, Pursuing bid with
multiple projects on hand and cutting bid price to secure a project leading to; Cash
flow shortage.
 Due to the reason of not using advance payment particularly for the intended
purpose, projects have been suffering in material and equipment shortages and
compromising project quality.
 Through this study it was observed that no resent model of evaluation has been made.
Also 67.4% of respondents disagree that currently the public procurement system is
improving just as the project delivery system and with the same rate as the construction.
 74.5% of the respondents were not satisfied with competitive low bid method while the
remaining 25.5% suggested modification.
 It can be concluded from the research that parties that are responsible for the causes of
poor performance on public building projects are all client, contractor and consultant.
The portion of their share in the cause may vary but all causes identified are interrelated
with one another. Every problem occurring at some point from the initial of the project
procurement to the final of the project construction/ execution is a trigger for one
another.

5.2 Recommendations
The findings of this research showed that the performance of majority of grade one contractors
working in the Federal public building construction projects was very low. Therefore, the
following are recommended.
 Public Procurement and Property Administration Agency should look back and review
the case of limiting and adopting public procurement of works to be based on competitive
lowest evaluated bid method and if possible develop other method which will go in
parallel with the country construction law to achieve a true value of money and minimize
underside performance issues since they have the authority to (initiate amendments on
laws and implementation system improvements according to the proclamation (article
15(2)).
 Proper procurement planning & implementing plan should be followed for every project
since it’s the foundation for establishing well-articulated tendering process leading to
selecting qualified contractor to assure the client will enjoy a successful project.
 Restricted tendering method for mega and complex project is better as it will minimize
the chances of the client selecting unqualified bidder since the competition is limited to
agencies that are invited by the procuring team. However, Ministry of Finance and
Economic Development should look back on restrictions of public procurement method
and conditions for use of other method under (article 33(2) & (3)) and modify the
threshold of restricted tendering in order to make it applicable for public sector clients
which are investing on large construction projects with respect to complexity and budget.
 Construction planners, managers and all other stakeholders involved in procurement

decision-making should formulate a systematic evaluation approach, as this will assist in
eliminating unnecessary project demands,
 Consultants should avoid if possible or minimize the existence of incomplete drawings

and specification before tender document is floated or right there wrongs before the
construction of the project starts. And Contractors should perform a cash flow analysis
on a regular basis to identify cash flow problems, conduct trainings on cash management
for project managers since cash shortage is the main problem & cause for other defects.

 Seeing from the result that the competitive weighted average bid method has better
performance; it is recommended to use this method. Also adopting other international
methods such as average bid method. Because this method does not solely dependent on
either the engineers estimate or the contractors offer. And tendency of contractors to cut
bid price is minimum since the responsive bid depends on the average of all bids and
realistic price offer and engineers estimate can be attained.
 Public clients should familiarize themselves with various procurement systems as this
will assist them in making well-informed procurement decisions.

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https://blog.udemy.com/procurement-methods/ (May 18, 2019 3:24)
http://www.docdatabase.net/more-175high-grade-contractor-embassy-of-ethiopia-1345741.html
(May 18, 2019 3:24)

Appendix-1
Assessment of Tender Evaluation System for Public Building Project
Works in Ethiopia
Dear Sir or Madam
I am a student from the Addis Ababa Science & Technology University. I am

conducting assessment on the above captioned title specifically on public
building projects. It is strictly for academic purpose. Please answer the under
listed questions as accurately as possible. All information provided will be
treated confidential. No name will be ascribed to any response. You are at
liberty to answer or not to answer any questions that you are not familiar with.
Thank you in advance for your cooperation
Thank you,
Meron Demesew

QUESTIONNAIRE
A BACKGROUND OF RESPONDENT
Instructions: - Fill your response on the ranking space based on the grading scale
indicated below.
1 Please give some personal details below
1.1 Current Position:-_________________________
1.2 Working duration in the position/experience (yrs.):-___________________
1.3 Please tick in the box your level of education
[ ] Certificate level [ ] Diploma
[ ] Advance diploma/First degree [ ] Master’s Degree [ ] Other Professional
qualification: …………………
1.4 Please give some detail of your organization

1.4.1 Sector
[ ] Public sector [ ] State/public Enterprise [ ] Private
[ ] other
[ ] Other: …………………
1.4.2 Business
[ ] Owner [ ] Consultant [ ] Contractor
B GENERAL INFORMATION ON TENDER EVALUATION
1 Have you ever been involved in tender document preparation & evaluation?
[ ] Yes [ ] No
Is the tender evaluation system on public projects fair & free from bias or corrupt
working condition? 2
[ ] Yes [ ] No [ ] Sometimes
3 Do you think there is a fair and experienced team member in public tender evaluation?
4 Which of the following methods do you use for tender evaluation?
[ ] Open Bidding [ ] Two Stage Bidding
[ ] Restricted/selective Bidding [ ] Direct procurement/ Negotiation
[ ] Other: …………………
5 How long does the evaluation process take?

[ ] Less than 1 week [ ] between 1 and 2 week [ ] 1 Month
[ ] More than 1 month
[ ] Other: …………………

6 Is there delay on tender evaluation? If yes, please specify some of the causes for delay
How does organization often evaluate a contractor? 7

[ ] Based on lowest evaluated price submitted
[] Weighted Average
[ ] Selecting those between lowest and highest tenderers (Average)
[ ] Any other (Please specify)………………………………..
Use the following ranking scale to indicate your ratings of each variables on the basis of
the attributes listed:
1. Strongly Disagree
2. Disagree
3. Neutral
4. Agree
5. Strongly Agree
C Identified procurement related causes of poor performance at tendering stage
Causes of Poor
Performance
No Description
Ranking
1 2 3 4 5
1. Contractors’ Problems
1 Incomplete Bids
2 Not all requested documents have been provided.
Not all requested prices have been submitted, e.g. separate, itemized,
3 unit or alternate prices missing or not properly filled out.
4 Front Loading of price or abnormal pricing on some items of works
5 Bid Bond missing from bid, Surety’s Consent missing from bid.
6 Receipt of Addenda not acknowledged or not referred properly
7 Lack of understanding the scope of work
8 Flawed Bids – Bid not signed or sealed properly.
9 Mathematical/ Arithmetic errors in bid.
10 Biased submission of bid/ Bid rigging
11 Cutting bid price to secure a project
12 Pursuing bid with multiple projects on hand
13 Failing to use structured risk management during cost estimation
2. Owners’ Problems
1 Insufficient Number of Bids submitted

2 Long Bid evaluation and awarding process

3 Failing to describe project scope clearly
Lack of research and understanding of specific project before the
4 tender document preparation & floating of tender invitation
Poor communication with consultant during tender document
5 preparation/ b/n & among procuring entities
6 Lack of professionals on the owner side
Criteria are requested beyond the scope of local contractors on the
7 case of ICB (international competitive Bid)
Owner wants to exercise privilege clause to award in accordance with
8 non-disclosed criteria.
9 Favoring contractors that already have project with the client
Owner wants to open a late bid either because too few bids received or
10 owner knows/prefers bidder.
Compromising Criteria that are clearly specified as non-compliant or
automatic rejection on the bid document (E.g.:- Error on Bid Security,
11 submitting of original audit report etc...)
13 Challenge in procurement planning & implementing plan
3. Consultants Problems
1 Unit prices not properly specified or evaluated.
2 Incomplete Drawings
3 Biased/slanted specifications (Unrealistic or excess quantity of work
on BOQ or inserting item of work that does not exist actually), using
hidden criteria
4 Criteria for determining compliance & consequences of non-
compliance are not clearly specified.
5 Methods of remedying informalities in the bid are not clearly

specified.
6 Criteria are requested beyond the scope of local contractors on ICB
7 Lack of research and understanding of specific project before the
tender document preparation & floating of tender invitation
8 An addenda is issued late, e.g. too close to submission deadline
10 Favoring local contractor

11 Favoring Foreign contractor

12 Unjustified exclusion of qualified bidder (rejecting contractors with
minor reasons which do not affect the project directly or indirectly)
D Identified possible causes of poor performance in public building at construction

stage or project
Causes of
Poor
No Description Performance
Ranking
1 2 3 4 5
1. Client
1 Financial shortage of client
2 Lack of initiative between staffs
3 Unfair or poor estimation of project contract period
Missed or change of project scope & requesting supplementary works
4
5 Lack or shortage of cooperation from client
6 Selecting an unqualified bidder
7 Poor communication
8 Insufficient advance payment release
9 Late advance payment release
2. Contractor
1 poor coordination and site management problem
2 Using of poor quality of material
3 Delay on facilitating imported materials on to site
4 Failing to facilitate proposed manpower on site
5 Failing to deploy proposed machinery on site
Not using advance payment particularly for the intended project
6
8 Cash flow shortage
3. Consultant
1 Variance between bill of quantity and design
2 Frequency of varied works
4 Late approvals on work

5 Unfair supervision, influence on site
Comparison of issues and concerns and advantage on the common bid type
Competitive Lowest
E Responsive Bidding and Competitive Weighted Average Bidding that are currently
observed on public building projects for better Performance in Building
Construction Project Sites. ( 1 up to 5 )
Ranking
N A. Competitive B. Competitive
o
Description
lowest bid weighted average
evaluation system bid evaluation
1 Responsive/ winner price is closer to a reasonable
price and helps in better performance.
2 Encourages/prompts open competition and fair

playing field
3 Help for client to finish the project with good

quality
4 Project cost of bids which are evaluated through

the above method is under reasonable price
5 Doesn't result in best value of money for the client
6 Doesn't help client finish the project within given

schedule
7 Both client and contractor are not benefitting as

planned.
8 Mostly the delay is twice of the given contract time

or incur delay problems in general.
9 Projects have always disputed between contractor

and any of the parties
10 Projects incur claim issues and termination during

project construction period

11 Most unqualified bidders may attend
12 Makes it less likely that contracts will be awarded

to the best performing contractor
13 The final project cost after execution is higher (

incur cost overrun)
14 Which bid evaluation system do you prefer?

[ ] Competitive lowest bid evaluation system [ ] Competitive weighted average bid
evaluation [ ] Average Bid [ ] other
15 Do you believe currently the public procurement system is improving just as the project
delivery system?
16 Do you think the public procurement system is improving with the same rate as the
construction technology?
17 Do you think PPA directives restricting bid evaluation to lowest bid is one major factor for
many public building projects to inure d/f flaws?
18 Why do you think that contractors swap advance payment other than its intended purpose?
[ ] Multiple project on hand
[ ] Cash flow problems
[ ] Other______________________________________
19 Do you believe increasing percentage of the advance payment or paying the maximum
limited 19 percentage helps to improve the performance of contractor?
20 Are you satisfied with Competitive lowest bidding evaluation system?

If not satisfied please specify other alternative method that you prefer and any suggestions

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Assessment of Tender Evaluation System for Public Building Project Works in Ethiopia

Assessment of Tender Evaluation System for Public Building Project

MERON DEMESEW WUBE

ADDIS ABABA SCIENCE AND TECHNOLOGY UNIVERSITY

Name: Meron Demesew Signature, Date: ______________May, 2019

Addis Ababa Science and Technology University i

Date of Defense: June 13, 2019 G.C

2. Dr. ___________________ __________________ ___________________

3. Dr. Melaku Sisay ___________________ ________________

4. Mr. Alemayhu Feyissa ___________________ ________________

5. Dr. Brook Abate ____________________ _______________

Addis Ababa Science and Technology University ii

Keywords: bid, tender evaluation, public building

Addis Ababa Science and Technology University iii

Addis Ababa Science and Technology University Page | iv

Abstract ................................................................................................................................................... iii

Table of Contents .................................................................................................................................... v

List of Table .......................................................................................................................................... viii

List of Figure .......................................................................................................................................... ix

1.3.1 General Objective........................................................................................................................... 4

1.3.2 Specific Objectives.......................................................................................................................... 4

1.5 Significance of the Study................................................................................................................... 5

1.6 Scope and Limitation ........................................................................................................................ 5

2.1 General ............................................................................................................................................... 7

2.3 Alternative Evaluation Method...................................................................................................... 12

2.4 Tender Evaluation in Ethiopia ....................................................................................................... 17

2.4.2 Application of Procurement Rules .............................................................................................. 19

2.4.3 Methods of Public Procurement ................................................................................................. 21

Addis Ababa Science and Technology University Page | v

2.6 Procurement Plan............................................................................................................................ 26

2.7 Challenges of Public Procurement ................................................................................................. 28

2.8.1 Bid Document Preparation .......................................................................................................... 30

2.8.3 Evaluation of Bids ........................................................................................................................ 31

2.8.4 Announcing and Awarding of Successful Bidder ...................................................................... 35

3. MATERIALS AND METHOD .................................................................................................... 36

3.1 Description of the Study Area ........................................................................................................ 36

3.2 Data Collection........................................................................................................................... 36

3.2.2 Case Study..................................................................................................................................... 37

4. RESULTS AND DISCUSSION .................................................................................................... 39

4.2 Existence and extent of the problem in procurement stage ......................................................... 42

4.3.3 Problems of Consultant at construction stage ........................................................................... 59

4.4 Current procurement method and tender evaluation.................................................................. 63

4.5 Comparison of common bid types ................................................................................................. 66

4.5.2 Competitive weighted average bidding ...................................................................................... 69

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5. CONCLUSIONS AND RECOMMENDATIONS .......................................................................... 75

5.1 Conclusions ...................................................................................................................................... 75

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Table 2.1 Example on mechanism of the average bid method…………………………. 14

Table 2.2 Example 2 on mechanism of the average bid method……………………….. 14

Table 2.3 Example 3 on mechanism of the average bid method……………………….. 15

Table 2.4 Example 4 on mechanism of the average bid method……………………….. 16

Table 2.5 Public Procurement Operations and Practices Challenges…………………... 29

Table 4.1 Response rate of the structured questionnaire……………………………….. 39

Table 4.2 List of Identified typical tender problems in procurement process………….. 42

Table 4.6 Summary of projects progress……………………………………………….. 73

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Fig 4.1 Respondents organization classification…………………………………….. 40

Fig 4.2 Qualification of respondents…………………………………………………. 40

Fig 4.3 Position of respondents in the organization…………………………………. 41

Fig 4.4 Experience of respondents…………………………………………………… 42

Fig 4.5 Problems of contractors during procurement stage…………………………. 45

Fig 4.6 Problems of owner during procurement stage……………………………… 48

2. Dr. _ ___

3. Dr. Melaku Sisay ___

4. Mr. Alemayhu Feyissa ___

5. Dr. Brook Abate ______ _